Esports Crypto Streaming Service Turns Bandwidth Into Profits

(Bloomberg) -- One of the biggest knocks against most cryptocurrencies is that they have few real-world benefits besides speculation.

In the case of the digital token Theta, the blockchain project underpins a peer-to-peer video streaming network that offers rewards to many of its 1 million monthly users in exchange for unused bandwidth. After rallying more than 300% this year, Theta's market value has swelled to around $6 billion, putting it in the ranks of the top 20 digital tokens, according to data from CoinMarketCap.com.

Sony Group Corp. and Samsung Electronics Co. are among the industry titians that back the endeavor, which was developed by an esports livestreaming startup. Investors such as Sony also stake coins, a process used to help validate transactions that create new blocks in blockchain networks. In exchange they receive rewards in the form of a secondary token called TFuel, which has increased in value to about $2 billion.

“The [Theta] token is up 100x-plus since we invested,” said Samuel Harrison, managing partner at Blockchain.com Ventures, which has an equity stake, holds coins and serves as a validator of transactions. A little over a year ago, Theta traded for 4 cents. It's now around $6.

In addition to watching video-gaming live streams and movies from the likes of MGM, Theta network users can share their bandwidth with others and earn Tfuel tokens.

“A heavy viewer can get $5-$10 a month,” Mitch Liu, chief executive of Theta Labs Inc., said in an interview. “It's significant in developing countries. And that pays for half of your Netflix subscription.” An average Theta.tv user watches for about 63 minutes a day, he said.

While Theta's audience isn't growing, it has stayed stable for years, Liu said. “We made a strategic decision that we are not going to be competing with YouTube,” he said. Co-founders of YouTube and Twitch are among the company's advisers.

Instead, the company is expanding the array of services it offers. It's also waded into NFTs, or non-fungible tokens, which are typically digital art that's recorded on blockchain. Singer Katy Perry said this week that she would make NFTs of her performances available on the network as well as taking an undisclosed stake in the company. Theta Labs has also launched a decentralized exchange, and is hoping more decentralized-finance (DeFi) apps, which let users borrow, lend and trade peer-to-peer, will jump over.

“Both Compound and Uniswap can run on Theta without any code change,” Liu said, referring to two of the most popular DeFi apps that both got started on a rival blockchain, Ethereum.

Unlike many other leading crypto projects such as Bitcoin, Theta is still highly centralized. Theta Labs owns roughly half of 16 main validator nodes that create blocks. But there are also thousands of so-called Guardian nodes that anyone can set up that check whether transactions have been processed correctly, and finalize blocks. Theta Labs owns 20% of all Theta supply, and an undisclosed amount of TFuel tokens.

When Liu and his co-founder, Jieyi Long, started the company in 2015, it was called Sliver.tv and was supposed to focus on live virtual-reality streaming of video-game tournaments. It had a few million users of its streaming service in Brazil and Eastern Europe, but found that getting video to those parts of the world was expensive, and the video quality was poor. So the company shifted to using blockchain for video delivery, and held a private token sale raising $20 million for Theta Labs -- a subsidiary of Sliver.tv -- in late 2017.

It's facing a lot of competitors in the video category, like VideoCoin and Livepeer. The crypto company Tron owns BitTorrent, the file-sharing software often used for video.

“Theta is still a strong contender in a space with lots of competition,” said Aaron Brown, a crypto investor who writes for Bloomberg Opinion. “Its price has basically tracked Bitcoin, with no major move up or down. The technical news is fine, but not overwhelming.”

But Theta's equity investors, like venture-capital firm DHVC, are believers, not speculators.

“It's not just a pure financial incentive or goal, we are really creating a new ecosystem,” Ali Farahanchi, partner at DHVC, said in an interview. “This is a new way of conducting business, when you have streamers that can provide their computing time to the network. That's kind of decentralized streaming. We are just getting started.”