Key Insights
Livepeer’s network has witnessed a 10% quarter-over-quarter (QoQ) increase in transcoding usage, with demand-side transcoding fees surging by 18% QoQ. This growth has been attributed to rising adoption levels and an increase in Ethereum’s market price. Staking rewards also saw a notable rise of 19% QoQ, totaling $25 million, fueled by higher token issuance, improved real yield, and escalating network fees. As a result, Livepeer’s market capitalization jumped 15% QoQ, reaching $554 million. Meanwhile, fees from the AI Subnet decreased by 52% QoQ to $7,000, primarily due to a 62% drop in ticket issuance. However, a 25% rise in the price per ticket indicates a shift towards more valuable AI workloads.
Primer
To build decentralized video applications akin to Twitch or TikTok, robust infrastructure for live and on-demand video streaming is essential. Video content must be transcoded into formats suitable for various bandwidths and devices. While traditional cloud services such as AWS, Google Cloud, and Microsoft Azure offer transcoding solutions, they often come with hefty costs. Livepeer emerges as a decentralized and permissionless network, providing an open marketplace for video infrastructure that supports both live and on-demand streaming. Its compute marketplace allows participants to contribute GPU resources for a range of workloads, including video transcoding and AI-powered processing. Given that AI video models demand significantly more GPU resources than their text and image counterparts, Livepeer presents a scalable, cost-effective alternative for video compute tasks, potentially cutting transcoding costs for users by up to tenfold. The decentralized transcoding network consists of three main participants: Node operators, known as “Orchestrators,” manage the routing of transcoding jobs, with their workload correlating directly to the amount of Livepeer native tokens (LPT) they stake. These operators earn ETH fees as well as newly minted LPT tokens. Service nodes, referred to as “Transcoders,” supply computational resources and execute video transcoding, earning ETH fees in return. Typically, Orchestrators and Transcoders are operated on the same machine. Delegators stake LPT tokens to support efficient node operators, securing the Livepeer network and earning a share of both ETH fees and LPT rewards. Livepeer is also extending its capabilities beyond video transcoding by introducing an AI Subnet, dedicated to AI inference tasks, which supports various AI-driven video generation services.
Key Metrics
Demand for Livepeer’s services is driven by applications and developers that require video transcoding, live streaming, and media generation functionalities. This encompasses decentralized social media (DeSoc) applications, Web3-native platforms, and traditional Web2 applications that need scalable video infrastructure. While services like TikTok, Twitch, Spotify, and SoundCloud depend on centralized streaming infrastructure, decentralized video platforms and tokenized music streaming apps can utilize Livepeer’s decentralized offerings. The utilization of Livepeer’s network can be measured by the minutes of video transcoded, which increased by 10% QoQ from 32 million in Q3 to 35 million in Q4 2024, and rose 15% year-over-year (YoY) from 30 million in Q4 2023. This growth is likely a consequence of advancements in AI-powered video processing, enhancements in real-time streaming, and broader developer adoption. A significant factor in this increase was the launch of Livepeer’s AI SDK in Q4 2024, which facilitated AI-driven media generation, thus augmenting video processing demand. The rollout of Cascade further boosted adoption by transitioning from batch AI processing to real-time enhancements, allowing for AI-driven analytics and interactive avatars during live streams.
Fees from Transcoding
Services utilizing the Livepeer network incur demand-side fees in ETH to access transcoding capabilities. Node operators, or orchestrators, earn these fees for processing videos and share a portion with their delegators according to their fee-sharing agreement. An orchestrator’s likelihood of receiving transcoding tasks is affected by their stake weight, meaning those with a higher stake are prioritized for more jobs, leading to increased earnings. In Q4 2024, the demand-side fees from transcoding rose by 18% QoQ, increasing from $62,000 in Q3 2024 to $73,000, and reflected an 8% YoY increase from $68,000 in Q4 2023. This strong fee growth correlated with overall usage increases, likely driven by Ethereum’s price rise of about 11% during the same period. As transcoding fees are typically denominated in ETH, the surge in Ethereum’s value elevated the USD-equivalent fees collected on Livepeer, contributing to the 18% QoQ growth.
