What is Livepeer (LPT)? Grayscale’s Bet on Streaming Video

When Grayscale, the firm behind the GBTC investment vehicle, announced in March 2021 that it was creating new trusts based on other cryptocurrencies, most of the newly-announced trusts picked were well-known, unsurprising cryptos such as Chainlink and Filecoin. But there was one new addition that seemed to catch even crypto enthusiasts off-guard: Livepeer.

Livepeer is an Ethereum-based decentralized service that aims to significantly slash costs for video streaming apps. It does so by distributing resource-hungry transcoding tasks to users who lend their computer’s processing power to the network. Like most decentralized services, there are incentives for network participants, such as the “orchestrators” who transcode video, and delegators who stake LPT tokens to ensure liquidity.

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Grayscale clearly sees potential in the idea, but what’s it really all about? Here’s a look at how Livepeer works, how users can get involved, and how to buy its LPT token.

What is Livepeer?

Livepeer is a decentralized service designed to minimize infrastructure costs for streaming or on-demand video applications.

It’s not a consumer-facing video platform itself; this isn’t a decentralized alternative to Twitch or YouTube. Instead, it’s a behind-the-scenes solution for app creators that distributes the task of transcoding video—or converting it from one format to another before playback—across participating computers on the network.

The firm suggests that it can cut resource costs by up to 50 times compared to traditional, centralized approaches to transcoding video.

How does Livepeer work?

Livepeer relies on its “orchestrators,” or people who have added their computers to the network, to handle transcoding demands from app developers as needed. These individuals trade their computing resources—CPU and GPU power, along with bandwidth—in exchange for fees paid out in cryptocurrency. Livepeer also calls these users “video miners,” keeping with the mining parlance used for the block creation work on many other blockchain platforms (like Bitcoin).

Developers who use Livepeer’s network to fuel their video apps must pay LPT for transcoding and distribution services. Additionally, LPT holders can stake their tokens towards an orchestrator to become a delegator, thus earning a smaller share of fees and rewards for participating in the network without being directly involved in the transcoding process.

The price of Livepeer’s LPT token shot up nearly 450% in the days following the announcement of the Grayscale Livepeer Trust in March 2021, according to CoinGecko.

What’s so special about Livepeer?

Video streaming is expensive for app developers. It’s one of the hidden costs that consumers may not directly see or understand, but those costs can be passed onto them in terms of service fees, increased advertising, or having their data sold.

By minimizing those costs through distributed computing, Livepeer may enable new kinds of video-driven apps and business models. On the other end of the equation, people can contribute their computing power and earn fees and rewards in the process.

What can you do with Livepeer?

Livepeer is not a consumer-facing service, so users who watch videos that are transcoded on the Livepeer network may not have any indication that the service was involved.

For app developers, Livepeer provides a potentially cheaper alternative to centralized services, trimming down computing costs to implement video functionality within their services. And for network participants, there’s incentive for plugging your computer into the network and/or staking LPT tokens to help ensure liquidity.

Livepeer has launched a “co-mining” pilot program with decentralized storage platform Filecoin, as of March 2021, allowing users to mine and earn rewards on both.

How to buy LPT

LPT is not currently available for purchase for fiat currency, and exchanges such as Coinbase, Binance, Gemini, and Kraken do not support trading as of this writing. However, you can find it on altcoin exchanges such as the decentralized exchange (DEX) Radar Relay.

You can purchase coins such as ETH or BTC with fiat from an exchange like Coinbase and then send those funds to an external wallet before using them to buy LPT from another exchange. Uniswap and Balancer are other examples of exchanges that support LPT.

The Grayscale Livepeer Trust

Grayscale’s cryptocurrency-based trusts are exchange-traded investment vehicles designed to provide exposure to crypto for traditional investors. The price of each trust roughly tracks that of the respective cryptocurrency, and Grayscale holds a significant amount of each coin or token within the trust. Investors do not own any actual cryptocurrency by investing in a trust, but they can potentially reap the benefits of its increasing value.

By creating the Grayscale Livepeer Trust, the firm is betting on the future of the LPT token: that it will increase in value over time, and that investors will want exposure to it. As of March 2021, Grayscale owns $8.5 million worth of LPT, but the success and growth of its Bitcoin Trust is any indication, the firm could amass significantly larger sums in time.

The future:

Livepeer’s success will likely depend on its ability to scale to meet demand. If its distributed network can provide similar quality of service as centralized alternatives and do so at a fraction of the cost, then it could become a reliable option as Web3 apps and platforms grow in popularity. As of March 2021, it’s still a relatively small network, with some 47 transcoders connected to the network. Livepeer CTO Eric Tang tweeted in the same month that the service had transcoded more than 1.6 million minutes of video over the prior 30 days.

However, Livepeer is not the only service attempting to use decentralization to solve the high costs of video streaming. Theta is the highest-profile service in the bunch, but it takes a different approach by using excess user bandwidth to help serve streams to other users, rewarding you with Theta Tokens in exchange for your bandwidth. VideoCoin, which describes itself as an “Airbnb for video,” is closer to Livepeer in approach; it distributes computing tasks across connected nodes on the network. There are also more general decentralized computing power-sharing networks that support video needs (like rendering), such as Golem.

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Livepeer eventually aims to become fully decentralized, but is currently steered by the legal entity Livepeer Inc. that founded the network. A 2017 roadmap that the official Livepeer website FAQ now calls “slightly outdated” offers a high-level look at how the network may eventually scale and gradually shed its centralized elements.

Decentralized infrastructure services could prove to be very valuable as the Web3 market grows and matures. Grayscale is betting that Livepeer will be one of the services that helps transform the streaming video market, and that vote of confidence may well help it stand out from the pack and bring in more app developers who want to tap into its decentralized network.

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