The Livepeer network is a platform for decentralized video streaming. Grayscale's Rayhaneh Sharif-Askary hosted a conversation with Doug Petkanics, co-founder of Livepeer. Watch the full conversation, or read the full transcript:
Rayhaneh Sharif-Askary: Hi everyone. Welcome to the Livepeer Deep Dive webinar. We are going to give folks a couple of minutes to join and then we will kick it off.
Doug Petkanics: Right. I see the participants number growing. Thanks everyone for joining. Start soon.
Rayhaneh Sharif-Askary: We'll give folks about one more minute and then we will kick it off. Okay, great. I think we have critical mass. So hi everybody. Thank you for joining. For those of you that don't know me, I am Rayhaneh Sharif-Askary. I am responsible for investor relations at Grayscale. I am fortunate enough to be joined today by Doug Petkanics, founder and CEO of Livepeer. The purpose of this is to really make the protocol more tangible for you all, our investors, and to bring it to life. We're just going to have a conversation. I'm going to have questions for Doug, and then at the end, I have questions that folks sent in that we will go over. So first things first, I do have to read a disclaimer. Nothing that we are discussing today is investment advice. You should always consult your own broker or advisor. Our private placements, including Grayscale Livepeer Trust, are only available to accredited investors. So with that, I'm going to kick it off. I'm going to hand it over to Doug to give us some background on himself and how Livepeer came to be created.
Doug Petkanics: Sure. Thanks so much, Ray for having me on. Thanks everyone for joining. Excited about this session. So as you mentioned, my name is Doug Petkanics. I'm one of the founders of a project called Livepeer and our mission is to build the world's open video infrastructure. Going back to the origin story of how we came to do this, my co-founder Eric and I are both software engineers by background and we've actually built two infrastructure companies previous to Livepeer as founders and engineering leads, one of which that worked out great and had a great outcome and one of which which actually didn't work out. One of the pain points that we felt there was that we had built and relied on these closed proprietary big tech platforms for our distribution and for actually accessing our users. Turns out that wasn't such a good idea because when they didn't open up and they didn't allow us access to the users and didn't honor the APIs they were planning in the ways that we expected, they controlled our own destiny and we didn't get to be part of the change in the world that we saw.
We said, "Never again are we going to build on these closed platforms. We want to build open and we want to enable developers that are building things to have control over their own destinies." We had done a lot of video engineering, we were really interested in video and at the same time, we saw the rise of these new blockchain based technologies that could enable you for the first time to put economic incentives into open source software, get people to contribute to that software, to run it and to benefit economically from the upside. We said, "Well, this can be the fuel that actually helps create an open video infrastructure network that helps power video streams all around the world for really popular applications." No one else is doing this yet back in 2016. We know a lot about video and have done a lot of video engineering. We set out on this mission to create a video infrastructure that could be really powerful for the world.
Rayhaneh Sharif-Askary: So on that, for a lot of people, I think conceptually, it makes sense and just as a practical matter, what is exactly Livepeer and how does it work? That might involve explaining a little bit about video transcoding.
Doug Petkanics: Sure thing.
Rayhaneh Sharif-Askary: Maybe you can explain it to me like I'm five years old.
Doug Petkanics: Definitely. Video is 80% of the traffic on the internet today by bandwidth. I think everyone has felt how much video has impacted their lives through Zoom streams like this, through watching Netflix and YouTube. It's how we get entertained, how we learn, how people participate in the economy. All that video requires a tremendous amount of infrastructure to capture it, to distribute it all around the world really quickly so that we have a good live-streaming experience and to do something called video encoding, which is often, video is captured at the source in ultra high definition, but you can't deliver high definition to every single device on the planet. People are watching on their phones, people are watching on slow connection speeds, people are watching on different types of devices. Video transcoding, that's a word that might come up today, that's the act of taking that one high definition video and converting it into 10 or 20 different smaller videos such that when people are watching it, their devices, the players are smart enough to know which version of the video to request based on their connection speed and their device type.
