Facing pressure from traditional streaming media giants, what opportunities does Theta have?

Theta has become an undeniable force in the cryptocurrency and streaming media market; however, it still faces fierce competition from traditional media giants like YouTube and Netflix.

(This article is authorized to be reprinted from "The Way of DeFi," with the original title "The Way of DeFi | Messari Report: From Streaming Media to Web3.0, What Other Opportunities Does Theta Have?" Original article here)

Over the past 20 years, with the rise of platforms like YouTube, TikTok, Twitch, and Netflix, streaming media content has been rapidly adopted. The COVID-19 pandemic has accelerated this trend as people around the world have been forced to stay at home and turn to streaming media for entertainment. According to Cisco, streaming media currently accounts for 75% of internet traffic.

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Content Delivery Networks (CDNs) are servers distributed globally to provide internet content, including streaming media, to consumers. Due to their proximity to consumers, CDNs are considered critical internet infrastructure, enhancing video quality and reducing latency. While they are important, CDNs still have issues. Typical experiences include user overload, network stress from high-quality graphics, challenges in serving remote areas, and expensive network maintenance costs. As a result, operating costs increase and are subsequently shifted to video platforms; Netflix's CDN costs account for 20% of its revenue.

Introduction to Theta: Global Mesh Network

Theta is the world's first decentralized video network that utilizes blockchain technology to address the drawbacks of media streaming and video on demand. Theta uses a peer-to-peer mesh network where individuals on any personal computer, mobile device, or smart TV can voluntarily use their spare bandwidth and computing power to relay videos to other users and earn token rewards for their contributions. Theta video relayers are edge nodes (also known as Caching Nodes) as opposed to centralized CDN servers, which are geographically closer to users (TVs, phones, and computers). Therefore, Theta Network provides superior streaming, lower costs for video platforms, and incentives for relayers to voluntarily provide bandwidth; all parties benefit from the Theta model.

Currently, Theta TV is the leading application on the Theta Network with millions of users. Similar to Twitch, Theta TV is a live streaming platform where users can earn rewards by relaying streams to others. Additionally, Samsung VR, Pandora, and MGM are collaborating with Theta to utilize the network.

Theta's blockchain and underlying technology are complex, utilizing novel consensus mechanisms and payment solutions to operate and secure the network. The Theta team and advisors behind this technology are highly qualified industry veterans.

The leadership team of Theta includes Mitch Liu, CEO of Gameview Studios and holder of a Bachelor's degree in Computer Science and Engineering from MIT, an MBA from Stanford University; CTO Jieyi Long, Ph.D. in Computer Science from Northwestern University, developer of patented VR live streaming technology; and Chief Product Officer Ryan Nichols, former director at Tencent WeChat.

Theta's advisors include YouTube co-founder Steve Chen, Twitch co-founder Justin Kan, Verizon Chief Network Officer Kyle Okamoto, and Rakuten Product Director Jonathan Wong. In this report, we will introduce Theta's blockchain and technology, Theta token, and the upcoming Mainnet 3.0.

Theta's Technology

Blockchain is not designed to store large amounts of data such as images, videos, and audio. Adding streaming amplifies complexity and levels of storage required, as streaming may require high throughput capabilities handling millions of transactions per second. Additionally, it is necessary to incentivize users in the Theta model to share their spare bandwidth while maintaining decentralization and security.

Theta blockchain is designed specifically for video and data streaming. Its blockchain utilizes a novel multi-level BFT consensus mechanism that allows thousands of nodes to participate in the consensus process while still supporting high transaction throughput per second. There are two types of nodes in its consensus mechanism:

Enterprise Validator Nodes: Up to 30 nodes that propose and generate new blocks on the blockchain. Current validator node list members include Google, Blockchain Ventures, Samsung, Sony Europe, Binance, and Theta Labs.

Guardian Nodes: Ultimately confirm the blocks generated by enterprise validator nodes and serve as a check against malicious validator nodes. Unlike enterprise validator nodes, anyone in the world who meets the minimum requirements can become a guardian node. There are currently over 3,000 guardian nodes globally.

Independent of the consensus mechanism, Theta has thousands of Edge Nodes that capture real-time video, perform real-time transcoding, caching, and relay real-time streams to other Edge Nodes and/or end-users in exchange for TFUEL, the "gas fuel" of the Theta network. Edge nodes are part of Theta's broader vision to become a decentralized edge network, a distributed computing network that brings computation and data storage as close to the requesting point as possible, providing low latency and bandwidth-saving peer-to-peer sharing for any type of data.

