Steem For Investors #3 – Is Steemit A Ponzi Scheme?

Tai Zen:

All right. Let’s get this broadcast started. If you are listening to this, I would appreciate if you let me know whether you can hear or not.

Hi Guys. This is a very quick hang out. Just want to make sure that the audio and everything is working before I start the broadcast here.

I just want to answer some quick questions about Steemit. In the previous video I did about Steemit investors number 2, I was getting a ton of questions during our broadcast with me and my buddy

People ask that if Steemit is a Ponzi Scheme because you put money into it and it pays you back out. Basically, you have to convert your money to Bitcoins, take your Bitcoins to buy some Steem, put it into your Steem account, and use that to start blogging & posting, then get paid for it.

That’s one way to do it. That’s how I and started our crypto market channel on Steemit.

The other way to do it is going to the website, register an account and then start making some interesting posts that have high-quality content. After that, when you upvote those contents, the system will pay you the Steem tokens automatically and you don’t have to buy anything.

Therefore, if you don’t have any money to buy Steem tokens from Poloniex or other exchanges to put into your Steemit account, just go there and create content and it’ll put it in there.

Now here’s something to keep in mind. People always ask whether Steemit is a Ponzi Scheme. They don’t just ask about Steemit but they asked about every cryptocurrency that comes out. Just assume that every cryptocurrency is going to be a Ponzi Scheme.

When Bitcoin first came out, it was called a Ponzi Scheme. When Litecoin came out, it was called a Ponzi Scheme. When Dogecoin came out, it was called a Ponzi Scheme. When NXT came out, it was called a Ponzi Scheme. When the Ethereum came out, it was called a Ponzi Scheme.

Whenever a new coin comes out, it’s called a Ponzi Scheme. There is nothing new. Every new cryptocurrency that comes out will be referred to as a Ponzi Scheme.

Therefore, how do we determine if it’s a Ponzi Scheme or not? You have to do your research.

One way is if you watch our channel, you will know whether that coin is a Ponzi Scheme or not because we talk about some of the coins.

Most of the time, whenever we are discussing a certain coin, we have done some extensive research into that coin, the community, the people behind it, who’s working on it, what past projects they have, what kind of history they have. By doing that, when we invest in it, we have a higher probability that it’s not a Ponzi Scheme or a failed investment risk.

This is going to be normal for every cryptocurrency that you hear me and talk about because that’s just how it is.

This is a new asset class. This is a new investment vehicle. It happens all the time when people are questioning whether a new coin is a Ponzi Scheme or not.  Since they don’t have any experience in trading cryptocurrencies, they are going to call it a Ponzi Scheme. It sounds too good to be true to them.

Here’s something that I want you to consider. We don’t know if a new cryptocurrency is a Ponzi Scheme or not. We have to do research on it and we have to look at the use cases of it. Are there any real use cases for that cryptocurrency? In case it has a valid use case, we have to look at it as new technology.

Just think about this.

We have the blockchain technology, blockchain cryptocurrency technology and the commercial use of that technology.

When they put them all together and introduced the market, the market can see or understand the commercial technology behind it, but they don’t understand the cryptocurrency or the blockchain technology that drives the commercial use of this.

Because of that, they are going to naturally assume that it’s a Ponzi Scheme. That’s why you have to do your due diligence to make sure that the cryptocurrency blockchain technology a real technology that is going to dominate and revolutionize the financial industry.

In term of the commercial use case of it, is that a valid technology? Is that something that the world needs? Is that seriously going to solve a real-world problem? That’s what you have to look at.

If you could call it a Ponzi Scheme because it’s a blockchain or cryptocurrency technology, that’s just a waste of time and it’s just a bunch of bullshit and nonsense. You have to look at the commercial use of that technology.

If we call Steemit a Ponzi Scheme, we also have to call Facebook, MySpace Reddit, Twitter,  LinkedIn and all these other social media platforms Ponzi Schemes too because they’re all social media platforms.

Speaking of the definition of a Ponzi Scheme, it is the situation where you put money into an investment, then instead of the investment is growing, the people who created that investment takes money from the new investors to pay the old investors. Consequently, early investors think the system is making profits. However, in reality, it’s not. They just take money from new investors and pay it to early investors.

For example, if you live in the United States of America, the most popular Ponzi Scheme is a social security administration. You can go to It is like the biggest Ponzi scheme that America has and people participate in all the time.

I mean I don’t like to support Ponzi Schemes, but the government is forcing every citizen in America to do it.

The way social security works is there is an amount of money from the salary of the 20, 30, 40-year-old worker taken output into one big retirement bucket called social security in America. Then, the government takes money out of that and pay the older 60, 70, 80-year-old investors that put money into it a long time ago.

The reason why it’s a Ponzi Scheme is that there’s more money going out than the money coming in. That is a classic example of a perfect example of a Ponzi Scheme.

Now, as far as Steemit goes, I have not seen evidence of that yet. At the moment, I don’t see it as a Ponzi Scheme because it’s based on a blockchain or a cryptocurrency technology and the commercial use of it is very valid.

