We at Scout has been digging deep into the basic economics of running a transcoder lately. As one of the outcomes of this research, we’ve created a dashboard for the Livepeer community transcoder:
The X-axis is “round”. A new round is initiated by Livepeer network roughly every 20.8 hours.
Here is some necessary knowledge you need to know in order to understand this dashboard:
Total Stake: This is the number of tokens that has been staked towards your transcoder. This number includes the tokens both from your delegators (people who stake their tokens towards your transcoder) and from the transcoder itself which is called “Pending Stake”.
Pending Stake: This is the number of tokens that a transcoder owns. Every round when your transcoder receives rewarded tokens from the network or reward cut from your delegators, this number will increase. And all the “Pending Stake” are staked towards the transcoder automatically.
Transcoder Reward: This is the number of tokens that the protocol rewards your transcoder every round. The value of “Transcoder Reward” is in proportion to your “Total Stake”. The bigger your “Total Stake”, the bigger “Transcoder Reward”. But your transcoder doesn’t keep the entire amount. Part of that amount goes to the people who stake their tokens towards your transcoder after your transcoder takes a cut. Now this leads us to the most exciting next part: How should I calculate the income of my transcoder
Income Breakdown: The income of a transcoder comes from two parts:
a. The reward amount generated by the network based on the size of your “Pending Stake”. That amount is 100% pocketed by the transcoder.
b. The second part is the cut a transcoder takes from network reward for all your delegators. The higher the reward cut, the more tokens a transcoder gets to take from the delegators. Obviously, if the reward cut is too high, you risk losing your delegators to other transcoders. So In the chart below, the deep blue line is the network reward generated based on the size of the “Pending Stake”. The yellow line is the cut the transcoder takes from its delegators. Since Livepeer community node has been taking 50% reward cut since the beginning and the delegators haven’t really switched transcoders for a long time, that line is quite steady.
Another easy way to calculate the income is to count the difference of “Pending Stake” between two rounds. Check out the two screenshots below:
Transaction Cost: Last but not the least, your transcoder does bunch of transactions such as bond/unbond/rebond tokens, claim earnings, and etc. And all these transactions cost some ETH.
I hope you get all the basics. In the next post, I’d like to show you an interesting experiment we did with our own transcoder in the past few weeks. The income chart is very different from the community node
Livepeer team has been using the income from this transcoder to seed numerous community projects since the beginning. That includes us! Please consider delegating towards it if you have extra tokens.