You might notice this when you're watching a Netflix video. You might see that the video starts off really grainy and shaky, but then it might jump up in quality to high definition as your connection improves and then it might drop down. That's leveraging all these different output encoded videos so that you can have a great viewing experience without having to know about any of this technology going on underneath the hood. That's what the Livepeer network does. Livepeer is this video infrastructure. It's anyone that wants to build a video application, something that looks like YouTube or Twitch, can use Livepeer to power all of that complex video stuff, including the video transcoding under the hood. It's ultimately cost-effective. It's 10 times more cost-effective than alternatives. It's global, it's scalable, it's reliable, and it's powered by these advances in blockchain technology and I'm happy to get into that as well.
Rayhaneh Sharif-Askary: Who are the incumbents? So today when I'm watching a YouTube video on my phone or I am watching SVU obviously on Netflix, what has been done to that video and who is doing it today?
Doug Petkanics: So that video, it's captured at the source, it's sent into a video infrastructure that's then transcoding it and converting it into all these formats. Then it's sent to a content delivery network where it might be copied to thousands of servers all around the world. One of those might be sitting underneath your apartment building, one might be sitting at the end of the block, so that when you go to watch it, it can be served really close to where you are. Who's doing that today? There's a small handful of big tech companies that actually have an infrastructure that can do this at scale. For many live videos, those are unsurprisingly Amazon with Amazon Web Services, Google with Google Cloud, and Google owns YouTube. Amazon owns Twitch, a really popular live-streaming platform, and then some big content delivery networks like Akamai for example, have servers all around the world.
The reason that they're the only infrastructures that can do live video at scale is because it's so compute heavy, it's so expensive and you need servers that are just standing by, provisioned, ready to handle whatever capacity comes in. If your YouTube-like app or platform needs to be able to handle a thousand different streams of video, you need enough servers standing by, sitting there, to handle up to a thousand, even if you only have a hundred coming in at once. That's really hard to do outside of Amazon and Google.
Rayhaneh Sharif-Askary: Okay, so how do we think about decentralization? I also want to touch on earlier, you were talking about the cost. What is the cost differential of using Livepeer or doing this in a decentralized way versus what people are being charged today by what's essentially a monopoly of a few incumbents in the space?
Doug Petkanics: So there's lots of different things people might do in video, but we're going to focus on live-streaming, so an app like Twitch where they let any user go live and start a stream and users can watch that right away. If you want to build something like that and you want to use one of these cloud incumbents to be the infrastructure, it's going to start at $3 per stream per hour. It's pretty expensive. If a new startup wants to let 100 users go live, you're talking about $300 an hour just for the video transcoding and so on Livepeer's network, we have a hosted service at livepeer.com. It wraps up the Livepeer network. We start at 30 cents an hour, so it's 10X cost disruptive. The underlying network itself... This is anyone around the world that wants to contribute computing power to encode live video, it charges about 2 to 5 cents per hour. You're getting down to nearly 100X cost disruptive over what a cloud provider might charge to do it end to end.
How can this happen? How can Livepeer enable this price disruption? As I mentioned, this Livepeer network is run by anyone who runs a Livepeer node. Anyone in the world can join this and run the Livepeer software to enable this. The ones who are doing it effectively have GPUs, graphical processing units, these boards that people use to mine cryptocurrencies actually and do gaming and rendering and these sorts of tasks, but these cryptocurrency miners have thousands of these GPUs deployed around the world mining crypto, and it just so happens that they have video encoding chips on these boards that sit there doing absolutely nothing. They can't mine crypto. What's really cool about Livepeer is we let them earn additional revenue for encoding video without disrupting their existing crypto mining. We're tapping into this huge latent supply of compute capacity where they have no opportunity cost, it only cost them a couple of pennies in electricity and bandwidth a day, and therefore, they can offer this service really cost disruptive price to what the monopolies are charging.
Rayhaneh Sharif-Askary: Anybody that has GPUs, which is basically the equipment necessary to mine Bitcoin, can participate in this. Regardless of the economics around mining Bitcoin, this is just something that they have the ability to do, but anybody that has a GPU can basically do this?
Doug Petkanics: Kind of correct. One subtlety is that GPUs are not used to mine Bitcoin. Bitcoin is dominated by a different type of hardware.
Rayhaneh Sharif-Askary: That's right. I'm sorry, ASIC. That's right.