That’s been a huge problem with Facebook, Myspace, LinkedIn, Twitter and everything because the people who create the content are not getting paid for it. It’s the advertisers are paying the owners of that network.

Therefore, Steemit is the first social media platform where the advertisers can pay directly to the content creators. The system pays the content creators and it creates the content curators who upvote, downvote, like or dislikes the content.

Due to its real-world commercial use, we put a small investment into it and we’re going to see how it works. If it fails, you can trust that we will come back and tell you that it fails, just like we did with a DAOhub investment.

We made a post video of what we learned from the failed DAO hub investment. I will probably make another video to share with you some of the other lessons that we learned from that failed investments.

We don’t always succeed in every cryptocurrency investment that we put money into, but we have a high success rate with the ones that we do so that it covers up the rest of the ones that we do lose money. Therefore, we’re not worried about it. That’s how we invest.

I’ll take some questions here real quick and then I’ll end this video.

Matt Ezell asks: “Can you think of any other crypto that has similar cash out structure with a long tail slow payout?”

I cannot think of one off the top of my head because it’s new. It’s a new environment. There’s always going to be people that come out with new things.

For example, when Etherium came out with a smart contract concept for their blockchain, they will call it a Ponzi Scheme. They said they wouldn’t work, blah, blah and so far they’re $1 billion market cap.

Yes, they failed with the DAO hub because of the team rush the software out before it was fully tested and checked. However, it doesn’t mean that it’s a Ponzi Scheme. It means that they just built, wrote some bad software. People make mistakes, you know.

Let me see here we have. Next question is by Arthur. He asks: “Is it time to buy Steem today?”

It depends. I buy at a slightly higher price. Let me check quickly. The market cap, which means the total value of the network, is $263,000,000.

If you take a social media network such as Facebook, it’s worth in the billions of dollars. I will show you real quick here. I just google the market cap of Facebook and their market cap is $359,000,000,000.

If you look at the market cap or the value of the entire Steemit network, it’s at $263,000,000. I’m just going with the number $250,000,000, so the math is easy in my head.

Let’s just say that the market cap of Steemit is at $250,000,000 and it grows to a billion, that’s a 4X growth. That’s a 400% growth.

If you believe that Steemit has the potential to be better or just as good as Facebook, Reddit, LinkedIn or Twitter, or let’s just say it reaches the current market cap is $359,000,000,000. It’s a 1,440X return.

Therefore, if you believe that Steemit has a potential to grow and become a more popular social media platform or a viable social media platform to where they can get several million users on there, it’s going to be worth over a billion dollars guys. So that’s the case.

Let’s just say it becomes $1,000,000,000. If you invest now, there’s an opportunity for it to increase by 300%, 400%, or up to 500% profit.

Basically, that’s up to you. I cannot tell you when to buy it and when not to buy it.

I put a small investment in it. If it makes me 5X, 10X, or 20X return, I’m okay with that. The reason is I don’t know anywhere else in the stock market or anywhere else that is going to give me a potential 300%, 400%, 500% profit in that short period of time.

The other question that Arthur asked is when you convert the Steem tokens into Steem power.

That’s up to you. I cannot tell you when to do that. If you are a content creator like my myself and, we bought 6 Bitcoins worth of Steem tokens and we convert it into Steem power.

Keep in mind that Steem power is like your credibility or your credit score. The reason we bought Steem power with that number of Bitcoins is we want to speed up and increase our market share, our visibility on Steemit. We want to show that we have credibility. Therefore, instead of waiting for our posts and articles to be seen by people, we just went out to embark that credit.

Since we already have it on Youtube, we know that when we go to Steemit, we can fast track and speed it up just by buying our reputation instead of waiting for it to build up.

When people see our videos and our blog posts, they’re going to see that we have lots of subscribers and they’re going to see that we’ve been around since the beginning. It means that we were going to have more credibility much quicker.

If you don’t have a popular platform or a large number of users and subscribers like we do, then it probably will not work for you very well.

That’s is our first step on Steemit. In the future, maybe we’ll add to it. However, in the meantime, that’s what we started with because we were able to afford it.

Again, my answer is that’s up to you. If you are a content creator and you have enough money to buy some reputation and credibility on Steemit, then feel free to do so. But if you’re not posting anything on there, then maybe it’s not a good idea for you to convert your Steem tokens into Steem power.

Once you convert your Steem tokens into clean Steem power to get extra credibility and reputation, you are going to lock those Steem tokens up for 2 years and you cannot get them out 2 years. They’re going to split it up into 104 increments payout period and it’s going to take 2 years to make those 104 payouts till we turn it back to you.

Leon and I are serious cryptocurrency investors. We have the most popular and most the fastest going cryptocurrency investing channel on the Internet. Because of that, we felt that it was a good investment for us to put 6 lockups Bitcoins for the next 2 years just to test out the platform.

I hope that answers your question.

Matt SO asks: “Can you see the payout structure being a problem for advertisers?”

Absolutely not. It will incentivize more people to advertise on that.

“Since the content is monetized by the value of posts publicly seen, just as it attracts new users, it also pushes people away when they see they aren’t able to make the same amount of money.”

