Let’s Activate Our Top Performing Nodes
As the number of minutes of live video streamed through the Livepeer network has increased to millions of minutes per week, and the associated fees paid into the network have risen accordingly, there has been a flurry of activity amongst existing and new node operators to compete to earn their share of the pie by providing reliable and scalable transcoding work. These operators stake Livepeer Token (LPT) to secure the work that their GPUs perform encoding video, and in return earn the ETH that users pay to access this functionality. They are suppose to also be increasing their network ownership through earning newly minted inflationary LPT each day, however the high costs of using the Ethereum network at the moment, has hampered this process. Often times these node operators find that the cost of calling the reward transaction each day to generate the new LPT is higher than the value of the LPT itself, and therefore they forgo this opportunity.
This is a huge challenge for the Livepeer network, and one that the entire community should place the highest priority upon addressing. The Livepeer network will be far stronger, if the global set of high performing node operators can earn a meaningful LPT stake, through a solid track record of performance.
To get a view of the current status, you can check out this dashboard.
It shows a list of all the nodes that are currently performing at a “top” level, meaning a performance score of greater than 6.3 in at least one region, which essentially means they can reliably encode video faster than real time with high availability. It then aims to indicate whether this node can profitably call reward with the previous round’s average Ethereum gas prices at various reward cut percentages. Currently there are 37 such nodes. The green check mark indicates that they currently have enough delegated stake to profitably call reward, and the red X indicates that they do not. Of the 37 top performing nodes, only 17 could profitably call reward at a 25% reward cut, which I’d suggest as a target acceptable rate for delegators, at the time of writing.
I propose that the community’s goal be to activate the top 66 performing nodes by the end of September. That gives us about 45 days to attract 29 more high performing nodes by improving the performance of existing nodes or attracting new ones to the project, and to ensure enough stake is allocated to the next 49 nodes to allow them to profitably call reward.
How can we do this?
There’s no silver bullet solution to this problem. Ideally the protocol economics would be designed so that all self-interested token holders would coordinate to make this happen automatically. While I believe it is in every token holder’s long term interest to ensure that Livepeer does have a reliable and global set of decentralized stakeholders providing infrastructure to the network, in the short term, many holders are more incentivized by maximizing their LPT yield or disincentivized by the high gas prices on Ethereum. Let’s take a look at a number of steps that we can take to hit this goal.
- Visualization, operations, and communication
The top performers dashboard above is a great start at visualizing the current status of what nodes are and are not “activated” to profitably call reward. Let’s continue with visualizations that show progress towards this goal of 66, and perhaps show actions that the community should take to help towards this goal.
The lightest and most achievable actions are “node X should raise its reward cut”, and more importantly, “stake to activate this high performing node.”
If it’s clearly visualized that staking X amount towards Y node would help activate them, then token holders can easily see a high impact action and take it to help the network. On the communications front, if we talk as a community about this goal, our progress towards it, and celebrate the activation of additional nodes, it will help accelerate the progress. Discord and the forum are great venues for this.
These tactics likely won’t get us all the way towards the goal alone, but even if they’re responsible for activating a subset of nodes, they will help tremendously.
2. Product work to showcase the benefits of activating nodes
Many token holding delegators right now don’t realize that they could be earning greater rewards through staking towards high performing nodes and their high ETH-based fee shares, than they would simply by leaving their stake where it is on a non-performant node. Many other products, particularly in the DeFi space, have made these sorts of visualizations evident through the product by packaging up the returns as “yield.”
Yield might not be the perfect concept for Livepeer delegators to chase, because of many subtle differences between Livepeer and a financial product, but the larger point here is that if nothing changed at the protocol level, we could still encourage greater stake movement and activation of more nodes simply by showcasing the yield that could be generated by such activity.
3. Scaling to make reward calls and staking far cheaper
This is likely the highest impact action, but is also the most complex to pull off. There is already a tremendous amount of engineering R&D work going in to the scaling effort to reduce the costs of reward and staking actions over 100x. There are prototypes in the works leveraging the layer 2 rollup chains. Migrating these high cost transactions onto a platform like this could make the cost of reward call and staking actions substantially cheaper, and could instantly activate all high performing nodes with minimal stake to profitably call reward and start earning LPT. While I hope that by the end of September we’ll see evidence that this is working and nearly ready to go on test networks, it likely won’t be ready for a production migration quite yet, and so we should collectively make sure we’re focused on the alternative tracks.
4. Protocol updates
The community has been participating in discussions in the Discord chat and in this forum thread about ideas for smaller protocol updates that could have an impact. Ideas have ranged from reducing the reward call frequency from 1x/day to 1x/week (meaning that it would take 1/7th of the stake to profitably call reward), to de-activating nodes that call reward but don’t earn fees in ETH over some time period.
There are likely some wins here, but they shouldn’t be taken lightly, as they call come with various cryptoeconomic security tradeoffs, implementation challenges, or risks of placing more trust in smaller groups that operate within the protocol.
Ultimately, it’s important to remember that one of Livepeer’s core principals is to “make technical first decisions in service of the mission.” In considering protocol updates we should always ask ourselves whether this is increasing the likelihood of becoming the world’s open video infrastructure? In the case of getting more LPT into the hands of high performing operators, it is creating stronger long term alignment amongst those who are helping the network most. As long as the changes don’t come with severe tradeoffs, this track should be considered.
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All in all, the goal of activating 66 high performing nodes to be able to profitably call reward by the end of September is my suggestion for the next community goal. If we focus on it, keep an open dialogue going around it, and track and measure our progress, I think it’s achievable and will have very positive long term effects for the network — especially with scaling updates right around the corner.