Livepeer (LPT) is one of the leading decentralized streaming solutions

As the number of streaming service users grows, so do the demands on computing power. Streaming video requires more bandwidth for transcoding (converting video encoding to another format in real-time), which increases costs.

According to some reports, about 80% of all Internet traffic is streaming video. However, due to the lack of resources for decentralized services such as Netflix or YouTube, streaming video quality can deteriorate — a problem that Livepeer, which will be discussed in this article, aims to solve.

What is Livepeer?

Livepeer is a decentralized platform based on the Ethereum blockchain for streaming video from broadcasters to users, which uses redundant computing resources for this purpose.

The Livepeer protocol was created back in 2017. The Livepeer team introduced a transparent and open ecosystem that any broadcaster can quickly join if they need computing power for high-quality video streaming transcoding.

How does the Livepeer protocol work?

Users (consumers of streaming video), developers of streaming applications and services, and so-called "conductors," i.e., broadcasters, play key roles in the Livepeer ecosystem. Individuals or companies with sufficient computing power for high-quality video streaming can join the Livepeer network and become conductors.

In addition to the three roles listed above, Livepeer also has delegators, who are LPT (native token holders) who delegate their tokens to conductors and are rewarded for their contributions to the ecosystem through commissions paid by the creators of streaming services. Commissions to conductors and delegators are paid in the cryptocurrency ETH or the stablecoin DAI.

The process of hosting and streaming video itself works like this:

1. When a user launches a live video broadcast through the Livepeer network, the video is immediately encoded into multiple formats so that it can run seamlessly on various devices.
2. The video is then transmitted for transcoding to particular Livepeer network nodes called "transcoders" — these are the ones that encode the video into different formats. Transcoders are selected through smart contracts, and to get the right to transcode, these nodes must bid in LPT tokens;
3. Transcoders are rewarded for their work through LPT tokens, and the streaming video is broadcast to end users.

Livepeer token

LPT is the native token of the Livepeer ecosystem, which, as of August 2024, exists on two networks, Ethereum (ERC-20) and Harmony. At the same time, all the existing 33.7 million LPT tokens are circulating in the market, but there is no maximum issuance for this asset, making it inflationary. In other words, the number of LPT tokens on the market constantly increases. LPT tokens are issued every 5,760 blocks in Ethereum — this period is called a "round" and lasts about 24 hours.

At the same time, the inflation rate of LPT tokens is adjusted according to the algorithm embedded in the protocol and depends on how many tokens are in circulation. As the issuance increases, the inflation rate of Livepeer tokens will decrease.

The primary function of the LPT token is to reward network members for their contributions to the Livepeer ecosystem. However, LPT tokens are also used as a security deposit. In other words, to be eligible to earn LTP tokens, members must first deposit them — a process very similar to staking. According to Livepeer's official website, the total number of LPTs deposited is 15.1 million — a little less than half of all tokens on the market.

Users can also trade LPT tokens on DEX exchanges, deposit them into liquidity pools to earn income from trading commissions, and perform other transactions on the DeFi market.

In addition to rewards, LPT tokens are used to manage the Livepeer ecosystem.

Does Livepeer have a future?

Livepeer is one of the few decentralized protocols in its cryptocurrency market segment. With the growing demand for video streaming, this platform has an excellent chance to grow, which can also benefit LPT token investors.