Livepeer Token
Before getting into the Livepeer token, it is worth noting that developers
(broadcasters) pay to use the network in Ethereum's ETH. ETH is the medium of
exchange token in the Livepeer network.
The Livepeer Token is a protocol token for staking, used by those who want to
perform work on the network, that serves the following purposes:
- It serves as a bonding mechanism in a delegated proof of stake system, in
which stake is delegated towards transcoders (or validators) who participate
in the protocol to transcode video and validate work. The token, and potential
slashing that occurs due to protocol violation, is necessary in order to
secure the network against a number of attacks. More below.
- It routes work through the network in proportion to the amount of staked and
delegated token, essentially serving as a coordination mechanism. It is a unit
of account that is specific to the Livepeer ecosystem. Services such as DVR,
closed captioning, ad insertion/monetization, and analytics can all plug into
the Livepeer ecosystem and potentially make use of the security provided by
staking LPT.
- The ledger of token balances and double spend prevention are provided and
secured by the underlying Ethereum blockchain consensus mechanism. Livepeer is
an inflationary token in which new token is generated by nodes who run the
Livepeer Media Server and perform transcoding, in proportion to the amount of
work that they contributed to the network. Nodes who don't perform work
correctly or attempt to cheat will have their token stakes slashed. This has
the effect of routing more future work, and fees, towards the nodes who have
successfully performed work in the past.
Assuming competition amongst nodes to win broadcasting business and the
associated fees in ETH, any increase in proportional amount of token, and hence
future work, that can be earned for performing transcoding will equate to a drop
in the cost that must be charged to the broadcaster. This creates a positive
economic effect for broadcasters looking to transcode live video through the
Livepeer Network.