The small but beautiful streaming video newcomer Livepeer, why has it gained the favor of the capital giant Grayscale?

When the company Grayscale behind the GBTC investment tool announced in March 2021 that it would create new trusts based on other cryptocurrencies, most of the newly announced trusts were well-known cryptocurrencies like Chainlink and Filecoin. However, there was one new discovery that seemed to catch cryptocurrency enthusiasts off guard: Livepeer.
Livepeer is a decentralized service based on Ethereum, designed to significantly reduce the costs of video streaming applications. It achieves this by distributing resource-intensive code conversion tasks to users who provide their computer's processing power to the network. Like most decentralized services, there are incentives for network participants, such as "encoders" who transcode videos, and liquidity providers who stake LPT tokens.
Grayscale clearly saw the potential of this idea, but what exactly is it? Here are the details on how Livepeer works, how users can participate, and how to purchase its LPT tokens.

What is Livepeer?

Livepeer is a decentralized service aimed at minimizing the infrastructure costs of streaming or on-demand video applications.
It is not a consumer-facing video platform; it is not a decentralized alternative to Twitch or YouTube. Instead, it is a behind-the-scenes solution for application creators, distributing the task of transcoding videos (or converting them from one format to another before playback) among the computers participating in the network.
The company claims that it can reduce resource costs by up to 50 times compared to traditional centralized video transcoding methods.

How does Livepeer work?

Livepeer relies on its "transcoders," or individuals who add their computers to the network, to process the code conversion needs of application developers as required. These individuals exchange their computing resources (CPU, GPU, and bandwidth) for fees paid in cryptocurrency. Livepeer also refers to these users as "video miners," consistent with the mining terminology used on many other blockchain platforms (such as Bitcoin) for creating blocks.
Developers using the Livepeer network to support their video applications must pay LPT fees for transcoding and distribution services. Additionally, LPT holders can stake their tokens to an encoder, acting as delegators, thus earning a small share of fees and rewards from participating in the network without directly engaging in the transcoding process.
According to CoinGecko, in the days following the announcement of Grayscale's Livepeer trust in March 2021, the price of Livepeer's LPT token surged nearly 450%.
What makes Livepeer special?
Video streaming is expensive for application developers. This is one of the hidden costs that consumers may not see or understand directly, but these costs can be passed on to them through service fees, increasing advertising spend, or selling their data.
By minimizing these costs through distributed computing, Livepeer enables new types of video-driven applications and business models. On the other hand, individuals 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 watching transcoded videos on the Livepeer network may have no indication of their participation in the service.
For application developers, Livepeer offers a potentially cheaper alternative than centralized services, thereby reducing the computational costs of implementing video functionality in their services. For network participants, it is necessary to connect your computer to the network and/or stake LPT tokens to help ensure liquidity.
As of March 2021, Livepeer has launched a "joint mining" pilot program with the decentralized storage platform Filecoin, allowing users to mine and earn rewards on both platforms.
Grayscale Livepeer Trust
Grayscale's cryptocurrency-based trust funds are exchange-traded investment tools designed to provide traditional investors with exposure to cryptocurrencies. The price of each trust roughly tracks the price of its respective cryptocurrency, and Grayscale holds a significant amount of each currency or token in the trust. Investors do not own any actual cryptocurrencies by investing in the trust, but they may benefit from the appreciation of its value.
By creating the Grayscale Livepeer Trust, the company is betting on the future of the LPT token: that its value will increase over time, and investors will want to acquire it. As of March 2021, Grayscale held LPT worth $8.5 million, but the success and growth of its Bitcoin trust fund indicate that the company may accumulate larger amounts of capital over time.

The Future

The success of Livepeer is likely to depend on its ability to scale to meet demand. If its distributed network can provide a quality of service similar to centralized alternatives while costing only a fraction of the price, it will become a reliable option as Web3 applications and platforms become more prevalent. As of March 2021, it remains a relatively small network, with about 47 transcoders connected to it. Livepeer's CTO Eric Tang tweeted in the same month that the service had transcoded over 1.6 million minutes of video in the past 30 days.

However, Livepeer is not the only service attempting to use decentralization to address the high costs of video streaming. Theta is the most well-known service in this category, but it takes a different approach by using additional user bandwidth to help provide liquidity to other users, rewarding you with Theta tokens in exchange for your bandwidth. VideoCoin calls itself the "Airbnb of video," and it operates in a manner closer to Livepeer, distributing computing tasks among connected nodes on the network. There are also more general decentralized computing power-sharing networks that can meet video demands (such as rendering), like Golem.
Livepeer's ultimate goal is to be fully decentralized, but it is currently managed by the corporate entity that created the network, Livepeer Inc. The Livepeer website's FAQ now refers to its "somewhat outdated" 2017 roadmap, which outlines how the network will eventually scale and gradually shed its centralized elements.
As the Web3 market develops and matures, decentralized infrastructure services will prove to be highly valuable. Grayscale bets that Livepeer will be one of the services that helps transform the streaming video market, and trust voting may help Livepeer stand out and attract more application developers looking to enter decentralized networks.