Steem uses a Delegated Proof of Stake (DPoS) consensus mechanism. The mechanism uses 21 witnesses to validate transactions on the network and produce new blocks in the blockchain. 20 of the witnesses are full-time whilst the 21st position is reserved for backup witnesses who rotate in this position. This differs from Proof-of-Work, another common consensus mechanism. In PoW miners compete to validate transactions and produce blocks. Blocks on the Steem blockchain are created every 3 seconds. The delegates are selected through a voting system, users who stake STEEM tokens are entitled to vote.
Steem's Token Variety Steem introduces a new incentive model and Sybil resistance mechanism that incorporates multiple native cryptoassets:
STEEM - The fundamental unit of account from which other tokens derive their value. It's liquid and can be bought and sold on exchanges.
Steem Power (SP) - STEEM that has been committed to a thirteen-week vesting schedule in which it cannot be transferred. When users vote on content, their influence on how the rewards are distributed is directly proportional to the amount of SP owned. SP also gives holders the right to 15% of the annual inflation, based on a percentage of the total SP owned.
Steem Dollars (SBD) - SBD acts as a stablecoin to lower the cognitive costs of using the network. They are created in a similar fashion to convertible notes in the startup world and there are terms allowing holders to convert to STEEM with minimum notice at the fair market price of the token. To prevent the token-convertible dollar from creating too much debt in the system, the blockchain automatically reduces the amount of STEEM generated through conversions to a maximum of 10% of the markets hare ensuring there will never be a debt-to-ownership ratio higher than 10%.

Use of Native tokens in the ecosystem:
STEEM acts as a unit of account and is meant to be transacted from peer-to-peer for goods and services.