Should You (Or Anyone) Buy Livepeer (LPT)?

Blockchain meets video streaming in Livepeer, a crypto that's recently risen to new highs.

Livepeer (LPT) is up almost 4,400% since the start of this year. It's a decentralized video streaming service that aims to reduce the costs of producing videos. According to its website, 80% of internet bandwidth is used by video streaming. And companies spend a lot of money on video production. That's something Livepeer believes it can address.

Let's take a look at what it does and why the price has increased so much.

Livepeer basics

• What it does: Livepeer's mission is to build the world's open video infrastructure.
• Management team: The two founders, Doug Petkanics and Eric Tang, both bring software engineering and entrepreneurship experience to the table.
• Date founded: 2017.
• Market cap: $1.3 billion (CoinMarketCap, Nov. 16).
• Availability: Several major U.S. cryptocurrency exchanges, including Coinbase, Gemini, and Kraken.

What's behind Livepeer's price jump?

There are a few reasons why Livepeer's price has jumped -- not least because many cryptocurrencies have posted significant gains since the start of this year. At time of writing, one LPT was worth around $60, a big drop on last week's all-time high of $100.

1. It has a strong real world use case

Outside of the general rise in cryptocurrency prices, Livepeer uses blockchain technology to solve a real world problem. This sets it apart from many cryptocurrencies on the market. The process of transcoding videos (formatting them so they play on different devices and bandwidths) is expensive. Livepeer uses a distributed work protocol to reduce its infrastructure costs.

This essentially rewards LPT holders for contributing their computer processing power and bandwidth to the task of transcoding videos. Tokenholders can also participate by staking their LPT and supporting the people who are contributing their bandwidth. Staking means tying up tokens to earn rewards and, in this case, keep the network secure.

2. It acquired MistServer

On Oct. 19, Livepeer announced its first major acquisition: MistServer, a media server created by video developers. The deal should increase Livepeer's user base and also add experienced developers to its team. It puts the company on the map and, once it can integrate MistServer's capabilities, it will also improve its streaming capabilities.

It also co-hosted COLLIDE, the first ever live concert to include the live minting of NFTs, and attended ETHGlobal's Web3 Jam hackathon.

Should you buy Livepeer?

If you're considering buying Livepeer, there are a few factors to take into account. First, all cryptocurrencies are highly volatile -- as seen by the 7% drop in Bitcoin's (BTC) price in the past 24 hours.

Two ways to guard against volatility are to invest for the long term and to only invest money you can afford to lose. Investing for the long term involves considering how the cryptocurrency might perform in the coming five years or more -- which means carefully researching the company's fundamentals.

For example, look into the management team, the potential demand for Livepeer's product, what the competition is doing, and how much developer activity there is. Those will all help you to evaluate whether you think the coin is worth adding to your portfolio.

The potential to stake your coins and earn passive income is also a big advantage. Staking rewards vary, but to give you an idea, I'm currently earning 6% APY on my LPT tokens.

Low-cost video streaming that's secure and doesn't rely on big corporations is a compelling offer. However, there are some negatives to consider too. Livepeer's system is reliant on people participating in its network. One would hope they'd continue to do this, but we can't take it for granted.

Also, it's entering a very competitive field and there's heavy competition from existing suppliers as well as newer cryptos and other technology. Incumbents like YouTube won't give up market share easily. Plus, this technology is evolving rapidly, so there's a chance Livepeer could be overtaken by a newer entrant.

More generally, the crypto market as a whole has recently hit new highs. Some analysts believe it is going to continue to increase in value, but others warn it could be about to burst. Finally, we don't know what shape increased regulation will take, which is another threat to the overall crypto market to consider.

Bottom line

Livepeer is an interesting cryptocurrency that's worth putting on your watchlist. However, it's wise to be cautious about a coin that's just hit an all-time high as speculation in the crypto industry can often push prices to unsustainable levels.

It's also important to do your own research and evaluate how well Livepeer might fit with your risk tolerance and overall investment strategy.