diff --git a/dialogs/demonotice.cpp b/dialogs/demonotice.cpp
index 9f3055426..7dc0e609e 100644
--- a/dialogs/demonotice.cpp
+++ b/dialogs/demonotice.cpp
@@ -12,7 +12,7 @@ DemoNotice::DemoNotice(QWidget *parent) :
 
 	QVBoxLayout* vlayout = new QVBoxLayout(this);
 
-	QHBoxLayout* layout = new QHBoxLayout(this);
+	QHBoxLayout* layout = new QHBoxLayout();
 	layout->setMargin(10);
 	layout->setSpacing(20);
 
diff --git a/dialogs/proxydialog.cpp b/dialogs/proxydialog.cpp
index bf3233a8b..fd4407027 100644
--- a/dialogs/proxydialog.cpp
+++ b/dialogs/proxydialog.cpp
@@ -5,8 +5,17 @@
 #include <QDialogButtonBox>
 #include <QComboBox>
 #include <QFileDialog>
+#include <QMessageBox>
 
-ProxyDialog::ProxyDialog(QWidget *parent, const QVector<Footage *> &footage) : QDialog(parent) {
+#include <QDebug>
+
+#include "io/proxygenerator.h"
+#include "project/footage.h"
+
+ProxyDialog::ProxyDialog(QWidget *parent, const QVector<Footage *> &footage) :
+	QDialog(parent),
+	selected_footage(footage)
+{
 	// set dialog title
 	setWindowTitle(tr("Create Proxy"));
 
@@ -19,7 +28,7 @@ ProxyDialog::ProxyDialog(QWidget *parent, const QVector<Footage *> &footage) : Q
 	// set the video dimensions of the proxy
 	layout->addWidget(new QLabel(tr("Dimensions:"), this), 0, 0);
 
-	QComboBox* size_combobox = new QComboBox(this);
+	size_combobox = new QComboBox(this);
 	size_combobox->addItem(tr("Same Size as Source"), 1.0);
 	size_combobox->addItem(tr("Half Resolution (1/2)"), 0.5);
 	size_combobox->addItem(tr("Quarter Resolution (1/4)"), 0.25);
@@ -30,12 +39,12 @@ ProxyDialog::ProxyDialog(QWidget *parent, const QVector<Footage *> &footage) : Q
 	// set the desired format of the proxy to create
 	layout->addWidget(new QLabel(tr("Format:"), this), 1, 0);
 
-	QComboBox* format_combobox = new QComboBox(this);
+	format_combobox = new QComboBox(this);
 	format_combobox->addItem(tr("ProRes HQ"));
-	format_combobox->addItem(tr("ProRes SQ"));
-	format_combobox->addItem(tr("ProRes LT"));
-	format_combobox->addItem(tr("DNxHD"));
-	format_combobox->addItem(tr("H.264"));
+//	format_combobox->addItem(tr("ProRes SQ"));
+//	format_combobox->addItem(tr("ProRes LT"));
+//	format_combobox->addItem(tr("DNxHD"));
+//	format_combobox->addItem(tr("H.264"));
 	layout->addWidget(format_combobox, 1, 1);
 
 	// set the location to place the proxies
@@ -58,6 +67,58 @@ ProxyDialog::ProxyDialog(QWidget *parent, const QVector<Footage *> &footage) : Q
 	connect(buttons, SIGNAL(rejected()), this, SLOT(reject()));
 }
 