Doug Petkanics: Yep, ASIC.
Rayhaneh Sharif-Askary: GPU, ASIC, right.
Doug Petkanics: To mine Ethereum, to mine Zcash, to mine Monero, to mine all these other popular cryptocurrencies. Again, there's millions of these deployed around the world in data centers and a lot of them have onboarded to Livepeer because it's a no-brainer value prop. There's no opportunity cost. It's just additional revenue for them.
Rayhaneh Sharif-Askary: You said anybody can do it that has the right equipment. As a practical matter, again, obviously, I'm a user in a way because I see the end video. Who's actually doing it today? Who are the users, whether they're individuals or platforms, that are actually participating today and providing files for-
Doug Petkanics: So yeah, I'd be happy to show you some users.
Rayhaneh Sharif-Askary: Video encoding.
Doug Petkanics: Yeah. I'd be happy to show you some users. You know what we just talked about, these node operators that have GPUs, that's the supply side. That's who's running the infrastructure on the network. They're a type of user for the protocol, but they're not the ones who actually want to pay for the service of video streaming. On the demand side, the users are not individuals, not an individual that goes live on Twitch or YouTube, but it's an application developer. It's someone who's building an application, a video app that uses video in their functionality. It might be something that looks like Twitch or YouTube, so I'd be happy to share my screen here and show you a couple of them.
Rayhaneh Sharif-Askary: That would be great.
Doug Petkanics: So hopefully, you can see my browser window here. First of all, any user can visit livepeer.com and visit our website. This is where we hide all of the blockchain and crypto complexity and just have this SaaS, this software as a service, type website that talks about video encoding. It has pricing just like on any website that's facing developers. Developers can sign up and register an API key. They can predict their pricing depending on how many streams they expect and the length of the streams and all these sorts of things. Then they can log into their dashboard and get all the developer centric stuff. Who are some of these developers? What are some of these applications? We're really focused on user generated content streaming apps, things that look like Twitch, for example. One great example is this site called playdj.tv.
It's a streaming application for DJs who do sets from their home or their studio. They broadcast it out to their fans through their site and on social media. We could take a look. There's a few sessions that are live right now. If you come on a Friday night, you might see 50 different DJs that are live at any given time. I clicked into one. We don't know what we're going to see. We got DJ Alex Foley here live with his deck doing a set. All these streams are flowing through Livepeer and using it for video encoding. One of the cool things about this example is this site launched on one of those centralized cloud providers and they had a ton of DJs signed up and after two weeks, they actually had to pause and shut down because the infrastructure was too expensive.
They were bankrupting themselves as founders and then they were able to relaunch on Livepeer, put a sustainable model on top and start growing. That's one great example. I should unmute DJ Alex. He can entertain us here. Now here's another example. Different use case. Live shopping and live commerce. This app, Korkuma, powers E-commerce merchants and local store owners to livestream selling items from their store. This is a trend that's been really, really popular in China and India and seen tremendous growth and it's starting to pick up steam in Europe and North America and people love to buy QVC style but think not QVC where there's just one channel, but the long tail of the thousands of Shopify owners who all have items to sell on their own audiences, and similarly, they said without Livepeer economics, they would've had to do a more enterprise premium focus only on high-end stores, whereas now they can actually build for the long tail and the masses.
Finally, here's an example of a game streaming platform vimm.tv. So this looks like Twitch and you can see a series of streamers that are live right now and just like in that first example, if we clicked into any of them, we'd see the livestream going on all powered by Livepeer under the hood. It's important to note none of these are built by Livepeer. These are all individual companies and apps that we power and their users just get the benefit of an app or an experience that couldn't exist and serve them under traditional business models. I'll stop there. We can talk into what I'm excited about for the future as we go on, but hopefully, that's a good example.
Rayhaneh Sharif-Askary: Definitely. No, this is great. Thank you. Let's talk about growth. Where is the growth coming from last couple years?
Doug Petkanics: We did a community call today. I was sharing some of the growth numbers. Maybe I'll just screen share again and show a chart because it's easier to look at that.
Rayhaneh Sharif-Askary: I love charts.
Doug Petkanics: Sure. Here we go. Can you see my screen?
Rayhaneh Sharif-Askary: Yep.
