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I wouldn't expect that to work well in the long-run, since Ghost (http://tryghost.org/features.html) has the same features (Markdown + minimalistic design), and it's open source.

And that's not counting the fact that Medium itself is free.

I'm not targeting users who are capable of hosting their own blog, let alone caring about whether it's open source or free. There are still people who are astounded by the simple possibility of putting their own content on the web.
Debug Assertion Failed! Implicit broken rule: "Startups rarely fail because of the competition".
So instead of complex algorithms that detect meaningful content, you resort to $7?
The network part is just something for later. Since when does medium use an algorithm?