What is Livepeer? How does it work?

Source: cryptopedia

Compiled by: Hu Tao, Chain Catcher

Livepeer is a scalable platform as a service (PaaS) for startups and organizations looking to add live or on-demand video to their products. At its core, Livepeer is a video transcoding protocol based on Ethereum, which refers to reformatting video to accommodate various bandwidths and devices. Livepeer aims to make streaming more reliable while reducing costs, acting as a decentralized marketplace for developers to build applications that integrate live video and transcoding providers. The native token of the network is LPT.

The core of Livepeer is to provide a scalable and cost-effective infrastructure solution to meet today’s streaming demands. In addition to consuming 80% of internet bandwidth, video streaming is also computationally expensive, primarily because video distributors must transcode the video before it can be played. The resulting costs mean that many video streaming companies have to generate revenue by selling user data and serving ads to users to cover infrastructure expenses. Livepeer seeks to provide a decentralized, token-incentivized open network to replace this model—claiming it can reduce costs by up to 50 times compared to traditional methods.

How does Livepeer work?

First, nodes called Broadcasters send video streams to the network for transcoding. These video streams are received by Orchestrators—users who contribute their CPU, GPU, and bandwidth to the network in exchange for fees charged to Broadcasters in ETH. To become an Orchestrator, you must know how to stake Livepeer. As an Orchestrator, if your behavior is malicious or subpar, your LPT stake may be slashed.

Orchestrators act as coordinators, responsible for ensuring that videos are correctly transcoded. Before sending the video back to the Orchestrator, they send it to transcoder hardware, which encodes and reformats the video. The work is allocated to Orchestrators in proportion to the amount of LPT they have staked. The transcoder performing this work is typically a GPU mining cryptocurrency, but sometimes idle video encoding ASICs are also available during the mining process. Livepeer enables these ASICs to be utilized, providing additional income for operators without interrupting their mining operations.

If you are an LPT holder but do not wish to participate as an Orchestrator or Transcoder, you can delegate your LPT tokens to an Orchestrator in exchange for a share of the rewards and fees earned by the Orchestrator.

Livepeer Consensus Mechanism

Livepeer employs a two-layer consensus mechanism. First, the Livepeer ledger and its transaction records are secured on the Ethereum blockchain. The second consensus layer handles the distribution of newly generated LPT and verifies that transcoding work has been completed correctly. This layer utilizes a Delegated Proof of Stake (DPoS) model, where Orchestrators act as validators—nodes participating in the protocol to ensure correct payment settlements, token distributions, and security.

When an Orchestrator performs transcoding work, Broadcast nodes can self-verify or outsource to other Orchestrators to check for errors and malicious behavior. This is a costly operation, so Livepeer only randomly verifies a small portion of completed work.

Livepeer Token (LPT)

LPT is designed to serve as a coordination and incentive mechanism to help keep the network as cost-effective, reliable, and secure as possible. It economically incentivizes coordinators to act honestly, thereby protecting the network.

New Livepeer tokens are minted at the end of periods known as "rounds" and distributed to delegators and coordinators based on their stake proportions. This is to ensure that those participating in Livepeer have more ownership of the network than those who do not. A round is approximately equivalent to 24 hours. The inflation rate of LPT automatically adjusts based on the number of tokens staked out of the total supply in circulation. This is to maintain ideal levels of network participation.

Livepeer's decentralized architecture provides video broadcasters with an alternative to the expensive centralized infrastructure they have traditionally relied upon. However, broadcasters are not the only stakeholders that benefit. Livepeer's model allows video streaming companies to explore new business models that do not rely on selling user data and serving ads—creating a better experience for consumers.

Similarly, Livepeer predicts that its technology can enable various new services, such as pay-per-use content consumption and improved creator economy streaming applications, which can establish better consistency among content creators, consumers, and the platforms themselves. Livepeer also offers a long-needed decentralized solution for embedding video into decentralized applications (dApps).