One of the most significant concerns that people have with the philosophy of Bitcoin is that early adopters will hoard the majority of the wealth and exacerbate the world’s wealth inequality. That is why the Steem blockchain, which spawned the delegated proof-of-stake (DPOS) algorithm, was designed to be inflationary without central control so that the money supply can match an increase in user base.

Although it goes against the de-inflationary principle set by Bitcoin, Litecoin, and other founding cryptocurrencies, Steem has established a model that allows for user equality on a long-term basis. With its unique DPOS consensus algorithm and an infinite maximum supply, there will always be a constant availability of the currency as long as users are still participating.

Checking out historical price swings in Steem or Steem Dollars (SDB), the price always regresses to the mean of around $1.50 or slightly less. It is not a currency to hold for long-term gains, but there is at least a sense of stability within its pricing.

About Delegated Proof-of-Stake

Delegated proof-of-stake is an extremely flexible consensus model allows currency holders to vote on transactions (or blogs in the case of Steem) to democratically approve of its value. Thay adds a human element for preventing unwanted interference within the blockchain’s network, which is especially ideal for communities. These transactions, along with votes, will be stored in the decentralized ledger.

Exceptional members of the community who contribute both computing resources, and who have respect among their peers, may become witnesses. These witnesses keep backups of the blockchain and record transactions to preserve the integrity of the entire network. If one of these witnesses become malicious, the community may directly vote them out of their position of power.

A traditional proof-of-stake (POS) blockchain, like the one behind Ethereum, is less democratic as transaction verification is assigned randomly rather than through elected witnesses. DPOS networks will also use elected delegates to oversee changes to the protocol rather than wait for decisions made by a centralized entity. Aside from all of that, POS is slower than DPOS.

Curation to make rewards merit-based

The Steem blockchain is no different from other blockchains powered by miners (which are also known as witnesses). Unlike Bitcoin and other standard cryptocurrencies, newly generated currency is not neutrally given out to miners and bloggers. Instead, the community decides to curate which content contributors deserve a more significant chunk of the reward pool so that the undeserving characters do not take advantage of the network.

It is true that Steem “whales” (massive hoarders of wealth) can sway the system to only curate content that they like or suits their interests, there is always room for new whales to join in. Unlike Bitcoin, in which only early adopters may hoard wealth, individuals may purchase a substantial amount of Steem so that they may also become one of these whales.

Conclusion

The Steem model goes against the intention of most other currencies, which is to be decentralized and disinflationary, but it does provide a fair distribution model that may be realistic for large populations. As Steem’s implementation is for a community-driven content platform, similar currencies derived from it may be applicable for similar uses like MMO games, reputation points for forums, or blockchain-based voting platforms. Big tech companies may also hold an interest in DPOS due to its incredibly fast transaction speed.

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