The Streaming Tidal Wave Gains Momentum from Decentralization and Cryptoeconomics

By Timothy Li, Head of Platform at Theta Labs

When you decide on a Netflix movie or click on a Youtube video, how long do you expect to wait for the video to load? How many times do you wait for the video to rebuffer? If you’re like me or 85% of people worldwide, you’re probably thinking wait? I don’t wait for videos… I watch videos!

We may take smooth, high quality video for granted, but as with any other convenience afforded to us, there’s some hefty technology operating behind the scenes to meet our simple expectation: to just watch, not wait. This is largely enabled by content delivery networks (CDNs), which operate a large physical footprint of servers and points of presence (PoPs) that deliver video streams to the end viewer.

Here’s the bad news: as video streaming bandwidth increases, existing CDN infrastructures become increasingly strained. It’s difficult to serve all users, on-demand, without any latency or decrease in video quality.

The tidal wave of online video content

Globally, viewers between ages 18–35 watch an average of seven hours of online video per week. As of last year, YouTube served up more than 1 billion hours of video per day. With content available anywhere and on-demand, viewers are able to pick and choose the most convenient circumstances to consume large amounts of content. Moreover, as service providers improve video quality, formats will improve from 1080p HD to 4K (UltraHD) and 8K. Immersive experiences such as virtual reality and augmented reality will also become staples as mediums of content consumption. All of this amounts to large increases in video traffic and bandwidth in the future. Globally, IP video traffic will account for 82% of consumer traffic by 2021.

CDNs swept away by the surge?

Content delivery networks need help, big time. Even large CDNs, with dozens of globally dispersed PoPs, are unequipped to bring massive amounts of data to all corners of the world. They are still not close enough to large swaths of end users, especially in remote regions like those of many developing countries.

Further, it takes a tremendous amount of investment in manpower and capital to deploy and maintain large networks of servers and infrastructure. Much of these costs are passed off to their customers: think the HBOs, CBSs, and Disneys of the world. Digital content platforms face substantial CDN costs, particularly in international markets. Netflix, which operates its own private CDN, counts international content delivery-related costs as 20% of cost of sales.

Akamai, the largest CDN, runs the highest percentage of employee overhead costs where G&A expense is 20% of revenue. This is unusually high compared to other similar technology companies. With a large global footprint comes offices and headcount (HR, Finance, IT) that has consistently outpaced revenue growth since 2012. Such companies are bound to succumb to operational inefficiencies when literally building all over the world. What CDNs and content platforms need is a way to elastically scale their infrastructure based on bandwidth demand and location usage.

Not all is dreary and hopeless, though. Decentralization and cryptoeconomics are exacting remedies to the ails of the overweight CDN and the overpaying content platform. New blockchain startups — such as Theta Labs — are combining these ingredients and blazing a new path forward.

Scaling through decentralization

Think of decentralization as moving core capabilities away from a central controlling entity and toward a constellation of dispersed resources. In fact, scaling is exactly the strength of a decentralized mesh network of users. A content distribution mesh network possesses self-scaling attributes, where the capacity of the entire network increases when an individual user joins. When users join the mesh network, they volunteer their spare bandwidth and computing resources to act as servers, relaying video streams to other users. This sharing economy approach has seen widespread success in areas such as cars/transportation, housing and office space.

The application of the model towards bandwidth and video delivery is no different. The capacity of the network is able to dynamically adjust based on how many users are present at any given time, essentially self-regulating so that overloading the network is rare. This is a complementary solution to centralized CDNs, as it allows CDNs to offload bandwidth to the mesh network they would otherwise have to deliver — and offloading bandwidth translates directly to cost savings. In the future, as these mesh networks become sufficiently dense, it’s not unforeseeable that the decentralized approach entirely replaces centralized CDNs.

However, a mesh network is only as strong as the participants that contribute to it. Incentivizing users to adopt and contribute to mesh networks has been a challenge in the past. Early on in a nascent network, when only a handful of users are present, network value is minimal. New users have little incentive to continually participate and they typically don’t stick around after they’ve watched what they came for. With cryptoeconomic token rewards, that problem is resolved.

Cryptoeconomics stimulates mesh video streaming and creates new utility

The cryptoeconomic token model allows early adopters to receive incentives that encourage them to grow the network and reward them for the video relaying service they provide to the network. Essentially, tokens serve to bootstrap network effects and get over the hump of the cold start problem. When a participant relays video streams to another viewer, he earns token rewards for doing so. Moreover, he wants many more viewers to join the network so he can continue to relay streams and earn more tokens.

Tokens are not just limited to incentivizing contributions to content delivery, but also enable a myriad of use cases at the application layer. Users are able to purchase premium services and products or support content creators through donations with tokens. Vibrant media ecosystems can thrive on top of such a video mesh protocol. Imagine leaving your computer on overnight to contribute to the network and then allocating those earned token rewards towards paying for your Netflix or Amazon Prime subscription. Tokens, which are a representation of value users contribute to the network, can be spent on a number of apps in the ecosystem and beyond.

Participating in the video streaming evolution

As computing becomes more ubiquitous, the stage is set for an evolution in video streaming. Sure, PCs can be plugged into the video streaming mesh network, but you’d be remiss to neglect edge devices such as mobile phones, tablets, smart TVs, gaming consoles, and other IoT devices. New, more engaging media ecosystems will emerge on the foundations of mesh streaming infrastructure networks and they will be powered by cryptoeconomic token incentives. They will flourish with significantly lowered content delivery costs and greater user engagement. The digital media stack is at the inception of a complete overhaul, which will be powered by users, for the betterment of all users.

Telcos, CDNs, digital media platforms are facing a critical choice — explore this new decentralized frontier with an open mind and willingness to innovate, or watch their business model threatened later.

At Theta, we’re biased toward action over conceptualization or ideation. That’s why we are pushing ahead with protocol development and have integrated the SLIVER.tv e-sports viewing platform as the first Dapp built on the Theta Network with a new blockchain. Get in touch with us to explore taking this new decentralized approach and revolutionizing the existing video streaming paradigm.