Fees from Livepeer AI
According to a report by Messari, Livepeer’s AI Subnet, which was launched in Q3 2024, expanded its offerings beyond transcoding by enabling AI-powered video generation through its GPU-based compute infrastructure. The development continued into Q4 2024 with the introduction of Cascade, which provided real-time AI video processing capabilities for applications such as automated video agents and live analytics. These innovations position Livepeer as a decentralized media compute provider, extending its functionality beyond conventional video transcoding. Within the Livepeer AI ecosystem, tickets and fees serve as the economic framework to compensate node operators engaged in AI video processing. Winning tickets are part of a probabilistic micropayment system, allowing operators to exchange them for fees in ETH. In Q3 2024, usage of Livepeer AI generated $15,000 in fees, accounting for 24% of the total transcoding fees, with 4,800 tickets issued at an average cost of $3. However, in Q4 2024, AI-related fees fell to $7,000 (10% of total transcoding fees), with ticket issuance plummeting 62% QoQ to 1,847 tickets, and overall AI fees dropped by 52% QoQ. Despite this decline, the average ticket price rose by 25%, from approximately $3 to $4, suggesting a pivot towards higher-value AI workloads instead of an outright decrease in demand.
Staking Rewards
The Livepeer network rewards staking in LPT to both node operators and delegators. To offer video services, node operators are required to stake LPT tokens. The stake weight of a node operator consists of their own tokens and those delegated to them. Staking rewards saw a 19% QoQ increase, rising from $21 million in Q3 2024 to $25 million in Q4 2024, and surged 277% YoY from $7 million in Q4 2023. An 8% QoQ rise in LPT price (from $14 to $15) and an 88% YoY increase (from $8) contributed to the higher USD-denominated rewards. This increase was also influenced by a rise in inflationary emissions and improving real yields, even as the staked ratio declined by 10%. The annualized daily inflation rate rose from 21% in Q3 to 23% in Q4 (up from 14% in Q4 2023), indicating a higher token issuance rate. Although the percentage of staked LPT fell, the overall reward pool expanded due to increased token emissions. Concurrently, the annualized daily real yield in USD improved from 30% in Q3 to 38% in Q4, up from 22% in the previous year, demonstrating that staking remained attractive despite growing inflation rates.
Staking Participation
The Livepeer Token (LPT) employs a Stake-for-Access (SFA) model, necessitating that node operators stake LPT to engage in network activities. Over the past seven quarters, staking participation—the percentage of circulating LPT that is staked—has consistently remained below the target of 50%. The number of delegators has also decreased, falling from around 3,900 in Q4 2023 to 3,137 in Q4 2024. This trend indicates that, despite the rise in staking rewards, fewer individuals are securing the network. As a result, those who do continue to stake may be earning a larger share of the rewards due to higher token emissions. The daily issuance of LPT has steadily climbed from 0.04% in December 2023 to above 0.06% by the end of September 2024, yet the staking participation rate has dwindled to nearly 43% in Q4 2024, remaining below the desired 50% equilibrium threshold. This dynamic influences LPT issuance, where participation below 50% leads to an increase in issuance, while exceeding 50% results in a decrease. The disconnect between incentives for staking and transcoding could explain the ongoing low participation rate. Previous analysis indicated that the top five LPT stakers earned 40-50% of staking rewards yet only about 20% of all transcoding fees. In Q4 2024, LPT’s market capitalization rose by 15% QoQ to $554 million, up from $482 million in Q3 2024, while its price increased by 8% from $14 to $15. This market cap growth surpassed price gains due to a 6% rise in circulating supply, which expanded from 35 million to 37 million LPT tokens, contributing approximately $30 million to the total $72 million market cap increase. The price appreciation amid increased token supply suggests that demand kept up with new issuances, potentially driven by network adoption and staking activity. Additionally, Livepeer’s inclusion in Grayscale’s Decentralized AI Fund may have bolstered institutional recognition and investor interest, contributing to a significant 84% YoY price increase.
