The Livepeer protocol secures a decentralised marketplace for verifiable media and AI compute through a tightly coupled set of economic and cryptographic systems. These mechanisms include LPT bonding, dynamic inflation, staking and delegation, slashing conditions, and rewards distribution - all executed through Ethereum-based smart contracts on Arbitrum. This page details each core mechanism, how it interacts with others, and why these design decisions underpin Livepeer’s scalable, permissionless infrastructure.
All protocol state (bonds, delegations, votes, job payments, etc.) lives on Arbitrum.
The LPT token is ERC-20-based and bridged between L1 and L2.The Arbitrum rollup finalizes via Ethereum; thus the underlying security is Ethereum’s.After Confluence (LIP-73), Ethereum mainnet now mainly serves as a historical source – new stake/votes are on Arbitrum only.
Livepeer does not use its own consensus; it relies on Arbitrum’s optimistic rollup.
Blocks (called rounds) occur roughly every 24 hrs, and after a ~7-day challenge window the state is finalized on Ethereum.This means trust assumptions are similar to other Ethereum Layer-2s: Arbitrum’s rollup validators and Ethereum miners secure the chain; fraud proofs protect against invalid blocks.
Livepeer’s core contracts are on an Ethereum Layer-2 (Arbitrum One), which inherits Ethereum-level security via optimistic rollup.LPT stakers (orchestrators and delegators) provide economic collateral against misbehavior.
Protocol rules penalize malfeasance by slashing stake (e.g. losing part or all delegated tokens).Off-chain video verification and optional arbitration ensure correct transcoding.
Gateways/Broadcasters (clients) and orchestrators exchange signed data (video segments, “tickets,” job outcomes).These off-chain interactions can be audited (via perceptual hashes or full verification), so a bad actor’s forged data can be proven on-chain by a dispute mechanism.Orchestrators commit to jobs by staking, and any detected mis-transcoding can trigger an on-chain slashing penalty.
The Livepeer Protocol defines several key actors that participate in the network and perform specific functions.
Orchestrators
OrchestratorsOrchestrators are the main participants in the Livepeer Protocol. They are responsible for processing video and AI jobs, earning fees and rewards, and maintaining the network’s security and decentralization.
Gateways
GatewaysGateways are the entry point for applications into the Livepeer network. They are the coordination layer that connects real-time AI and video workloads to the orchestrators who perform the GPU compute.
Delegators
DelegatorsDelegators are LPT holders who delegate their tokens to an orchestrator of their choice. They share in the rewards and fees earned by the orchestrator, and also share in any slashing penalties.
Livepeer relies on Gateways (prev. Broadcasters), Orchestrators and Delegators to process compute loads on the network.The Livepeer Protocol defines several key operational rules for the network and network actors.AI vs Video MechanismsAI services do not participate in the same reward distribution or round-based active set election as video Orchestrators
The video transcoding system and AI system are architecturally separate and operate independently.
This separation allows AI services to operate without requiring LPT staking, making them more accessible while preserving the security model of video transcoding through economic bonding.Incentive Structure Comparison
The Livepeer protocol uses a round-based system, where each round represents a fixed-length epoch in blocks, to coordinate reward distribution and staking activities.Mechanism
Rounds have a fixed length in blocks (configured in RoundsManager)
New rounds must be initialized by calling initializeRound()
Various protocol operations are only valid during specific times in a round
Parameter updates are restricted during “locked” periods of a round
Rewards can only be claimed once per round by a transcoder
FunctionsThe round system coordinates the protocol operations for:
Staking/Unbonding: Changes take effect in the next round
Reward Distribution: Calculated per round based on active stake
Parameter Updates: Restricted during lock periods
Earnings Claiming: Can only claim for rounds that have been initialised
Implementation MechanicsThis mechanism is implemented in the RoundsManager contract, which manages round lifecycle,
including length configuration, initialisation tracking and locking periods that gate protocol operations.
roundLength state variable stores the number of blocks per round.
default configuration is 5760 blocks for mainnet deployments (~24 hours at 15-second block times)
development environment default is 50 blocks for faster testing
updated via setRoundLength() (governed by Controller owner)
roundLength state variable stores the number of blocks per round.
default configuration is 5760 blocks for mainnet deployments and 50 blocks for development environments
updated via setRoundLength() (governed by Controller owner)
The video transcoding system was designed around token economics to bootstrap network participation:
Inflation rewards compensate Orchestrators for infrastructure costs
Staking requirements ensure skin in the game
Round-based rewards provide predictable income streams
AI services, using only AIServiceRegistry, operate more like a basic directory service without economic incentives built into the protocol layer. See Rewards Section
Mechanism
Orchestrators bond Livepeer Token (LPT) to participate in the network.
Bonded stake weight determines the proportion of new LPT minted each round that an orchestrator receives and governs its ranking in the network.