+void ProxyDialog::accept() {
+	QVector<ProxyInfo> info_list;
+
+	for (int i=0;i<selected_footage.size();i++) {
+		// loop through selected footage and send info to the proxy queue
+
+		ProxyInfo info;
+
+		// fill info struct based on user input
+		info.footage = selected_footage.at(i);
+		info.codec_type = 0;
+		info.size_multiplier = size_combobox->currentData().toDouble();
+
+		QString base_footage_fn = QFileInfo(selected_footage.at(i)->url).fileName();
+
+		// determine path from input
+		if (custom_location.isEmpty()) {
+			// use same as source (proxy subfolder)
+
+			// generate full path from footage path and proxy_folder_name's translated "Proxy"
+			info.path = QDir(QFileInfo(selected_footage.at(i)->url).dir().filePath(proxy_folder_name)).filePath(base_footage_fn);
+		} else {
+			// use existing location
+			info.path = QDir(custom_location).filePath(base_footage_fn);
+		}
+
+		// if the proposed proxy file already exists
+		if (QFileInfo::exists(info.path) && QMessageBox::warning(this,
+																 tr("Proxy file exists"),
+																 tr("The file \"%1\" already exists. Do you wish to replace it?").arg(info.path),
+																 QMessageBox::Yes | QMessageBox::No) == QMessageBox::No) {
+			// return to dialog without closing or starting any proxy generation
+			return;
+		}
+
+		// send to proxy generator thread
+		info_list.append(info);
+	}
+
+	// all proxy info checks out, queue it with the proxy generator
+	for (int i=0;i<info_list.size();i++) {
+		info_list.at(i).footage->proxy = true;
+		info_list.at(i).footage->proxy_path.clear();
+
+		proxy_generator.queue(info_list.at(i));
+	}
+
+	mainWindow->setWindowModified(true);
+
+	QDialog::accept();
+}
+
 void ProxyDialog::location_changed(int i) {
 	custom_location.clear();
 	if (i == 1) {
diff --git a/dialogs/proxydialog.h b/dialogs/proxydialog.h
index fa994d1e1..9285203c0 100644
--- a/dialogs/proxydialog.h
+++ b/dialogs/proxydialog.h
@@ -11,19 +11,29 @@ class ProxyDialog : public QDialog {
 	Q_OBJECT
 public:
 	ProxyDialog(QWidget* parent, const QVector<Footage*>& footage);
+public slots:
+	// called if user clicks "OK" on the dialog
+	virtual void accept() override;
 private:
-	// user's dimensions
+	// user's desired dimensions
 	QComboBox* size_combobox;
 
+	// user's desired proxy format
+	QComboBox* format_combobox;
+
 	// allows users to set the location to store proxies
 	QComboBox* location_combobox;
 
 	// stores the custom location to store proxies if the user sets a custom location
 	QString custom_location;
 
-	// stores the subdirectory to be made next to the source in the user's language
+	// stores the subdirectory to be made next to the source (dependent on the user's language)
 	QString proxy_folder_name;
+
+	// list of footage to make proxies for
+	QVector<Footage*> selected_footage;
 private slots:
+	// triggered when the user changes the index in the location combobox
 	void location_changed(int i);
 };
 
diff --git a/io/exportthread.cpp b/io/exportthread.cpp
index 79136b2f5..1f94a1b47 100644
--- a/io/exportthread.cpp
+++ b/io/exportthread.cpp
@@ -83,7 +83,7 @@ bool ExportThread::setupVideo() {
 	if (!video_enabled) return true;
 
 	// find video encoder
-	vcodec = avcodec_find_encoder((enum AVCodecID) video_codec);
+	vcodec = avcodec_find_encoder(static_cast<enum AVCodecID>(video_codec));
 	if (!vcodec) {
 		qCritical() << "Could not find video encoder";
 		ed->export_error = tr("could not video encoder for %1").arg(QString::number(video_codec));
@@ -109,7 +109,7 @@ bool ExportThread::setupVideo() {
 	}
 
