Despite all the criticisms here, this just validated Steemit as a real service that is now a real contender.
Because people on HN that have been around a while, have seen a dozen variations of this come and go, all the way back to the days of Flooz. Steemit will pop and rot, for exactly the same reasons that not a single system like this has ever worked long-term.
What Steemit actually represents is a signal that the crypto-currency mania is nearing an end for the initial speculative wave. The big dump comes next, in which most crypto-currency experiments that have attention today will die off.
There's nothing special about what Steemit is doing. They're slapping the latest hype train on top of what has been attempted for two decades. It doesn't work for a fundamental reason and there's nothing Steemit can do about that. It doesn't matter if you use a clone of Bitcoin as your foundation or an arbitrary tokenX with a different set of rules governing it. Slapping Bitcoin on the concept doesn't change the underlying broken premise.
1. Reward from blocks mined are distributed to the highest voted posts. This is all part of the Steem protocol. Only a small percentage goes to the actual miner.
2. The whole database sits on the blockchain. It's completely decentralised.
3. The incentive to have more Steem on your account is that your upvotes are worth more. This is both the blessing and the curse since whales become powerful curators. On the other hand it gives an incentive to hold Steem unrelated to the monetary value. That's why I don't see any dumping happening any time soon unless Steem skyrockets in value.
I simply don't agree that this has been tried before. It's a different story, even if it turns out to be a failure in the end.