> ## Documentation Index
> Fetch the complete documentation index at: https://livepeerfoundation-d4522ba3.mintlify.site/llms.txt
> Use this file to discover all available pages before exploring further.

# Economics

> Two revenue streams, two commission settings, and how every reward is split between an orchestrator and its delegators.

The orchestrator and delegator roles are two sides of one economic engine. An orchestrator earns
from two independent streams, and **shares a configurable portion of each with its delegators.**
Understanding this split is what lets either side make good decisions.

## Two revenue streams

| Stream                | Currency | Source                      | Frequency               | Depends on                          |
| --------------------- | -------- | --------------------------- | ----------------------- | ----------------------------------- |
| **Service fees**      | ETH      | Gateways paying for compute | Per job (probabilistic) | Volume of work, price, uptime       |
| **Inflation rewards** | LPT      | New LPT minted each round   | Once per round          | Total bonded stake; the reward call |

The streams are structurally independent. Fees track how much **work** you do; rewards track how much
**stake** you have. Both require active-set membership.

## Service fees (ETH)

Gateways pay with **probabilistic micropayment tickets**. Each ticket has a face value and a win
probability; the orchestrator redeems only winning tickets on-chain for ETH. Over many tickets,
earnings converge to face value × win probability.

How fees are split is set by the orchestrator's **fee share** (`feeShare`) — the percentage of fees
passed through to delegators:

```
total fee value = orchestrator's keep + delegator fee pool
```

A `feeShare` of 80% means delegators share 80% of fee revenue and the orchestrator keeps 20%. For
delegators, **higher feeShare is better.**

<Note>
  Current Explorer surfaces label this **Fee Share** (the part passed to delegators), not "fee cut."
  Read it as: higher is better for delegators.
</Note>

## Inflation rewards (LPT)

The protocol mints new LPT each round. An active orchestrator's pool receives a share proportional
to its total bonded stake — but **only if it calls `reward()` that round.** A missed call forfeits
that round's LPT for the whole pool, permanently.

How the pool is split is set by the **reward cut** (`rewardCut`) — the percentage the orchestrator
keeps:

```
total round reward = orchestrator's reward cut + delegator reward pool
```

| Reward cut | Orchestrator keeps | Delegators receive | Implication                                                             |
| ---------- | ------------------ | ------------------ | ----------------------------------------------------------------------- |
| 0%         | none               | 100%               | Maximum pull for delegated stake; operator earns nothing from rewards   |
| 10–25%     | 10–25%             | 75–90%             | Common production range; balances operator return with delegator appeal |
| 100%       | 100%               | none               | Maximum operator return; delegators get no LPT rewards here             |

For delegators, **lower rewardCut is better.** `rewardCut` and `feeShare` move in opposite
directions, which is a common source of confusion — see the table below.

## The two settings, side by side

| Setting     | Controls                                          | Better for delegators when |
| ----------- | ------------------------------------------------- | -------------------------- |
| `rewardCut` | Share of **LPT inflation** the orchestrator keeps | **Lower**                  |
| `feeShare`  | Share of **ETH fees** passed to delegators        | **Higher**                 |

## A worked example (delegator's view)

Suppose in one round:

* **900 LPT** of issuance is available to delegators and orchestrators (after any treasury cut),
* your orchestrator controls **5%** of total bonded stake → its pool gets **45 LPT**,
* its `rewardCut` is **10%** → delegators share **40.5 LPT**,
* you hold **10%** of that pool's stake.

Your reward for the round is **4.05 LPT**. If many more delegators join the same orchestrator after
you, your slice of the pool shrinks — your *percentage* of the pool is what matters, not the absolute
stake.

## Why inflation matters even if you don't operate

The protocol targets a bonding rate (\~50% of LPT bonded) and **adjusts inflation to steer toward
it**: under-bonded → inflation rises to attract stake; over-bonded → inflation falls to reduce
dilution. Issuance can also carry a **treasury cut** (LIP-92 set 10%, currently paused at its balance
ceiling). The practical takeaway for both roles: the mint rate is **not static** — check the
[live values](/network/reference/protocol-parameters) rather than an old annualized figure.

## An orchestrator's costs

Earnings are only half the picture. Orchestrator costs fall into three buckets:

* **Hardware** — GPU(s), server, networking (capital, amortized).
* **Infrastructure** — electricity, bandwidth, colocation/cloud (electricity is usually the largest recurring cost).
* **Staking opportunity cost** — LPT locked in self-bond can't be used elsewhere.

Unlike gateways, orchestrators **don't pay for the jobs they process — they're paid.** Very low-stake
orchestrators should also check that reward-call gas doesn't exceed the LPT earned; if so, disable
automatic reward calling until stake grows (see [Configure](/network/guides/orchestrator-configure)).

## Next

<CardGroup cols={2}>
  <Card title="Set pricing (orchestrator)" icon="tag" href="/network/guides/orchestrator-pricing">
    Price competitively so gateways select you.
  </Card>

  <Card title="Choose an orchestrator (delegator)" icon="list-check" href="/network/guides/delegator-choose-orchestrator">
    Use these settings to compare operators.
  </Card>

  <Card title="Governance & the treasury" icon="landmark" href="/network/explanation/governance">
    Where the treasury cut goes — and the vote your stake carries.
  </Card>
</CardGroup>