 	// setup context
-	vcodec_ctx->codec_id = static_cast<AVCodecID>(video_codec);
+	vcodec_ctx->codec_id = static_cast<enum AVCodecID>(video_codec);
 	vcodec_ctx->codec_type = AVMEDIA_TYPE_VIDEO;
 	vcodec_ctx->width = video_width;
 	vcodec_ctx->height = video_height;
diff --git a/io/loadthread.cpp b/io/loadthread.cpp
index ae4bcca35..bc771d7b1 100644
--- a/io/loadthread.cpp
+++ b/io/loadthread.cpp
@@ -250,6 +250,10 @@ bool LoadThread::load_worker(QFile& f, QXmlStreamReader& stream, int type) {
 									m->speed = attr.value().toDouble();
 								} else if (attr.name() == "alphapremul") {
 									m->alpha_is_premultiplied = (attr.value() == "1");
+								} else if (attr.name() == "proxy") {
+									m->proxy = (attr.value() == "1");
+								} else if (attr.name() == "proxypath") {
+									m->proxy_path = attr.value().toString();
 								}
 							}
 
diff --git a/io/path.cpp b/io/path.cpp
index 79248904d..c3a24f84a 100644
--- a/io/path.cpp
+++ b/io/path.cpp
@@ -3,6 +3,9 @@
 #include <QStandardPaths>
 #include <QFileInfo>
 #include <QCoreApplication>
+#include <QCryptographicHash>
+#include <QDateTime>
+
 #include "debug.h"
 
 QString real_app_dir;
@@ -41,3 +44,9 @@ QList<QString> get_effects_paths() {
 	if (!env_path.isEmpty()) effects_paths.append(env_path);
 	return effects_paths;
 }
+
+QString get_file_hash(const QString& filename) {
+	QFileInfo file_info(filename);
+	QString cache_file = filename.mid(filename.lastIndexOf('/')+1) + QString::number(file_info.size()) + QString::number(file_info.lastModified().toMSecsSinceEpoch());
+	return QCryptographicHash::hash(cache_file.toUtf8(), QCryptographicHash::Md5).toHex();
+}
diff --git a/io/path.h b/io/path.h
index 2e2f6d841..2a721c0fd 100644
--- a/io/path.h
+++ b/io/path.h
@@ -8,4 +8,7 @@ QString get_data_path();
 QString get_config_path();
 QList<QString> get_effects_paths();
 
+// generate hash algorithm used to uniquely identify files
+QString get_file_hash(const QString& filename);
+
 #endif // PATH_H
diff --git a/io/previewgenerator.cpp b/io/previewgenerator.cpp
index e1da9262b..923a824a1 100644
--- a/io/previewgenerator.cpp
+++ b/io/previewgenerator.cpp
@@ -13,10 +13,8 @@
 #include <QtMath>
 #include <QTreeWidgetItem>
 #include <QSemaphore>
-#include <QCryptographicHash>
 #include <QFile>
 #include <QDir>
-#include <QDateTime>
 
 extern "C" {
 #include <libavformat/avformat.h>
@@ -65,13 +63,7 @@ void PreviewGenerator::parse_media() {
 					&& fmt_ctx->streams[i]->codecpar->width > 0
 					&& fmt_ctx->streams[i]->codecpar->height > 0) {
 
-				/*dout << "avg_frame_rate was:" << fmt_ctx->streams[i]->avg_frame_rate.num << "/" << fmt_ctx->streams[i]->avg_frame_rate.den;
-				dout << "r_frame_rate was:" << fmt_ctx->streams[i]->r_frame_rate.num << "/" << fmt_ctx->streams[i]->r_frame_rate.den;
-				dout << "codec_frame_rate was:" << fmt_ctx->streams[i]->codec->framerate.num << "/" << fmt_ctx->streams[i]->codec->framerate.den;
-				dout << "nb_frames was:" << fmt_ctx->streams[i]->nb_frames;
-				dout << "duration was:" << fmt_ctx->streams[i]->duration << "OR fmt_ctx's duration is:" << fmt_ctx->duration;*/
-
-				// heuristic to determine if video is a still image
+				// heuristic to determine if video is a still image (if it is, we treat it differently in the playback/render process)
 				if (fmt_ctx->streams[i]->avg_frame_rate.den == 0
 						&& fmt_ctx->streams[i]->codecpar->codec_id != AV_CODEC_ID_DNXHD) { // silly hack but this is the only scenario i've seen this
 					if (footage->url.contains('%')) {
@@ -82,16 +74,10 @@ void PreviewGenerator::parse_media() {
 						contains_still_image = true;
 						ms.video_frame_rate = 0;
 					}
+
 				} else {
 					// using ffmpeg's built-in heuristic
 					ms.video_frame_rate = av_q2d(av_guess_frame_rate(fmt_ctx, fmt_ctx->streams[i], nullptr));
-
-					// old heuristic
-					/*if (fmt_ctx->streams[i]->r_frame_rate.den == 0) {
-						ms.video_frame_rate = av_q2d(fmt_ctx->streams[i]->avg_frame_rate);
-					} else {
-						ms.video_frame_rate = av_q2d(fmt_ctx->streams[i]->r_frame_rate);
-					}*/
 				}
 