Doug Petkanics: Good. Okay, so the metric that we care a lot about is minutes of video streamed through our network and we just did this quarterly community call. I think two weeks ago, we hit our all-time high of 2.4 million minutes of input video over the course of the week. I don't know the number off the top of my head. I think that's probably around 150 to 200 livestreams at any given moment are flowing through the network. That's a great start. It's up from... One quarter ago, we were under 500,000 minutes and if you look back to the beginning of the year, we were probably closer to 150, 200 thousand minutes. This growth is coming from these user-generated content platforms. The reason that Livepeer is appealing to them is because they're typically... They're communities of creators and they're letting all the users go live for free and therefore, they're letting many users go live.
They have many streams of video that leads to all these minutes, but not all of those streams are highly monetizable. Some of them only have a couple viewers and if you don't have hundreds or thousands of viewers, it's hard to cover that $3 an hour cost for a cloud platform, but if you're much lower, if you're 30 cents an hour, 10 cents an hour, all of a sudden, you can let all these users go live, you can create a big audience. You're able to push them towards and monetize the more popular experiences or put on a subscription model or a freemium model and these platforms can exist. They're user-generated content platforms like what we're seeing and they're great candidates because they have a lot of video and really need to leverage this infrastructure. Just to put some of this usage in-
Rayhaneh Sharif-Askary: Oh sorry, go ahead.
Doug Petkanics: I was going to say, just to put some of this usage in context and perspective, this is not an enormous number relative to what YouTube or Twitch is doing. Like I mentioned, this is like 150 plus concurrent livestreams. I think Twitch is doing 100,000 at any given moment, but for these decentralized infrastructures, these Web3 infrastructures, this is representing 7 to 10 thousand dollars a week in fees paid by these platforms into the network. That's pretty significant. That's higher than many of the cloud storage platforms, the indexing and data platforms. As it relates to new decentralized infrastructures built on blockchains, the whole ecosystem is early, but I think it stands out as a shining example.
Rayhaneh Sharif-Askary: What happened between basically over the course of June and early July?
Doug Petkanics: Looking at these spikes here? New popular applications onboarding onto the network.
Rayhaneh Sharif-Askary: Okay. Well, that's great.
Doug Petkanics: Yep, yep. So definitely in early days, the big application can lead to a big spike in usage and as you get more and more overtime, you'll see smoother growth, but it's also worth noting prior to January, there actually was no livepeer.com hosted SaaS product. It was a much more challenging experience to build on Livepeer directly. It's really only been six or so months that the easy access point and gateway has been available, even though Livepeer has been around for a few years as a protocol.
Rayhaneh Sharif-Askary: So moving on to the Livepeer token, can we talk about that and where that fits in?
Doug Petkanics: Definitely. The Livepeer token falls under a model that I think we pioneer called the work token model. The purpose of the token is that people who want to run nodes and run infrastructure on Livepeer actually get the token and they deposit it on the blockchain as a security deposit against the work that they perform. The reason they do that is because people pay dollars into the platform for video encoding and the bigger security deposit they have, the more work they can perform, the more dollars they can earn.
It's analogous to something in construction called a surety bond where if you want to construct a big building, as a contractor, you need to put down a big deposit such that if you don't complete the contract, then the building owner can make a claim against them and get their money back. It's kind of the same concept. It's like you take the Livepeer token, you deposit it as security, and then you have the right to perform work. As long as you do it honestly and accurately, you'll earn the fees associated with it. That's the primary purpose of the Livepeer token. It helps secure and incentivize the network.
Rayhaneh Sharif-Askary: So on that note, do how we think about it? For us, Grayscale, we have a trust, allows people to invest in the underlying token. How do you think about it as an asset? What are the tokenomics? Supply cap, inflation, burns? Can you talk to us a little bit about that?
Doug Petkanics: Yeah, so first of all, it might be interesting to just think about why it should be valuable or how it would accrue value. The simplest way of doing it, there's a lot of nuance to it, but like I was just describing, if you had 5% of the Livepeer tokens and you staked them on the network, you'd deposited them on the network, you would have the ability to compete for and perform about 5% of the work on the network and therefore earn 5% of the fees. Now, what are 5% of the fees on the network? As we just saw in the chart today, that's a number that's five times higher than it was three months ago, but the number of tokens is still pretty limited. That 5% of tokens that you had entitles you to 5X more fees now than it did three months ago. The idea is that as the usage of the network grows and as the fees grow, then each Livepeer token that you stake or deposit would enable you to earn more of these fees.
