Recently the Livepeer team announced that they are accelerating the decentralization of Livepeer network governance. Livepeer’s founders and contributors are known for their research and innovation, and I've been impressed by their work, their level of care and attention. Staking infrastructure providers and other staking networks can learn from the ways that this community's governance processes develop.
How should Livepeer be governed? Figment is working with the Livepeer team to educate the Livepeer community, to make design considerations, and to help bootstrap governance participation.
A network should be governed in a way that supports the network’s mission, and network decisions should be informed by voices that are critical to delivering the network’s mission.
The Livepeer team is building the world’s open video infrastructure: reliable, high-quality infrastructure services at a lowered cost, via an open market for entities to use and provide livestreaming infrastructure. Perhaps the Livepeer network is best thought of as a kind of public good, and Livepeer stakeholders should be empowered to shape the future of the network. How?
With a clear and established governance process. This process should be developed to prioritize a useful network, via sound technical decisions and incentives that are aligned to fulfill the Livepeer Project’s mission, while enabling stakeholders to exit. I think that network incentives should also be aligned to enable new stakeholders to join, in order for the network to grow.
As Livepeer Inc. CEO Doug Petkanics notes, the more that a network grows, and the more diverse the interests of its stakeholder base become, the more likely that contentious governance issues will arise in the future. If parties care enough to voice conflicting opinions about the future direction of the network, this should be a sign that the network is useful and achieving its mission. I think that governance should establish a path for diverse opinions to be a supporting force for the network.
The mission of the Livepeer Project is to build the world’s open video infrastructure. What does that mean? This will be something different than a streaming service--Livepeer is striving to be the backbone for many kinds of streaming application services, small and large. Why will streaming services use Livepeer instead of existing infrastructure?
Livepeer intends to market reliable, high-quality infrastructure services at a much lower cost than traditional providers can provide. How? By incentivizing participants to contribute their underused hardware and bandwidth. Low-cost streaming infrastructure enables video applications that are not possible with traditional, centralized cost structures.
Low-cost streaming enables new demand and for new kinds of platforms, beyond Youtube or Twitch. We could see Esports platforms streaming thousands of live sporting events, cloud-based security cameras and baby monitors, OTT platforms streaming thousands of television channels, and IoT (Internet-of-things) devices, like smart cars, uploading video via Livepeer’s open video infrastructure.
Livepeer is an open market for entities using and providing livestreaming infrastructure. Anyone can join to provide services or to build applications that use these services, because participation is open and the software is open source. Participants work together and know what to expect because of the way that Livepeer’s incentives have been configured.
The Livepeer network is perhaps best thought of as a kind of public good. Its stakeholders will be part of its development, infrastructure, and economic policy. In order to be a reliably open platform for development and a reliably open market for livestreaming infrastructure, the Livepeer network should benefit the public and be governed by the public, rather than being governed by and benefiting a single entity. However, different stakeholders are likely to have different values, each with different preferences for how the Livepeer network should be developed.
Livepeer began as a small group of contributors able to iterate rapidly, fix bugs, and protect user value. They have recognized the importance of decentralizing Livepeer’s governance and control over time, in order for the project to fulfill its mission. Let’s take a closer look at what the founders envision for the future of the Livepeer network.
Since video streaming is a complex, cutting edge technology, governance participation should be informed by experts. Why? Because if it’s not a reliable, working, and useful technology, it won’t be used and it won’t be a thing that’s worth governing.
Expertise in decision-making allows us to be more competent to better predict the outcomes of our decisions (and whether or not they can even be delivered). From what I can see, knowing the impacts of decisions is foundational to good governance. Who better to inform decisions about a video technology than those who understand it well?
Livepeer’s contributors should be incentivized to develop competitive improvements that benefit the platform as a whole. Livestreaming infrastructure providers should be able to operate competitively without being disrupted by core operators or owners of the platform. Livepeer stakeholders should be empowered to shape the future of the network using an established process. The changes made via Livepeer’s governance structure should align the network’s incentives to prioritize the project’s mission to build open video infrastructure for the world. The Livepeer team has proposed these guiding principles to support Livepeer's mission.
Livepeer should work: it should be useful, reliable, and impactful. In order to begin delivering Livepeer’s value propositions, we should focus on practical utility before refining its design and outcomes. We can iterate towards perfection when it is clear that Livepeer has become something worth decentralizing and governing. Livepeer’s governance process should reflect this in its design. How?
What does it mean to be extensible? Governance should be designed for the addition of new capabilities and functionality in order to serve many new stakeholders in the future. In keeping with our priorities, we should focus on practical utility before refining the governance process and outcomes. Livepeer should begin with a governance process that is clear, extensible, and amendable itself.
Remember the mission: "Build The World’s Open Video Infrastructure.”
The stakeholders who contribute directly to how Livepeer’s works are largely technical, so it’s critical that the governance process is informed and guided by the technical voice. How? Open source developers, network infrastructure operators, and Livepeer application developers can educate and promote the awareness of critical information for making good technical decisions. This will be important so that non-technical stakeholders can make informed governance decisions that reflect the priorities of Livepeer’s mission.
Not every communication will be made in the open, but the technical means to enact decisions should follow a well-communicated and documented process. Participation in that process should be clear to and understood by everybody. Every community stakeholder should have a very clear view of how governance decisions are proposed, reviewed, and executed.
If the governance processes are transparent, documented, and well-understood, then the steps to reach a consensus-based action on the Livepeer network should be clear to everyone in the community.