 				ms.video_width = fmt_ctx->streams[i]->codecpar->width;
@@ -238,7 +224,9 @@ void PreviewGenerator::generate_waveform() {
 		}
 	}
 
+	// TODO may be unnecessary - doesn't av_read_frame allocate a packet itself?
 	AVPacket* packet = av_packet_alloc();
+
 	bool done = true;
 
 	bool end_of_file = false;
@@ -455,10 +443,7 @@ void PreviewGenerator::run() {
 			parse_media();
 
 			// see if we already have data for this
-			QFileInfo file_info(footage->url);
-			QString cache_file = footage->url.mid(footage->url.lastIndexOf('/')+1) + QString::number(file_info.size()) + QString::number(file_info.lastModified().toMSecsSinceEpoch());
-			//dout << "using hash" << cache_file;
-			QString hash = QCryptographicHash::hash(cache_file.toUtf8(), QCryptographicHash::Md5).toHex();
+			QString hash = get_file_hash(footage->url);
 
 			if (retrieve_preview(hash)) {
 				sem.acquire();
diff --git a/io/proxygenerator.cpp b/io/proxygenerator.cpp
new file mode 100644
index 000000000..9f54b56a5
--- /dev/null
+++ b/io/proxygenerator.cpp
@@ -0,0 +1,387 @@
+#include "proxygenerator.h"
+
+#include "project/footage.h"
+#include "io/path.h"
+#include "mainwindow.h"
+
+#include <QDir>
+#include <QFileInfo>
+#include <QtMath>
+#include <QStatusBar>
+
+#include <QDebug>
+
+extern "C" {
+	#include <libavformat/avformat.h>
+	#include <libavcodec/avcodec.h>
+	#include <libswscale/swscale.h>
+}
+
+enum AVCodecID temp_enc_codec = AV_CODEC_ID_PRORES;
+
+ProxyGenerator::ProxyGenerator() : cancelled(false) {}
+
+void ProxyGenerator::transcode(const ProxyInfo& info) {
+	// set progress to 0
+	current_progress = 0.0;
+
+	// open input file
+	AVFormatContext* input_fmt_ctx = nullptr;
+	avformat_open_input(&input_fmt_ctx, info.footage->url.toUtf8(), nullptr, nullptr);
+
+	// open output file
+	AVFormatContext* output_fmt_ctx = nullptr;
+	avformat_alloc_output_context2(&output_fmt_ctx, nullptr, nullptr, info.path.toUtf8());
+
+	// open output file writing handle
+	avio_open(&output_fmt_ctx->pb, info.path.toUtf8(), AVIO_FLAG_WRITE);
+
+	// get stream info from input file
+	avformat_find_stream_info(input_fmt_ctx, nullptr);
+
+	// create array of input decoders
+	QVector<AVCodecContext*> input_streams;
+	input_streams.resize(input_fmt_ctx->nb_streams);
+	input_streams.fill(nullptr);
+
+	// create array of output encoders
+	QVector<AVCodecContext*> output_streams;
+	output_streams.resize(input_fmt_ctx->nb_streams);
+	output_streams.fill(nullptr);
+
+	// create array of swscale contexts for pixel format conversion
+	QVector<SwsContext*> sws_contexts;
+	sws_contexts.resize(input_fmt_ctx->nb_streams);
+	sws_contexts.fill(nullptr);
+
+	// loop through file to find compatible video streams
+	for (int i=0;i<int(input_fmt_ctx->nb_streams);i++) {
+		AVStream* in_stream = input_fmt_ctx->streams[i];
+
+		// create new stream in output
+		AVStream* out_stream = avformat_new_stream(output_fmt_ctx, nullptr);