So really, it's backed by demand for video infrastructure and that's a industry that's... Livestreaming is a $70 billion industry. About 30 billion of that was on infrastructure this year. That 70 billion in industry's growing at 250 billion within five years. Video is obviously on the rise. Livepeer is looking to take a big chunk out of that and then the token is what entitles you to be able to do work and earn those fees along the way. That's first. I'd mentioned you can participate in this even if you're not running nodes and doing work. Any token holder can basically delegate their tokens towards someone who is doing work. They'll do it on your behalf and they'll share some of those fees back to you. That's the way a more passive participant would help secure the network but also earn some fees. Happy to talk about some of the other tokenomics, but any questions on that before I move forward?
Rayhaneh Sharif-Askary: I'm sure we'll have a ton of questions at the end.
Doug Petkanics: Okay, so you asked about amount of token, inflation, et cetera. Right now, there's about 23 million Livepeer token in existence. About half of it or 49% to the exact is actually deposited on the network for people who are doing these roles of doing work. The reason that that is an interesting number is because our... Livepeer's inflation, so how many new tokens are generated each day, it's not predetermined, it's not fixed. The target is we want 50% of all the tokens on the network to be staked and participating and the other 50% can be freely circulating for liquidity, for other uses, et cetera. What happens if less or more than 50% of the network is participating? If less than 50% of the tokens are staked, then every day, the inflation rate of Livepeer token rises and more and more tokens are distributed to only those who are participating.
So you only get these inflationary Livepeer tokens if you're deposited on the network and you're doing the work. What happens is if less than 50% are participating, each day, more and more tokens get generated and that incentivizes more people to stake to chase the higher yield and returns on their token. If more than 50% of the network is participating, then that inflation rate decreases every day a little bit and less and less tokens are issued. That might encourage someone to un-stake and say, "Oh, I'm actually going to find some alternative use for my token where I think I can get more value out of it."
Long story, what those alternative uses might be. This is really cool because for the first couple of years, we saw the inflation rate rise as people were staking, a lot of tokens were issued. Then we saw it come way, way, way down because it was so high. It was over 100% percent a year and that means a lot of tokens are generated, so then you saw people start to un-stake and sell and then it fell below 50%. For the last couple of months, it's been hovering right around this 50% target finding a annual inflation rate. I'd have to do the calculation, but I think it's something like 7 to 8% per year at the moment.
Rayhaneh Sharif-Askary: Okay. How do these new tokens come into existence?
Doug Petkanics: They're minted by the protocol in the blockchain, like a block reward. If someone's heard of Bitcoin mining and every time a new Bitcoin block is produced, there's a new Bitcoin reward that goes to the miner. Similarly, in Livepeer, these node operators that are doing work every day can submit a transaction to generate these new tokens and they get distributed to themselves as node operators and all of the other token holders who decided to delegate their tokens on their behalf to these node operators.
Rayhaneh Sharif-Askary: Over the longer term, call it 5, 10, 15 years, if you had to guess, where would you see the supply going?
Doug Petkanics: The answer is wherever it needs to be to ensure 50% participation. I wouldn't think of your Livepeer tokens in terms of how many tokens do you have versus how many are in existence. I would think about what percentage of the network do you own? By staking and participating, you get to grow that percentage or at least maintain that percentage. Hopefully, as the amount of fees that could be earned grow, then you accrue more and more fees along the way.
Rayhaneh Sharif-Askary: Okay. If we wanted to take a step back and put Livepeer token in context with some of the other tokens that folks are likely more familiar with like Bitcoin or Ethereum, what are the similarities, differences? How would you put it in context for everybody? I realize that's a tough question, but I like tough questions.