Delegators are LPT holders who delegate to an orchestrator of their choice and share in its rewards (% set by the Orchestrator).
Staking gives both orchestrators and delegators voting power in governance (delegators via the Orchestrators vote).
Misbehaviour (e.g. double‑claiming payments, downtime) can trigger slashing, burning a portion of the orchestrator’s stake and that of its delegators.
These mechanisms create a strong reputational incentive to act honestly and maintain service quality.FunctionsThe Staking and delegation mechanism allows token holders to:
Bond tokens to themselves or other addresses using bond()
Register as transcoders with transcoder() specifying reward cut and fee share
Unbond tokens with unbond() which creates an unbonding lock
Withdraw tokens after the unbonding period with withdrawStake()
The protocol maintains a limited active set of transcoders, ordered by total stake, which are eligible to perform transcoding work and earn rewards.Implementation Mechanics— 2.1 Staking and delegationOrchestrators must bond Livepeer Token (LPT) to participate.
Bonded stake determines the proportion of new LPT minted each round that an orchestrator receives and governs its ranking in the network.
Delegators are LPT holders who delegate to an orchestrator of their choice and share in its rewards. Staking gives both orchestrators and delegators voting power in governance.
Misbehaviour (e.g. double‑claiming payments, downtime) can trigger slashing, burning a portion of the orchestrator’s stake and that of its delegators.
This creates a strong incentive to act honestly and maintain uptime.
Service fees (paid in ETH by content consumers) and inflationary LPT are pooled each round.
Active Orchestrators receive rewards proportional to their stake and work done
Delegators share in rewards and governance (% set by the Orchestrator)
Round-based rewards provide predictable income streams
MechanismsFunctionsImplementation Mechanics
The reward system distributes newly minted tokens based on:
A transcoder calling reward() during its active round
The protocol’s current inflation rate (managed by the Minter)
The transcoder’s rewardCut parameter which determines commission percentage
The treasury’s treasuryRewardCutRate which allocates a portion to the protocol treasury
The remaining rewards distributed proportionally to delegators
Rewards accumulate in earnings pools which are claimed by delegators through claimEarnings() or automatically when performing bonding operations.2.3 Dynamic inflation and rewardsLivepeer uses a dynamic inflation model. New LPT is minted every round and distributed to orchestrators and delegators proportional to their stake and participation. If less than 50 % of the LPT supply is staked, inflation increases to encourage more staking; if more than 50 % is staked, inflation decreases. This adaptive system balances security (high stake) with token dilution. Inflation rewards are in addition to the ETH fees earned from work, providing a dual revenue stream for orchestrators and delegators.2.4 Slashing and quality enforcementTo maintain service quality, the protocol includes slashing conditions. Orchestrators that misbehave by submitting invalid results, double‑claiming tickets or going offline can have their LPT stake partially burned. Delegators who bond to a misbehaving orchestrator share in the penalty, incentivising careful selection of operators. Slashing protects the integrity of the system and aligns incentives towards honest behaviour.
MechanismsFunctionsImplementation Mechanics
The probabilistic micropayment system allows broadcasters to pay orchestrators efficiently at high throughput. It works as follows:
Broadcasters fund their account with a deposit and reserve via fundDepositAndReserve()
For each video segment, the broadcaster creates a signed ticket with faceValue and winProb
Tickets are submitted off-chain to the orchestrator
Orchestrators redeem winning tickets on-chain via redeemWinningTicket()
Funds are transferred from the broadcaster’s reserve to the orchestrator’s account
This system allows for efficient microtransactions without requiring every payment to be recorded on-chain.2.2 Payment and probabilistic ticketsBroadcasters fund an ETH deposit on‑chain. With each transcoded segment, they send an off‑chain probabilistic payment ticket to the orchestrator. Each ticket has a win probability and face value. Winning tickets can be redeemed on‑chain for ETH, debiting the broadcaster’s deposit; losing tickets are worthless. This mechanism drastically reduces on‑chain transactions while ensuring that orchestrators are paid fairly. Since the probability of winning and the face value are known, broadcasters can predict their costs, and orchestrators can estimate expected earnings.
MechanismsFunctionsImplementation Mechanics
The protocol uses a standard proxy pattern for upgradeability, for example when new LIPs are passed and implemented.
The Controller maintains a registry of contract IDs to implementation addresses
Each core contract is deployed with a proxy that delegates calls to the implementation
Upgrades are performed by deploying a new implementation contract
The Governor is used to update the implementation address in the Controller
Proxies continue to maintain state while using the new implementation logic
This pattern allows the protocol to evolve without migrating state or requiring users to interact with new addresses.
MechanismsFunctionsImplementation Mechanics
The protocol is deployed on Ethereum mainnet though is actively used on Arbitrum One (due to its lower fees and hight throughput), with specific configurations for each environment.The main configuration parameters include:
