Steem has several types of tokens, Steem, Steem Dollars (SBD), and Steem Power (a denomination of VESTS). Steem and steem dollars are liquid while steem power (SP) is not.
Blockchains like Steem and Bitcoin produce new tokens each time a block is produced. Unlike Bitcoin, where all of the new coins go to the block producers (called miners), the Steem blockchain allocates a majority of the new tokens to a reward fund. The reward fund gives users tokens for Steemians participating in the platform.
When you are paid on the website Steemit, you can choose to be paid 50% in STEEM Power and 50% in STEEM Dollars, or 100% in Steem Power. Here’s an example of a 50/50 payout: If you earn $200 on a post, you will get $100 STEEM Dollars, and 50 STEEM Power (assuming STEEM Power is worth $2 each).
It’s also possible to receive STEEM tokens through other means, such as VESTS through mining (valid until January 2017), or transferring Steem Dollars to someone via STEEM Memo.
STEEM is the base liquid currency token in the platform. STEEM can be powered up into STEEM Power, traded for Steem Dollars, and transferred to other accounts. It is a cryptocurrency token, similar to bitcoin.STEEM is the standard Cryptocurrency tradable on various exchanges. Its value can fluctuate just like any other coin.
VESTS (Steem Power)
VESTS are a type of token given to miners (until Hard Fork 17), witnesses and content creators and curators. They are denominated as Steem Power on the website Steemit.
STEEM Power (abbreviated SP) is a measurement of how much influence a user has in the Steem network. The more STEEM Power a user holds, the more they can influence the value of posts and comments.
They are non-liquid, thus must be “powered down” before being able to trade them. Powering down Steem Power (VESTS) takes 3 months, and is paid out as 13 weekly payments. The power down rate will stay the same if you earn more STEEM Power while powering down, thus it’s recommended to re-power down after earning a large amount of fresh STEEM Power.
STEEM Power gains interest over time, and usually gains interest faster than the power down rate, thus you will still be earning interest while powering down.
SBD (Steem Dollars)
Steem Dollars are a currency which was designed to be pegged to the US Dollar. They can be converted on Steemit into STEEM Power (powering up), or into STEEM (easily tradable on various exchanges).
Steem Dollars may also be converted into STEEM. There are another quick option trading it in the Internal market. Steem Dollars can be used to buy things in marketplaces, such as Peerhub.