That’s good. You should be happy that it does that because it pushes out all the bullshitters. Because if you have good content on there, people are going to upvote you. The people, who upvote you, are going to get paid to make sure that they upvote the good content.

For example, I produce content and it’s not good, then I’m going to be downvote and I won’t get paid for it. It incentivizes me to create better content for you.

The people who upvote good content will enhance their credibility and how they get paid. If they downvote the content and it happens to be good content, they’re not going to get paid for it. Eventually, their words have no reputation. It has no Steem power.

That’s why it’s important to have a lot of Steem powers because you have a good reputation.

When I and upvote your content on Steemit, we feel that the content you created is really good. By upvoting you and paying you with ours our credibility, we are using our credibility to share with the community that we believe your content is valid.

Besides, people are going to trust us because they know that we are a valid source of knowledge and experience about how to invest in cryptocurrencies. They are relying on our reputation and our credibility to upvote other people.

The system is going to let us know that when we upvote something, it gives me more credibility than someone new to cryptocurrency and don’t know anything about cryptocurrencies.

Since we know that our credibility has a big reputation in the cryptocurrency world, Leon Fu and I both have the ability to vote people, but we are very cautious on who we upvote. If we upvote the wrong content, we lose credibility in that. We’re in this for the long term, not for a short term, a get-rich-quick scheme or make a fast buck scheme. Because of that, we are going to be careful and be very conservative about who we upvote.

Sometimes, we upvote stuff that has nothing related to cryptocurrencies. For example, is very good at software. I’m very good at art and other areas in life that you may not be aware of. When you might randomly see me upvote stuff that, I believe that is very good content in that specific niche, industry or field.

The key to the success of Steemit is this. You got good content. If you don’t know how to produce good content, you know how to upvote good content. You know how to read the content or view the content and let the rest of the community know that that’s good content.

All right. I need to wrap this up.

If you create good content, you’ll be rewarded. If you could curate, which means classify filter out what’s good content and what’s not, you get paid for it. If you have good credit, you get paid for it. Those are things.

“Do you think of right now Steemit is here to stay or is there still a chance that it could fail?”

I believe it’s here to stay. That’s why we locked up 6 Bitcoins for 2 years.

We believe that it solves a real-world problem because that’s the plan. The biggest problem that all the social media platforms have right now, which is the fact that it’s not rewarding the people who produce good content and it’s not rewarding the people who filter out good content, the curators. It’s rewarding the people who own the network.

Therefore, Mark Zuckerberg, the owner of Facebook gets paid a ton, billions of dollars every year for all the content that’s on Facebook, but he didn’t create that.

Steemit is a game-changer in our opinion because it actually pays directly to the people who create content. That is good. That’s the reason why.

“The first payout was on July 4th and hasn’t been gained transaction for the past month. It may be too early to tell?”

Yes, it’s too early. This is a risk that you take for investing. The reason why you get paid 3,000, 4,000, 5,000 or like we made over 4000% profit on Ethereum is the risks that you take. If it fails, you lose everything. That’s the reason why you get paid.

We’re always going to be in it too early. Just know that, so you don’t have to ask that.

“2 years is like 20 years in the crypto world. Steemit is the first one in this market, but there are others coming like Yours Network, Akasha. Scary to go big on Steemit, isn’t it?”

Well, that’s up to you, Matt.  Put what you can afford. At this juncture in our crypto investment career, Leon Fu and I are at a point where we can afford to put up 6 Bitcoins. If we lose it, it doesn’t hurt us. We can still move on and invest in more cryptocurrencies. We only invest what we can throw away and not worry about it. Therefore the word “big” is relative. Something that’s big for you might be small for me.

I mean it costs me $5,000 a month to live in America. If I don’t make $5,000 a month in America, I cannot feed my wife and kids and live in the house that we live in.

Maybe I can live for 1, 2 or 5 years with that amount of money in another country such as China, Vietnam or somewhere. However, in America, that’s not a big deal. In other countries, it’s a big deal. Therefore, how big or how small in cryptocurrencies is relative, Matt.

“By saying my country club Massa, I mean they won’t eventually be just the whales hanging out and upvoting each other.”

Absolutely not. In the beginning, the whales are helping to upvote content they feel it has good quality to get people to incentivize and motivate them to get in. Otherwise, nothing will happen.

I got my driver waiting outside for me. I just want to make this quick video to explain my thoughts on whether or not Steemit as a Ponzi Scheme. If you think it’s a Ponzi Scheme, don’t invest in it. If you don’t, then put a little money that you can afford.

Thanks for watching this video. Hope it helps you guys understand if Steemit a Ponzi Scheme or not. I look forward to seeing you guys in a future video.

If you like it, give me a thumbs up. I’m going to post it on Steemit after it’s done the processing. You guys give me a thumbs up over there and let me know if it’d be awesome. If not, give me a thumbs down.

Thanks for watching this video and I’ll see you guys in a future video. My Indian drivers going crazy outside, so let me get out there. Okay, this will conclude the broadcast.


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