The blockchain is a requirement because without it, your video can be taken down entirely by the platform. Like for example Louis Rossmann’s video about Grayjay which google falsly claims violated YouTube ToS when it clearly doesn’t, or when people get false copyright strikes and lose monetization.
With the LBRY blockchain, Odysee can hide your video and ban you from their platform, but your video will still be up and visible on other platforms, and monetization still works, everything you’ve earned is not lost. It is your video, not the platform’s video.
If it was only federated, whichever instance you uploaded to will have the ability to take down your video entirely which can be an issue if you are a critic of the instance itself or if you are a whistleblower, not to mention that video hosting is incredibly expensive, and adding federation on top of that is downright monetarily impossible. The p2p aspect of LBRY solvea this by distributing hosting costs to uploaders and other “seeders.”
The blockchain itself acts as a public record of uploaded videos and where to download them, like a torrent tracker, and records cannot be deleted, so the blockchain doesn’t host the videos themselves. The video itself can be taken down from the original source but since it is also p2p, the video can remain in circulation.
Another thing about blockchain technology in general is that it provides you with a way to identify yourself and authenticate transactions without providing your real name, email or credit card. You need neither of these on Odysee yet can still earn money.