Yes, that's a fairly good way of describing what's happening. SLM is generally not storing anything, though, just acting as more a handshake intermediary from the client to the source video. Didn't want to get too technical here, but this is a bit from the logs to give an idea:
2025-08-27 19:03:00.271874: INFO: Extraction successful for https://www.youtube.com/watch?v=vD03E54HIIU.
2025-08-27 19:03:00.272842: INFO: Found 10 formats.
2025-08-27 19:03:00.272842: INFO: Best format URL found using m3u8: https://manifest.googlevideo.com/api/manifest/hls_playlist/expire/1756357381/ei/pY6vaIXjBtvBy_sP3_aukA0/ip/108.34.251.146/id/bc3d37139e072085/itag/96/source/youtube/requiressl/yes/ratebypass/yes/pfa/1/sgoap/clen%3D1839938%3Bdur%3D113.638%3Bgir%3Dyes%3Bitag%3D140%3Blmt%3D1756108039461250/sgovp/clen%3D52523316%3Bdur%3D113.600%3Bgir%3Dyes%3Bitag%3D137%3Blmt%3D1756108045204118/rqh/1/hls_chunk_host/rr7---sn-8xgp1vo-cvne.googlevideo.com/xpc/EgVo2aDSNQ%3D%3D/met/1756335781,/mh/6l/mm/31,29/mn/sn-8xgp1vo-cvne,sn-8xgp1vo-xfgl/ms/au,rdu/mv/m/mvi/7/pl/17/rms/au,au/initcwndbps/4381250/bui/AY1jyLPxrOP4quqQIfFuMxDmqNkzZVPyUMyVHFBgF2IMz_dsVxWh0OJuCr99jhFgGMZi3CnSlTHhgmZx/spc/l3OVKftBI1cBEl4-aCn9K-q-P9iAj7YognpaKeIgahyvKDyFwVZkfbWey4aaCP0NS8jn6IPOCkLvkQ/vprv/1/playlist_type/CLEAN/dover/11/txp/6309224/mt/1756335290/fvip/4/keepalive/yes/fexp/51355912,51552689,51565116,51565682,51580968/sparams/expire,ei,ip,id,itag,source,requiressl,ratebypass,pfa,sgoap,sgovp,rqh,xpc,bui,spc,vprv,playlist_type/sig/AJfQdSswRAIgeu4mX7_HWAI2-mNEcHUYBbxsHImJ6Ab4cdpRxeLFUnICIEIjICEvwemiczDUoXYj9W3KOL8JUIq55zu44tEUKriu/lsparams/hls_chunk_host,met,mh,mm,mn,ms,mv,mvi,pl,rms,initcwndbps/lsig/APaTxxMwRAIgQSIshkPW8luzb3ArUHjJrKLmhKWjIfvnHg1cUXsnlLICIBKsTVMuUinZoOJL7Q6hRM92BqymwZpohm7v23DtmRBN/playlist/index.m3u8
That "best format" is what's being served up, and that is determined each time your launch the content from the link in the Stream File.
This is a different functionality called Streaming Stations. For YouTube, it uses parts of the same code, but it functions quite differently because of how Channels works. The stream resolves on the server first and then serves it to the clients, so there is no issue like with Stream Files that connect directly from the clients to sources without going through the server.
I'm not clear what you're getting at here? Or does what I said above change what you are asking?