Qualitative Analysis
Partnerships and Ecosystem Expansions: The AI Video Startup Program, supported by Livepeer’s Grants Program, aims to assist startups focused on decentralized AI video technologies and applications. This initiative provides selected startups with grants of up to $20,000, along with infrastructure credits and mentorship from the Livepeer team. In October 2024, Livepeer held an AI Demo Day, showcasing eight startups from its AI Video Startup Program that combined generative AI with decentralized infrastructure, highlighting innovative applications within the sector. Additionally, the Real-Time Video AI Bootcamp, set to launch in Q1 2025, is an educational initiative by Livepeer for developers and technical artists delving into AI-powered video processing. The bootcamp will feature workshops, hands-on project development, and challenges with incentives aimed at advancing real-time video applications.
Technological Advancement
In Q4 2024, Livepeer released an AI SDK designed to make generative AI more accessible through its decentralized GPU network. This SDK offers a cost-effective alternative to centralized AI services and supports programming languages like TypeScript, Python, and Go, incorporating OpenAPI-based integrations. The SDK features developer-friendly aspects such as type safety, intuitive APIs, and thorough documentation, enabling capabilities like text-to-image, image-to-video, upscaling, and AI-enhanced text processing. Future updates are expected to introduce additional functionalities, including text-to-audio, image-to-text, and lipsync features. Livepeer’s AI evolution from the launch of its AI Subnet in Q3 2024 to the introduction of Cascade in Q4 2024 highlights significant advancements in the network’s AI video capabilities. By enabling node operators to earn fees for AI inference jobs, the AI Subnet has introduced decentralized AI-powered services. By the end of Q3, 27 AI node operators were actively engaged, with enhancements like speech-to-text via Whisper and support for Stable Diffusion 3 expanding its offerings. Building on this foundation, the Cascade initiative marks a strategic pivot toward real-time AI video processing. While Livepeer has primarily been utilized for livestream video transcoding, Cascade broadens these capabilities to include real-time applications like automated video agents, live analytics, and AI-enhanced content creation. Unlike traditional AI models that operate on pre-recorded content, Cascade empowers AI pipelines to analyze and enrich video streams in real time, unlocking new opportunities for applications like live sports analytics and interactive AI avatars. By leveraging Livepeer’s high-throughput streaming infrastructure, which already handles 80-90% of network activity, Cascade enhances the network’s role in AI-driven media processing. Recent upgrades, including support for complex setups and multi-container GPU configurations, further boost scalability and efficiency.
Governance
The Livepeer community approved the E² – Education & Experience initiative in Q3 2024, funding it with 4,000 LPT to explore AI’s role in creative industries over six months. This project emphasizes AI literacy, public engagement, and technical development, aiming to promote Livepeer AI adoption through educational content, live demonstrations, and workflow enhancements. Its objectives include increasing AI-generated outputs, expanding social reach, and fostering industry partnerships. The initiative is structured into three phases—early development and workshops, content rollout and showcases, and ecosystem expansion through collaborations—led by a team with expertise in AI, blockchain, and digital media. Building upon prior AI-driven creative projects, it aims to boost Livepeer’s technical capabilities, adoption, and brand visibility within the creative sector.
Closing Summary
In Q4 2024, Livepeer experienced a 10% QoQ growth in transcoding usage, reaching 35 million minutes, while fees from transcoding increased by 18% QoQ to $73,000, driven by rising demand and Ethereum’s price appreciation. Although fees from the AI Subnet dropped by 52% QoQ to $7,000, a 25% increase in per-ticket price indicates a shift towards higher-value AI workloads. Notable developments during this period included the launch of Cascade, which enabled real-time AI video processing, and the Livepeer AI SDK, which enhanced AI media generation capabilities for developers. The sustained adoption of Livepeer Studio by Fishtank further supported network growth, while Livepeer’s inclusion in Grayscale’s Decentralized AI Fund likely contributed to institutional recognition and a 15% QoQ rise in market cap to $554 million. Governance initiatives are centered on community-driven AI education through the E² – Education & Experience proposal, which secured 4,000 LPT to foster AI literacy and public engagement. Moving forward, Livepeer aims to broaden its real-time AI processing functionalities and reinforce its status as a decentralized media compute provider.
