Taking a social media bath with the Steem (STEEM) tokens

The Steem (STEEM) tokens are among the few cryptocurrency solutions that have attracted a following outside the blockchain community. In detail, many artists, writers, and other creators use Steem’s payment system.

In fact, Steem claims to have paid $59.596 million to users between June 2018 and January 2019. In particular, they use most of that money to pay for content on Steem powered apps or blogs.

Plus Steems claims it has processed 1.169 million payments as of 2 January 2019. Thus, Steem has supposedly processed more payments than Ethereum (ETH) and Bitcoin (BTC). For the record, Steem estimates Ethereum has processed 545,244 transactions and Bitcoin had processed 530,125 transactions as of January 2, 2019.

In addition, Steem claims its blockchain has one million users. Moreover, there are reportedly 324 Steem-based apps for those users.

What are the Steem (STEEM) Tokens?

Thus we need to ask what are the Steem (STEEM) tokens and why are they so attractive?

In essence, Steem is a blockchain-payments platform that uses a cryptocurrency as an accounting and bookkeeping tool. To explain, the cryptocurrency increases security and makes record-keeping more efficient.

Importantly developers claim the Steem platform can process transactions quickly; or every three seconds. Additionally, developers claim the platform can process huge volumes of the Steem (STEEM) tokens.

Is there a Security hole in the Steem (STEEM) Tokens?

On the positive side, Steem’s developers could have solved the blockchain chain scalability problem.

To explain, existing blockchains like Ethereum and Bitcoin have a very limited capacity. The high level of encryptions limits the capacity of traditional blockchain solutions.

This makes for very slow processing speeds. For instance, Ethereum (ETH) is limited to 15 to 20 transactions per second.

On the negative side, the only solution to the blockchain scalability problem I know of is a sidechain. To clarify, a sidechain is a less encrypted shortcut around the blockchain.

Sidechains are less secure because they have less encryption. Thus, Steem could be more vulnerable to hacking than its creators are letting.

In fact, I think Steem will be hacked because of the amount of money its developers claim to process. For example, “white hat” or good guy hackers admit to breaking into up to 82 Steemit accounts at once in 2016.

To clarify, the Steemit social media platform is the most popular Steem app. Therefore, I think Steem and Steemit could be security nightmares and lawsuits waiting to happen.

Could Steem get hacked or shut down by Uncle Sam?

Beyond, hacking both Steem and Steemit could play fast and loose with the banking laws. To explain, Steem operates somewhat like a bank by processing payments through an account. However, there is no indication Steem insures accounts like banks do.

Interestingly, the popular stock-trading app Robinhood dropped plans to offer checking and saving accounts just before Christmas 2018. In detail, Robinhood pulled the plug on checking and savings accounts. After Forbes pointed out Robinhood’s “cash management accounts” were not insured by the Federal Deposit Insurance Corporation (FDIC).

To clarify, the FDIC is the US government agency that insures bank accounts in the US. Under these circumstances, a blockchain platform like Steem or Steemit could get shut down by the FDIC for offering uninsured bank accounts.

Thus, the value of Steem (STEEM) tokens could vanish overnight. In fact, the Steem (STEEM) Tokens could become worthless if regulators target Steem or Steemit.

How valuable are the Steem (STEEM) Tokens?

Naturally, this raises the question, how valuable are the Steem (STEEM) Tokens? I am skeptical of the Steem (STEEM) Tokens because they are not Ethereum compatible.

Thus Steem is not part of Bancor’s Liquidity Network. In detail, the Bancor Network can quickly convert any ERC (Ethereum Request for Comment) token into Ether (ETH). In addition, the BancorX protocol can covert Bancor (BNT) tokens into EOS (EOS). Like Steem’s developers, EOS creators claim to have solved the blockchain scalability problem.

Therefore, Steem’s value as a cryptocurrency is dubious. However, Mr. Market thinks the Steem (STEEM) Tokens have a little value.

For instance STEEM had a Market Capitalization of $86.235 million and a Coin Price of 28.06¢ on 4 January 18. Additionally, STEEM tokens achieved a 24-Hour Market Volume of $388,097 on the same day. There was a Circulating Supply of 307.275 million and a Total Supply of 324.249 million STEEM on the same day.

On balance, Steem (STEEM) is an interesting and highly effective payment solution. However, its value as a cryptocurrency is questionable.

Thus you should look into Steem if you need a payments solution for media sales. On the other hand, Steem’s value to speculators is questionable. In fact, I think there are better cryptocurrencies that could be more effective payment solutions out there. For instance, EOS (EOS).