Most recent update: [June 26, 2023]
What Is Livepeer (LPT)?
Livepeer is a fully decentralized video streaming protocol built on the Ethereum blockchain and utilized to transcode live and on-demand video. Livepeer aims to become a blockchain-based alternative to traditional, centralized video and broadcasting solutions that are operational today. The protocol is different from traditional centralized services like YouTube and Vimeo as it does not store or host video. Instead, Livepeer utilizes excess computing resources to share video more efficiently between broadcasters and consumers.
According to the Livepeer whitepaper, the broadcasting and video streaming space is seeing significant growth, and Livepeer is hoping to introduce decentralization to the space. The protocol aims to make streaming and broadcasting decentralized while also ensuring a secure economic infrastructure. The protocol utilizes a two-layer consensus mechanism to significantly reduce the cost of video streaming and transcoding compared to traditional methods currently in use.
Livepeer understands that video streaming utilizes significant bandwidth, accounting for nearly 80% of global internet usage, with video broadcasters incurring significant costs due to transcoding. Livepeer gives broadcasters access to thousands of distributed processors, allowing creators to make videos in a secure, affordable, and efficient ecosystem. The LPT token is the driving force behind the ecosystem, securing the Livepeer network and delegating responsibilities amongst users on the network.
How Does Livepeer Work?
Livepeer’s core architecture is created around users, otherwise known as orchestrators, any user that has the required computing power can become an orchestrator. An orchestrator dedicates their computing resources to transcoding and distributing video on behalf of developers and broadcasters, Nodes, also known as broadcasters, send video streams to the Livepeer network for transcoding. Orchestrators receive the video streams and assign their computing resources (CPU, GPU, bandwidth) to the network, in exchange for their resources, orchestrators charge a fee to broadcasters. To become an orchestrator, users must stake their LPT tokens, and if any orchestrator acts in a malicious manner or not in the network’s best interest, they can have their stake slashed.
The orchestrator is responsible for ensuring that the video stream is transcoded properly, the video is sent to hardware that encodes and reformats the video. The transcoded video is then sent back to the orchestrators, with each orchestrator getting work depending on their LPT stake. Usually, transcoders are GPUs that are used to mine digital currencies, Livepeer allows any idle computing power to be put to use, allowing operators to access extra revenue.
History And Founders Of Livepeer
Livepeer was founded as Livepeer Inc, which is the entity behind Livepeer, Doug Petkanics and Eric Tang founded Livepeer Inc. Livepeer is an open-source protocol, allowing developers to contribute to its underlying code. Doug Petkanics graduated from the University of Pennsylvania in 2006 and has worked with several companies such as Groupon and Wildcard. Petkanics has worked with Accenture, after which he co-founded Hyperpublic, which Groupon later acquired, after founding Hyperpublic, Petkanics founded Wildcard in 2013 and has been at the helm of developing Livepeer since 2016.
Co-founder Eric Tang has a degree in electrical and computer engineering from Carnegie Mellon University. Tang has worked with Next Jump and Clickable, after which he joined Petkanics and founded Hyperpublic.
The team at Livepeer did not carry out a token sale for its LPT token, instead a specific amount of the LPT token was distributed between the founders, early members of the Livepeer team, and the Livepeer community. LPT tokens were also assigned to the Livepeer development fund.
What Makes Livepeer Unique?
Livepeer is a project that aims to disrupt the broadcasting industry through the utilization of blockchain technology. Livepeer is open source, developers can improve the protocol significantly and participate in the management of the protocol. With the advent of high-quality video content driving the broadcasting industry, Livepeer introduces decentralized computing power and crypto-economic incentives, allowing users to benefit significantly. Users on Livepeer can participate on the platform in several ways, giving them access to pay-as-you-go content consumption, video-enabled decentralized applications, and more.
How Is Livepeer Secured?
As a platform, Livepeer has been created on the Ethereum blockchain and uses a consensus mechanism called the Delegated Proof-of-Stake consensus mechanism. Delegated Proof-of-Stake does not involve mining, with the validation of new blocks depending on the number of tokens staked. While other consensus mechanisms like the Proof-of-Work mechanism require a significant amount of electricity and computing power, Delegated Proof-of-Stake requires much lesser resources and has a significantly lower impact on the environment. Delegated Proof-of-Stake is also significantly more scalable and allows Livepeer to benefit from Ethereum’s extensive decentralized application ecosystem, considerably boosting the use of the Livepeer network.
Livepeer Token Supply Model
The LPT token is the native token of the Livepeer network and has a total supply of 22,859,012 LPT and a maximum supply of 22,906,951 LPT. The current circulating supply of LPT is 21,164,655 LPT, out of the total token supply the founders and team members split 12.35% between themselves, with a vesting period of 36 months from the network’s launch. A further 19% of LPT tokens were issued towards pre-sale purchases. A further 64% was distributed towards the crowd sale, and a further 5% was kept in reserve to maintain the Livepeer network and ensure the project’s future.
The LPT token acts as an incentive that helps maintain the Livepeer network, keeping it reliable, secure, and cost-effective, it also acts as an incentive for orchestrators to act in the network’s best interest and secure the network. New LPT tokens are minted at the end of specific periods called “rounds” and are distributed between delegators and orchestrators depending on their stake. This method gives users that participate on the Livepeer network more ownership over the network than those users who do not participate on the network.
Why Does The LPT Token Have Value?
The LPT token is the native token of the Livepeer network and is critical to the network, fulfilling several use cases. Users often prefer the censorship-resistant architecture of protocols such as Livepeer, compared to the traditional centralized services in existence today. Livepeer is independent of any external influences such as governments to modify or delete content. Livepeer also utilizes a pay-as-you-go subscription model, which means users do not have to pay any subscription fee towards any service that they do not utilize. Content creators can also earn more through Livepeer, as the platform removes the need for any intermediary.
Risks Associated With Livepeer
While Livepeer has immense potential, the project does have its fair share of potential risks. Let’s look at some of the potential problems, Livepeer is entering a very competitive space, and the biggest threat to the protocol comes from already established players such as Amazon Web Services. However, Livepeer does have an advantage because it isn’t possible to develop decentralized applications on Amazon Web Services. With the growth and adoption of decentralized applications, Livepeer looks set to take away some market share from established players.
Security on Livepeer depends on the decentralization of orchestrator nodes. Livepeer has built a robust network yet could still be vulnerable to events that could render a significant chunk of its nodes offline. Another factor impacting security is the profitability of nodes, If nodes are not profitable, they will be unable to attract operators, making the protocol vulnerable to attacks.
References
https://decrypt.co/resources/what-is-livepeer-lpt-grayscales-bet-on-streaming-video
https://github.com/livepeer/wiki/blob/master/WHITEPAPER.md#introduction-and-background
Due Diligence
Prior to listing Livepeer on the VirgoCX Platform, VirgoCX performed due diligence on Livepeer and determined that Livepeer is unlikely to be a security or derivative under Canadian securities legislation. VirgoCX’s analysis including reviewing publicly available information on the following:
- The creation, governance, and location of Livepeer and/or its primary development team;
- The supply, demand, maturity and liquidity of Livepeer; and
- Legal and regulatory risks associated with Livepeer.
Statutory Rights under Securities Legislation
VirgoCX is offering Crypto Contracts on crypto assets in reliance on a prospectus exemption contained in the exemptive relief decision Re VirgoCX Inc. dated May 30, 2022 (the Decision). Please be aware that the statutory rights in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under the securities legislation of each other province and territory in Canada, do not apply in respect of the Crypto Fact Sheet to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
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