If someone disagrees with a governance decision, then they should be able to exercise their right to opt out of the network. Whether by forking the protocol code, forking the underlying network itself, liquidating their LPT-token position, or transitioning to another video infrastructure solution, governance processes should support the stakeholder’s right to leave the network.
Livepeer’s protocol was initially designed to incentivize participation and to route ownership towards those doing active work. Work comes in many forms: infrastructure operations, development, security, and quality assurance). Those who do work on the network should accrue ownership of the network, and they should benefit from Livepeer’s economics. Livepeer’s governance decisions and resources should prioritize incentivizing participation at the expense of other short term motivations.
As a global network and video infrastructure backbone, Livepeer can only succeed with active participation from the key stakeholders mentioned above, and decisions about Livepeer’s incentives should reflect that. But do Livepeer's incentives serve its mission? What will incentivize Livepeer's network of stakeholders to grow?
It's not yet clear to me how the incentives of non-token stakeholders will remain aligned with the incentives of LPT token-holders. Why is this important?
LPT ownership could be considered to effectively be Livepeer network ownership.
Presently, the Livepeer network’s incentive mechanisms are primarily driven by the value of Livepeer tokens (LPT), since staked LPT or delegations from LPT stakers are required to do work for the Livepeer network. The only way to participate in capturing value from the Livepeer network (ie. fees & inflationary rewards) is via LPT staking.
According to the recently-published roadmap, the team's polling application proposes to use LPT to gauge token-holder sentiment about proposals, and the proposed 'Binding Voting System' only mentions token-voting for consideration thus far. These suggest to me that in the future, LPT tokens may be required to legitimize changes to the Livepeer network.
Who owns LPT tokens?
According to Messari's reporting, 6,343,700 LPT was distributed to the community via Merkle mine, 1,235,000 LPT was retained by the founders and early team (vesting over 36 months), 1,900,000 LPT was sold in a pre-sale (vesting over 18 months), 500,000 LPT was reserved for protocol development, and 21,300 was issued as a grant to a couple of early advisors and contributors.
How can new stakeholders acquire LPT?
Newcomers have the opportunity to run orchestrators using only a small number of LPT. Then they can potentially win delegations from existing stakers. Running an orchestrator could enable new stakeholders to capture a portion of the new LPT supply by earning a commission. However, a new orchestrator is likely to be incentivized to set a low ‘reward cut’ (aka commission) in order to be competitive in an established set of orchestrators. My observations have been that delegations tend to be “sticky,” in that delegators don’t tend to change their delegations.
There is only one way to acquire LPT if you do not currently have LPT, and that's via a current LPT token-holder that's willing to transfer some of their LPT holdings. However, are the current LPT-holders incentivized to do that? Coinmarketcap reported that LPT exchange volume exceeded 10,000 USD twelve times in the three months preceding March 23, 2020 (~$31.6k being the highest, and ~$23.3k being the second).
Presently-low liquidity can make buy-in difficult, though my guess is that speculators have had the opportunity to gradually accumulate. I write ‘speculators’ because it seems that Livepeer isn't yet being used the way that it's intended to be used.
There seems to be an incentive to monopolize Livepeer’s future.
Though token distribution has extended beyond the initial distributions, the inflationary incentives that reward stakers have increased the holdings of initial and existing token-holders. Staking rewards have nearly doubled the total supply of LPT from ~10M to nearly 20M. It's likely that stakers have sold some, but this process encourages stakers to continue to hold their tokens and to compound that process, a cycle that makes tokens more likely to be staked than to be liquid.
Are market forces enough to incentivize present and future LPT-holders to distribute LPT to new stakeholders?
I think that the present incentive mechanisms have effectively rewarded early participants (including present participants), but I am skeptical that they're extensible to future stakeholders. As the network becomes more useful, it could be tempting for existing stakeholders to monopolize ownership of the network.
How can the network incentives enable future stakeholders to have meaningful buy-in? If the token is a critical element of governance, and governance is to be extensible, shouldn't the token distribution process also be extensible? Perhaps market forces are insufficient to grow the network.
As the Livepeer network grows, ideally so will its stakeholders and the diversity of stakeholder interests. Governing parties should remember the Livepeer Project’s mission: "Build The World’s Open Video Infrastructure.”
To fulfill this mission, Livepeer should be a technical-first, practically usable network for video developers, with the goal of serving as the backbone for the world’s video infrastructure. Livepeer should be run by thousands of worldwide participants who are actively engaged in its success and financial upside as owners.
If Livepeer is to fulfill its mission as an open market with open participation, the network's incentive mechanisms must serve its current stakeholders and extend to its future stakeholders.
While governing parties should reference these founding principles as a guiding hand to represent the intentions of the project from the early days, they should also consider the present incentive mechanisms of the network and how well they will serve the project's mission in the future.
Governance could make or break a network. Our design decisions will drive the success and failure of competing growth strategies in the Livepeer ecosystem, as well as the behaviours and attention of network participants. Ultimately, design decisions will determine which entities participate in our network, how they participate, and to what extent they participate.
I’m looking forward to helping to make Livepeer a better network for all of its stakeholders. Let’s work together on the Livepeer forum to consider this and other potential problems.
Hopefully you found this useful. Questions? Comments? Feedback is always welcome! I’m on Twitter.
Special thanks to Doug Petkanics for detailed, thoughtful feedback.