Theta blockchain also supports Turing-complete smart contracts, ported from Ethereum smart contracts to Theta. The combination of smart contracts with video streaming creates new use cases benefiting both video platforms and users. For example, platforms can write a smart contract to reward the most engaged viewers, viewers can tip their favorite streamers, users can enable payment models based on usage, and royalty distribution can be clear and agreed upon.

Furthermore, anyone can now mint TNT-20 tokens on the Theta blockchain using Theta Token Minter. Suppose a streaming creator can mint their own custom Theta TNT-20 tokens, customize the quantity and inflation schedule of the tokens, and write a smart contract to reward loyal followers with tokens. Then, users receiving the tokens can hold and hope for them to appreciate with the creator's growth, or exchange the tokens on Theta Swap. The combination of smart contracts, video streaming, and the Theta product suite adds a new level of interaction that could significantly increase engagement and retention.

As mentioned earlier, scaling Theta blockchain for streaming is particularly challenging due to the high transactional nature of streaming. To address scaling limitations, the Theta team has built a resource-oriented microtransaction pool to increase throughput and reduce on-chain transactions. The microtransaction pool is an off-chain pool where any user can withdraw from it while preventing double-spending. For example, a streamer using the Theta network can pay for video content pulled from multiple nodes without the need for on-chain transactions as they are pulled from the microtransaction pool. Parameters of the microtransaction pool can also be used to track the identity of the content creator, thus enabling copyright tracking.

THETA Token - Dual Token System

Theta Network operates using two tokens: THETA and TFUEL. THETA token has a fixed supply of 1 billion, and all tokens have been unlocked since 2019.

THETA can be staked and used as a validator or guardian node to secure the network. THETA stakers earn a percentage of all generated TFUEL. TFUEL is the "gas fuel" of the Theta Network, providing power for on-chain operations such as paying nodes to share video streams or executing smart contracts. The cost of TFUEL is borne by platforms utilizing the Theta Network, so end-users do not need to purchase any TFUEL tokens. Platforms do this to acquire more audience at lower CDN costs in the form of TFUEL. TFUEL will undergo significant updates with Mainnet 3.0.

Below is a comparison of THETA and TFUEL tokens:

Mainnet 3.0

On June 30, the highly anticipated Mainnet 3.0 is set to be released. Mainnet 3.0 will introduce two major updates:

Elite Edge Nodes, traditional edge nodes with staked TFUEL. Elite Edge Nodes will have dual earning potential: staking rewards for creating elite edge nodes and normal uptime mining, relaying video and data to other members of the network at a higher performance level. Theta also revealed a 4% inflation plan for elite edge nodes' normal uptime and a 5% inflation plan for validators and guardian nodes to ensure the network continues to expand.

A plan to burn TFUEL to offset TFUEL inflation. The initial plan is to burn 25% of all TFUEL payments on the edge network, introducing a cost to using the network for platforms (this cost remains significantly lower than traditional CDN costs). Burning 25% of TFUEL payments, smart contract fees, and staking could potentially significantly reduce Theta's supply.

Risks

Theta operates in the streaming and video space and inherently faces fierce competition. While decentralization offers many benefits, centralized entities like YouTube and Twitch will be able to act faster with their managed centralization. The quality, scale, and reputation of traditional platforms will make it challenging for content producers and users to be lured away.

There may also be intellectual property issues as music or videos found on Theta may be subject to copyright or licensing constraints. To address this issue, unlike pure Web3 applications, Theta does not have a moderation system. For example, the creator guidelines for THETAtv take a stance on acceptable content. According to the guidelines, any behavior that negatively impacts the THETAtv brand can be removed, and TFUEL can be removed.

Lastly, Theta needs to ensure that its blockchain and technology can scale. Scaling blockchain projects for video streaming is complex. The granularity of token rewards (e.g., ten thousand concurrent viewers making micro-payments every two seconds for a video) has surpassed the capabilities of Ethereum.

Conclusion

By creating the world's first decentralized video network to address the drawbacks of media streaming and video on demand, Theta has grown to become the highest valued crypto asset in its category. The multi-level BFT consensus mechanism of Theta combined with the dual token model empowers, secures, and funds over 25,000 peer-to-peer edge nodes that form the Theta edge network. Theta has proven to be a force in the cryptocurrency and media markets; however, Theta faces fierce competition from traditional media giants like YouTube, Netflix, and Twitch. To continue gaining market share, Theta needs to further develop its edge network, attract audiences to use Theta TV, engage streamers through smart contract privileges, release new products such as Theta Dex, and successfully launch Mainnet 3.0.