This Hot New Digital Currency Has Soared More Than 1000 Percent in 24 Hours

Steem, the digital currency behind the new social media website Steemit, soared more than 1,000 percent in value on Tuesday to over $150 million, two weeks after it first paid people who posted on its website, according to coinmarketcap.com.

Steemit essentially is a website that rewards or pays users who post content that gets multiple thumbs up from the site's participants. The reward given is the steem currency. Content on the site is not limited to digital currencies and users have posted varied topics from lasagna to a trip to North Africa.

"It's basically an incentivized social media platform," said Steemit's chief executive, Ned Scott, in an interview.

The steem currency's price on Tuesday was $1.75, equivalent to a market cap of $151.8 million (roughly Rs. 1,016 crores). That is the value of the 81.6 million steems in circulation. On July 4, when Steemit first paid users with steem for their content, the currency's value was only $13 million (roughly Rs. 87 crores), according to Scott.

Steem is the fifth-largest digital currency in terms of market cap. Coinmarket cap.com tracks a total of 657 digital currencies.

Digital currencies have gained broad appeal among investors as a mechanism to transfer assets without a third party or clearing agency.

Users who get the steem currency can then exchange it for Bitcoins within the platform. They can use their bitcoins to pay for services or goods or hold them as an investment.

Steemit is similar to social media website Reddit and Facebook in the way it operates. Unlike the two, however, Steemit is powered by blockchain, the underlying technology that anchors digital currencies such as bitcoin.

The new social media website was launched on an experimental basis without the rewards on May 4.

"There were many, many people looking at this project, several hundreds of users per day," said Scott. "And when they experienced that first payout on July 4, they bought something for their mother, they paid debt. And it suddenly felt real to everyone."

Steems are created solely by the platform's blockchain, whereas bitcoin is generated through a mining process where a miner tries to solve a set of complex mathematical problems.

Scott said the company had a "superangel" investor that helped it get off the ground last February. It will use this momentum to raise funds from institutional investors.

© Thomson Reuters 2016