Doug Petkanics: Yeah, well, so I think of Bitcoin as money and whether it's stored value or currency, that's its primary utilization. Ethereum I think of as fuel to use the network. When you want to do something on Ethereum, you pay ETH in order to have the Ethereum blockchain do your work for you. Livepeer is a little different. Like I said, I call it a work token model and a lot of other protocols that provide resources have also picked up and used this model. Protocols that represent data services like databases use this and people pay to access data from the database and that token gets distributed to those who are doing the work of serving that data. File storage networks use this sort of thing. Bandwidth networks where you're using bandwidth for content delivery use this model. Anywhere where there's some function being performed that you're paying to use, this work token model comes into place, and that's how I think about it in comparison to other protocols.
Rayhaneh Sharif-Askary: Are there any exciting updates that you can share? As a reminder, we don't share material non-public information and dovetailing with that, what are you most excited about today?
Doug Petkanics: Yeah, I think the thing that's been exciting for us is to show that, hey, here's a protocol built on a blockchain. It's a decentralized network and it's not just serving this new crypto crazed community that's doing something that's speculative and financial in nature. It's actually providing real disruptive value to a huge industry today. This $70 billion streaming industry can leverage what Livepeer offers. We've always been excited about that, but actually seeing the uptick and adoption and usage amongst these apps is one thing that's really exciting to us. We're going to continue to lean into that. I think there's a huge trend happening right now called the creator economy. It's this recognition that all these creators, the YouTube streamers, the Twitch streamers, the people on Patreon, the artists, they now have the opportunity to connect directly with their fans, monetize their time.
I think there's a lot of blockchain based things that enable that. Infrastructures like Livepeer are one of them, but also things like NFTs and tokens help them better monetize. We're excited about being part of helping these creators participate in the economy. As far as big news that we can share, I'm excited about some of the things that we're working on to come. We talked about video transcoding. That's just one element of the video stack. We're working on other really cool things like AI-based video processing. Can we automatically detect what type of video this is as it's being encoded? Is it adult content, violent content, copyrighted content? Things that app developers need to know when they're creating video streams and also tackling the content delivery piece. We have this global network of nodes and peers that should be able to help take a lot of load and cost off of this challenge of delivering video to people all around the world. Not dropping any huge announcements here, but those are some things we're excited about.
Rayhaneh Sharif-Askary: Well, it is certainly exciting to think about a protocol that is solving... Versus doing something theoretical that exists in crypto and blockchain world, but rather is solving a real problem that has existed and exists in the real world today. I think that will definitely help…
Doug Petkanics: Yeah. Definitely.
Rayhaneh Sharif-Askary: a lot of people.
Doug Petkanics: Yeah. We tried to blend a theoretical possibility of what can be built versus practicality of where can we deliver value today? That's been good because it keeps us focused and balanced and down to earth and lets us see real usage and adoption and not just be off on some tangent building for the future.
Rayhaneh Sharif-Askary: Tell us about your vision.
Doug Petkanics: World's open video infrastructure. All video…
Rayhaneh Sharif-Askary: All video.
Doug Petkanics:…captured on every device served to every device spread all around the world should run through these open networks. Livepeer can be that network because you could think of this infrastructure as a resource the way people think of electricity or water, and it should be maximally cost-effective. You should be paying the lowest price possible. How is that enabled? It's enabled by the fact that this is open source software that anyone can use for free and the people providing the infrastructure competing with one another to charge you the lowest possible price.
Whatever their electricity and bandwidth cost is, they should be willing to do this job by putting just a little bit of margin on top of that because if any other margin they try and create, there's another independent node operator sitting in the building next door that would be willing to do it for less. You'll get this infinitely scalable, maximally cost-effective network. It's a lot of work. It's a lot of productization and integrations, but that should be as ubiquitous as the protocols that power the first version of the internet like HTTP for example. Long way to go, but that's the potential.
Rayhaneh Sharif-Askary: So just world domination. What are the challenges? What do you see as challenges today and what do you think will be the challenges you face as you grow?
Doug Petkanics: Yeah, productization and fitting into this huge existing legacy industry and technology stack is definitely a challenge. Video's been around for 70, 80 years and there's so many different ways that people build in video like the way that you watch cable TV or broadcast TV is totally different than the way that you watch Netflix. That's even totally different than the technology behind the Zoom call right here, which is more real time. It's a lot to bite off and you have to choose how to productize, how to fit into some of those use cases so that they can integrate Livepeer today without ripping out everything they've done. That's the typical go-to-market product, market fit motion and takes a lot of work and iteration and I think that'll be one of the biggest challenges that we face.
