How The Livepeer Token Helps Make Decentralized Streaming Possible

Livepeer is designed as the world’s first decentralized video architecture — and the Livepeer token (LPT) is the engine that drives it. LPT is an ERC-20 token whose role in the Livepeer network is to provide security, assign work, and incentivize active participation in the various roles required for the provision of the best possible service to our users.

Before we dig into the detail, a few quick words on what that service entails.

Empowering disruptive video visionaries
The $70 billion streaming industry — already strong before 2020 — has accelerated over the past year as the pandemic shut down in-person entertainment across the planet and forced audiences and artists to seek out virtual venues. Video now accounts for 80% of web traffic — with less and less of it using Big Tech’s expensive infrastructure. Upstart platforms created by innovative developers are attracting increasingly large followings.

But these innovators face a challenge: the fees charged by centralized services to reformat — or transcode — raw video streams so they look equally great on any device at any speed can mount rapidly, which makes it hard for smaller players to succeed.

Now, thanks to Livepeer, there is an affordable, decentralized alternative.

The Livepeer network, built on the Ethereum blockchain and powered by thousands of distributed users, gives streaming app developers access to a secure, high-quality and affordable encoding architecture without a crippling price tag. And people are noticing: last summer, the network was transcoding 10,000–20,000 minutes of video per week. Recently it has been surpassing 400,000 minutes — growth of 20x..

Affordability, reliability, and scalability: these are the ingredients that we believe will make Livepeer the primary infrastructure for the entire streaming industry.

So where does LPT fit in?

LPT: The key to quality and security on Livepeer
The Livepeer token is the primary incentive for users who contribute their computational power and bandwidth to the network. These node operators, known in the community as “orchestrators,” are essential to quality transcoding and other infrastructure services for the live streaming industry.

There is another way to earn LPT, though. Users who choose to commit — or stake — their tokens in support of successful orchestrators also earn rewards from the Livepeer protocol, along with a share of the network fees paid by the growing number of streaming apps that are using the network. These users are known as “delegators.”

Orchestrators are allocated work according to the amount of LPT they have staked — their own or those of delegators — along with their geographical location, how reliable they are and how well they perform. Since more staked tokens leads to more work, and since more work equals more rewards, orchestrators compete to attract as many delegators as possible.

The benefits of participation
At the end of each round (essentially a day), the Livepeer protocol mints new LPT, according to a designated inflation rate (more on that later). Livepeer is a “stake-based” protocol, which means these rewards are allocated to each participating user in proportion to their contribution to the work of the network.

Those who have been active in a given round — either by running nodes or by staking tokens — receive a proportionate amount of the reward issue. Orchestrators earn an added benefit as well: they claim a portion of their delegators’ rewards as a commission for running the decentralized infrastructure. Users who did not actively participate receive nothing. Thus, active participants grow their holdings in the network, while the ownership of inactive users shrinks with every round in which they do not participate.

As previously explained, a greater stake = more allocated work, and more work = more rewards. So in this way, Livepeer rewards active participation in both the present and the future.

Participation is key to Livepeer’s growth. The more tokens that are committed to the network’s functioning, the more stable, secure and powerful it becomes.

The inflation rate used to determine the size of the reward issue offers another good reason for users to be active. The percentage of new LPT in each reward issue is determined by how many total LPT are committed to the network’s successful functioning. The higher this proportion, the lower the inflation rate and the more value existing tokens will retain.

Those who do not stake LPT may have readier access to their tokens, but their level of network ownership will fall at an accelerating rate as new tokens are minted — particularly if the inflation rate is high. Those who do stake receive greater ownership, more work and more rewards.

Additionally, by improving the security and quality of the network, active users can help generate more network usage fees — a portion of which goes to them. Finally, those who have committed their LPT can take part in Livepeer’s decentralized governance process by proposing changes to the protocol code and parameters.

All of this is designed to create a virtuous circle in which more work leads to greater rewards and “skin in the game,” which can enabled nodes to lower prices, which in turn leads to even more work — all of which yields a network that continually grows more robust, secure, and powerful.

Getting LPT outside the network
There is of course another way to get your hands on LPT without staking or running a node. The token is available on many leading crypto platforms, including Coinbase, Binance, Kraken, Gemini, OKEx, Uniswap, Balancer, and Gate.io. Additionally, in March, Grayscale Investments added Livepeer to its selection of digital asset trusts.

These exchanges provide greatly expanded access to LPT and to Livepeer’s decentralized video streaming infrastructure for users and developers around the world. Of course, the true power of the Livepeer token lies in its essential role on the network, where it is crucial to empowering developers to change the video streaming game.

Get started with Livepeer today.