Purpose of LPT
LPT is the native asset of the Livepeer protocol and serves three distinct functions:
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Security collateral – Orchestrators must bond LPT to participate in the active set. The stake acts as collateral against misbehaviour and determines how much work an orchestrator can perform. Delegators bond LPT to orchestrators and share in rewards. Although slashing is currently disabled, the existence of a bondable token allows the network to enforce economic penalties in the future.
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Reward distribution – New LPT minted through inflation is distributed proportionally to bonded stake. This makes LPT a “work token”: the more stake an orchestrator has, the more inflationary rewards it receives. Delegators share in these rewards based on the orchestrator’s configured reward cut. Fees paid in ETH are also split according to bonded stake, aligning incentives across both revenue streams.
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Governance power – Voting weight in Livepeer Improvement Proposals (LIPs) is proportional to bonded LPT. Tokenholders can propose protocol changes, vote on treasury allocations and direct network upgrades. Delegators indirectly influence governance by choosing orchestrators who represent their preferences.
Importantly, LPT is not used to pay for work. Broadcasters and AI builders pay in ETH or the underlying gas token, while orchestrators earn ETH fees. This separation avoids conflating supply‑demand dynamics (driven by video/AI workloads) with the security incentive (driven by LPT). It also allows Livepeer to leverage Ethereum’s gas market for payments while maintaining an independent security model.
Supply and inflation
LPT launched with a fixed genesis supply of 25.8 million tokens and continues to expand via dynamic inflation. Unlike Bitcoin’s deterministic halving schedule, Livepeer’s issuance adapts to network conditions. At the start of every round, the BondingManager mints new LPT, adds it to the total supply and distributes it to active orchestrators proportional to stake. The algorithm exposes several tunable parameters:
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Initial distribution and lockups – At genesis, LPT was allocated to early investors, founders, community members and a protocol treasury. Many allocations vested over multiple years to align long‑term interests. The majority of circulating supply is now held by the community.
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Adaptive inflation – The inflation rate responds to staking participation: if less than ~50 % of LPT is bonded, the rate increases; if more than ~50 % is bonded, the rate decreases. This feedback loop keeps the network secure by incentivising additional bonding when needed while reducing dilution when security is sufficient. Early on, inflation exceeded 13 % per year; as participation grew, the community voted to reduce baseline issuance to around 6–8 % and to direct a portion to the community treasury.
The precise formula is inflation := inflation ± inflationChangeRate depending on whether the bonded ratio is above or below the target bonding rate (initially 50 %). inflationChangeRate determines how quickly the rate adjusts (e.g., 0.0005 per round). Because rounds occur roughly every 21 hours, adjustments compound gradually. This design prevents abrupt shocks while steering the network toward the target stake level.
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Staking multiplier and round length – The protocol’s security depends not only on the percentage of LPT bonded but also on the work capacity per stake unit. As demand for video/AI throughput grows, governance can increase the number of active orchestrators (via numActiveTranscoders) to enlarge supply. Conversely, if demand shrinks, inflation continues to distribute rewards but orchestrator earnings decline, signalling to operators to scale down capacity.
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Future adjustments – Governance retains the ability to modify inflation parameters via LIPs. For example, the community could implement halving schedules, redirect a greater share to the treasury or introduce new reward mechanisms. By encoding inflation in governance, Livepeer can adapt to changing network conditions.
Beyond parameter tweaks, future proposals may explore token‑burning mechanisms (e.g., burning a portion of slashing penalties), veLPT locking (voting escrow models to weigh long‑term holders more heavily) or L2‑specific inflation (differentiating issuance on Arbitrum vs mainnet). Each change would require a thorough economic analysis and a governance vote.
The protocol routes a share of inflation to an on‑chain community treasury. In its first iteration, 10 % of newly minted LPT flowed into a multisig controlled by the Livepeer Foundation and community stewards. The purpose of the treasury is to fund public goods, research, marketing initiatives and tooling that benefit the entire ecosystem. Examples include grants for improving monitoring infrastructure, research into verifiable transcoding and support for builders. When the treasury balance reached a pre‑defined cap, contributions paused; future LIPs can adjust the rate or resume funding.
Treasury funds do not accrue automatically to orchestrators or delegators. Spending proposals must be approved by governance, ensuring transparency and accountability. Special‑purpose entities (SPEs) can request allocations to execute scoped projects (e.g., building a verification framework, developing new codecs) and must report back on milestones. This structure turns inflation into a community‑directed investment in the protocol’s long‑term health rather than pure dilution.
To ensure that treasury spending aligns with protocol objectives, the Livepeer community has experimented with frameworks for public‑goods funding. One example is the transparent milestone‑based grant model: proposers submit budgets and deliverables, funds are released in tranches upon completion and progress is publicly reported on the forum. Another is quadratic funding, which could match community donations from the treasury to signal strong grassroots support. Discussions have also explored regen network‑style retroactive funding, where contributions are rewarded after impact is demonstrated. These experiments reflect a wider movement in decentralised governance toward more inclusive and accountable resource allocation.
Rewards distribution
There are two revenue streams in Livepeer:
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ETH fees – When broadcasters or AI builders redeem winning tickets, ETH is transferred from their deposit to the orchestrator. The orchestrator shares a configurable percentage of these fees with its delegators (feeShare). High fee share attracts delegators but reduces the orchestrator’s margin.
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LPT inflation – In each round, the BondingManager calls reward() for every active orchestrator. The contract mints new LPT proportional to the orchestrator’s total stake (bonded LPT + delegations) and transfers it to the orchestrator. The orchestrator then splits the reward with delegators according to its rewardCut (percentage it keeps). Delegators call claimEarnings() to collect accumulated LPT and ETH.
Bonding is non‑custodial: delegators’ LPT remains within the BondingManager. To withdraw, a delegator initiates an unbond. After a thawing period of one round (currently ~21 hours), they can withdraw their principal and any unclaimed rewards. This unbonding period prevents rapid stake flipping and provides time for slashing (when enabled) to be enforced.
The configurability of reward cuts and fee shares creates a pricing market. Orchestrators must decide how much of the reward to retain versus share to attract delegators. Delegators, in turn, evaluate orchestrators based on uptime, transcoding quality, fee share, reward cut and governance alignment. The resulting competition drives better service quality and decentralises power.
Reward compounding and inflation capture
Because inflation is distributed continuously, delegators benefit from regularly compounding their earnings by calling claimEarnings() or by bonding additional LPT. Failure to claim for many rounds does not forfeit rewards, but it can delay compounding and reduce effective yield due to dilution. Some operators run bots to automate claimEarnings() for their delegators, smoothing compounding and saving gas by batching calls.
Reward leakage and “fee switch”
Historically Livepeer distributed all inflationary rewards to orchestrators and their delegators, while a fixed share of fees went to orchestrators’ delegators via feeShare. Recent discussions have explored introducing a “fee switch” that would route a portion of fees to the community treasury or burn a portion of fees to reduce supply. Such a change would require a LIP and economic analysis. Proponents argue that aligning fee flows with public goods funding could decouple network growth from inflation; opponents caution that reducing orchestrator income could shrink service capacity. As of early 2026, no fee switch has been enacted, but the conversation highlights that reward distribution is an evolving design space.
Last modified on February 18, 2026