Rayhaneh Sharif-Askary: So if it's okay with you, I'd like to jump into some of the questions that investors sent.
Doug Petkanics: Let's do it.
Rayhaneh Sharif-Askary: Okay, great. Who or what protocols would you say are your competitors?
Doug Petkanics: Yeah, well, we talked about the alternatives that people are using today would be running their infrastructure on Amazon Web Services or Google Cloud or Microsoft Azure. I think that ultimately, we represent an alternative cloud to those. There's lots of companies that have built great video technologies on top of those platforms that offer great features and services. Mox, Wowza, Brightcove. I think ultimately, those should consider being users of Livepeer, but today, the offerings might look a little similar. In the crypto blockchain centric world, there's a lot of projects that touch on different areas of the video stack. Many of them focus on actually creating applications like the decentralized YouTube or decentralized Twitch. We're a little more focused on the infrastructure. We're exclusively focused on the infrastructure side, which I think keeps us focused and makes us unique, but some of those consumer platforms definitely can get a lot of attention from users who are enthusiastic to have an alternative to YouTube.
Rayhaneh Sharif-Askary: Okay. How do you think about the risks around nefarious content? For instance, couldn't a transcoder be unknowingly implicated in something dreadful?
Doug Petkanics: Yes. This is a great question. I've written a lot about this. Many long theoretical posts. I think that depending on where you are in the stack, there's a different layer of responsibility. Any application that is distributing content and is the entry point for consuming, it has a huge responsibility to moderate that to ensure no one comes to harm and no copyright violations, et cetera. All the way down at the bottom, just open source software should have no responsibility. It doesn't know how it's being used. It doesn't know what the bits and bites are that are being sent through it. Livepeer exists in the middle at the infrastructure layer where there's these node operators all around the world and our view is they should have the appropriate controls and tools and choice to be able to participate or not participate in how their own hardware is being used.
What that means is Livepeer software needs to expose those controls. They need to be able to tap into lists or block lists of, say, nodes or broadcasters they don't want to support. I mentioned this AI-based task that can do content detection. Is this adult content? Is this violent content? Those are tools that the node operators themselves could use in order to make a decision to discontinue encoding a stream. It's definitely a tricky challenge and a sticky subject, but I think we all as builders of software have responsibility to keep it in mind and make sure we're building responsibly as we go.
Rayhaneh Sharif-Askary: So it sounds like it's something that has to be dealt with in a decentralized way.
Doug Petkanics: On the open Livepeer network, yes, absolutely. On livepeer.com, one gateway to that network that happens to be pretty popular, it's against the terms of service and we can turn off a stream. Anyone who's going to use this open network could send malicious content into it. It doesn't mean that they can distribute it legally. It doesn't mean that the application wants to serve it, but the node operators and network need the right tools to be able to prevent that as a community or an individual.
Rayhaneh Sharif-Askary: Okay. It's a question about profit margins around the transcoders and the incumbents. We talked about the cost generically, but is there color around the profit margins themselves?
Doug Petkanics: So again, there are so many different video workflows and ways that video can be done, and so it's hard to give a simple concrete answer there, but a good example is just if you look at Amazon, they will rent one of their servers that can encode two video streams for 50 to 75 cents an hour, but they'll build a service that does video encoding and they'll charge you $3 an hour for that. Now there are extra cost. They had to build additional services. They probably have redundancy and reliability.
Don't have complete transparency into what that is, but you see many developers choosing to do the do-it-yourself 50 cent option because there is a big margin put on the $3 an hour option. Now, even that 50 to 60 cent an hour server, Amazon, it's believed it's doing a 3 to 4X margin on top of that alone. Anyone choosing to build one of these services is paying a huge margin there. It gives perspective that because there's only a few games in town, because they can. The industry has settled around this expensive number for something that can be accessed on an open decentralized network for a fraction of the cost.
Rayhaneh Sharif-Askary: Okay. This is one we got into, but I think it bears repeating. How would you explain the value prop of investing in Livepeer to a layperson?
Doug Petkanics: I would say that you can earn a fraction of the future growth of video because video is going to flow through Livepeer's infrastructure. People are going to pay for that. When you buy a Livepeer token and stake it on the network, you're now entitled to a share of that. If all video grows, then your share is going to get greater, greater and greater.
Rayhaneh Sharif-Askary: That's a great explanation. Right.
Doug Petkanics: I think that's the simplest possible version I can come up with.
Rayhaneh Sharif-Askary: No, it's great. Video obviously is huge today and it's only going to get bigger. I think most people would agree with that, so that's great, thank you.
Doug Petkanics: Just like you gave a caveat at the beginning of this call, I would like to clarify the token is for actually participating, helping to secure this network and do the work that entitles you to that future growth of video. I think of the token itself as a passive investment. Yeah, you get a little bit of exposure. I think this network will be valuable. Hopefully, that would accrue value to the token, but the way to really optimize is to participate, to do the work and to earn the maximal returns.
Rayhaneh Sharif-Askary: Can you talk a little bit more about integrations with other protocols?
Doug Petkanics: Sure. So Livepeer is built on Ethereum. The Livepeer protocol is built on Ethereum blockchain. That's first and foremost a very direct integration. Another project that we're tightly integrated with and collaborate with is a project called The Graph, which is this data services project. If you visit the Livepeer protocol explorer, you run a Livepeer node, you're interacting with data that The Graph has made available. You don't have to wait for a slow blockchain to give you data all the time. What's interesting on The Graph's network, Livepeer is actually the number one most signaled protocol where their users are earning the most fees and their users are signaling supportive.
One of the reasons I'm excited about that is because we're working together to push forward this idea of Web3 infrastructures now being buildable as an alternative to building on Amazon and Google Cloud, along with other projects like storage networks like Filecoin, where we have an integration where Filecoin miners can also be Livepeer node operators at the same time and that brings additional revenue to them, but also benefits in the video world where video can be stored really close to where it can be encoded and that reduces latencies and speeds and benefits from decentralization. All part of this Web3 movement.
Rayhaneh Sharif-Askary: How can I purchase Livepeer? What's the difference if I buy through the Grayscale Trust? I will let you take the first part, Doug and I can chime in.
Doug Petkanics: Sure. Livepeer is available in a number of different methods depending on your level of technical proficiency. It's available on big exchanges like Coinbase and Binance and Gemini and Kraken and OKEx. It's available on decentralized exchanges straight on the blockchain like Uniswap and Balancer, and then it's available through vehicles like Grayscale. Would you like to elaborate on the differences there?
Rayhaneh Sharif-Askary: Yeah, so basically, like all of our single asset trusts, these are access products. A lot of people clearly have the domain expertise and the time to go out and buy their own tokens and to custody them, safeguard them. What we've done is we've just tried to take those headaches out of it and so we take the underlying, we put it in the form of financial product with which people are familiar, that can sit in their IRA, that has a CUSIP, tax statements, audits, and so that's really the difference. You're buying it in the form of financial product and we've just tried to make it a little bit easier and make it look and feel like a traditional investment that you would have in your brokerage account.
Doug Petkanics: Yep. Great. I've definitely noticed it's made Livepeer available to a much wider audience than exists purely through these crypto centric channels.
Rayhaneh Sharif-Askary: What else? I think that wraps it up for the questions. Doug, do you have anything else you want to leave us all with today that we didn't go over?
Doug Petkanics: Thanks very much for joining and for sending in the great questions. I think if you want to learn a little bit more about Livepeer, we have a great primer up at our project website livepeer.org. The first link there takes you to the primer at livepeer.org/primer. It's a 10-minute overview and we get you up to speed quick and then you can find us at livepeer.org. You can find us on Twitter @LivepeerOrg and our whole team is available and accessible to chat through our chat service forum as well. Thank you very much everybody.
Rayhaneh Sharif-Askary: Thank you so much for being on with me today, Doug. We really appreciate it. Thank you everybody for dialing in. Please feel free to reach out to us if we can be helpful with anything and have a great rest of your day and rest of your week.