What Is Livepeer (LPT)?

Livepeer token (LPT) serves as the key facilitator within Livepeer, a cutting-edge decentralized video protocol operating on the Ethereum blockchain. This groundbreaking platform empowers users to seamlessly integrate video content into their applications in a manner that is both decentralized and cost-effective when compared to traditional alternatives.

To achieve the decentralization of video processing, Livepeer leverages a network of node operators who collectively undertake the transcoding process. This crucial step ensures the efficient delivery of video content to end users by transforming raw video files into an optimized format tailored to individual viewers. Factors such as screen size and internet connection are taken into account during this transcoding phase.

Harnessing the power of blockchain technology, Livepeer employs game theory, cryptoeconomic incentives, and smart contracts to enable reliable and affordable video processing. By utilizing the Livepeer token (LPT), the protocol effectively coordinates and distributes video processing tasks among network participants, guaranteeing secure and dependable operations.

Basics

In the wake of the unprecedented challenges posed by the global pandemic, social media platforms have experienced a surge in popularity, with video content playing a pivotal role. To address this immense demand and provide a solution for video app developers and creators, the Livepeer network emerges as a formidable force. Operating through a vast array of distributed nodes, this network offers a secure, high-quality, and cost-effective encoding architecture, eliminating the burden of exorbitant expenses. Since its establishment back in 2017, the Livepeer network has remarkably processed an astonishing 150 million minutes of video, cementing its position as a reliable and efficient platform.

Decoding the Mechanism of Livepeer

The Livepeer network, a decentralized platform constructed on the Ethereum blockchain, serves as a medium that links individuals in need of video processing with suppliers offering such services. Its core objective is to ensure the video transcoding process's reliability, security, and affordability, surpassing current centralized solutions' capabilities. To achieve this, Livepeer employs its native token, LPT, as an incentive for network participants.

The network consists of two primary stakeholders: orchestrators and delegators.

Orchestrators play a pivotal role in the Livepeer network. Individuals who possess video mining equipment have the opportunity to stake their LPT and engage in video processing tasks within the network. In return for their services, orchestrators receive a portion of the video processing fee, which is disbursed in the form of LPT and ETH. These dedicated participants are known as orchestrators.

On the other hand, delegators, who may lack access to video mining tools or expertise in video processing, can still actively participate in the network. They achieve this by delegating their LPT to a node operator equipped with the necessary tools and knowledge to carry out video processing tasks. This delegation process is facilitated through the Livepeer Explorer. These participants are referred to as delegators.

LPT

The Livepeer network relies on its native asset, the Livepeer token (LPT), which operates as an ERC-20 token. It serves multiple purposes within the network, including enhancing security, distributing video processing tasks among participants, and incentivizing active engagement in various roles. The stability, security, and robustness of the network are directly proportional to the number of LPT tokens committed to its operations.

Orchestrators, who are assigned work based on the amount of LPT they have staked, whether their own or delegated by others, compete to attract delegators due to the direct correlation between delegated tokens, workload, and rewards.

At the conclusion of each round, which occurs daily, the Livepeer protocol generates new Livepeer tokens in accordance with a predefined inflation rate. This "stake-based" protocol ensures that rewards are distributed proportionally to each participant's contribution during the round. Active participants, either running nodes or staking tokens, receive a corresponding portion of the reward. Conversely, inactive participants in a given round do not receive any rewards.

Orchestrators benefit further by earning a commission from their delegators' rewards, serving as compensation for maintaining the decentralized infrastructure.

This system enables active participants to increase their stake in the network, while inactive users experience a reduction in their transcoding rights with each non-participatory round. Essentially, a larger LPT stake translates to more assigned work, resulting in greater rewards.

The inflation rate used to determine reward issuance also acts as a motivation for the user activity. The percentage of new LPT tokens generated in each compensation round is determined by the total LPT committed to the network's successful operation. A higher proportion of committed tokens leads to a lower inflation rate, thereby preserving the value of existing tokens. Consequently, token holders are naturally incentivized to stake more tokens in order to maximize their earnings.

Conclusion

Livepeer offers a decentralized video protocol that enables Web3 projects and companies to delegate video processing tasks to trustworthy entities. By utilizing this solution, they can bypass exorbitant and unpredictable video processing fees while avoiding censorship. Consequently, these entities can enhance the quality of their video content for their audiences, ensuring a better viewing experience.