+		out_stream->id = in_stream->id;
+
+		// find decoder for this codec
+		AVCodec* dec_codec = avcodec_find_decoder(in_stream->codecpar->codec_id);
+
+		// find encoder for chosen proxy type
+		AVCodec* enc_codec = avcodec_find_encoder(temp_enc_codec);
+
+		// we only transcode video streams, others we just passthrough
+		if (in_stream->codecpar->codec_type == AVMEDIA_TYPE_VIDEO && dec_codec != nullptr) {
+
+			// allocate decoding context for this stream
+			AVCodecContext* dec_ctx = avcodec_alloc_context3(dec_codec);
+
+			// copy parameters from stream to decoding context
+			avcodec_parameters_to_context(dec_ctx, in_stream->codecpar);
+
+			// open decoder
+			avcodec_open2(dec_ctx, dec_codec, nullptr);
+
+			// store decoding context in array
+			input_streams[i] = dec_ctx;
+
+			// retrieve more information about this stream
+			av_dump_format(input_fmt_ctx, i, info.footage->url.toUtf8(), 0);
+
+			// allocate encoding context for this stream
+			AVCodecContext* enc_ctx = avcodec_alloc_context3(enc_codec);
+
+			// copy properties from decoding context to encoding context
+			enc_ctx->codec_id = temp_enc_codec;
+			enc_ctx->codec_type = AVMEDIA_TYPE_VIDEO;
+			enc_ctx->width = qFloor(dec_ctx->width*info.size_multiplier);
+			enc_ctx->height = qFloor(dec_ctx->height*info.size_multiplier);
+			enc_ctx->sample_aspect_ratio = dec_ctx->sample_aspect_ratio;
+			enc_ctx->pix_fmt = enc_codec->pix_fmts[0];
+			enc_ctx->framerate = dec_ctx->framerate;
+			enc_ctx->time_base = in_stream->time_base;
+
+			out_stream->time_base = in_stream->time_base;
+
+			// if format uses global headers, add flag to enc_ctx
+			if (output_fmt_ctx->oformat->flags & AVFMT_GLOBALHEADER) {
+				enc_ctx->flags |= AV_CODEC_FLAG_GLOBAL_HEADER;
+			}
+
+			// set encoder options (mostly just multithreading)
+			AVDictionary* opts = nullptr;
+			av_dict_set(&opts, "threads", "auto", 0);
+
+			// open encoder
+			avcodec_open2(enc_ctx, enc_codec, &opts);
+
+			// copy parameters from encoding context to stream
+			avcodec_parameters_from_context(out_stream->codecpar, enc_ctx);
+
+			// store encoding context in array
+			output_streams[i] = enc_ctx;
+
+			// create swscontext for this stream
+			SwsContext* sws_ctx = sws_getContext(
+											in_stream->codecpar->width,
+											in_stream->codecpar->height,
+											static_cast<enum AVPixelFormat>(in_stream->codecpar->format),
+											enc_ctx->width,
+											enc_ctx->height,
+											enc_ctx->pix_fmt,
+											0,
+											nullptr,
+											nullptr,
+											nullptr
+										);
+
+			sws_contexts[i] = sws_ctx;
+		} else {
+			avcodec_parameters_copy(out_stream->codecpar, in_stream->codecpar);
+		}
+	}
+
+	// write video header
+	avformat_write_header(output_fmt_ctx, nullptr);
+
+	// packet that av_read_frame will dump file packets into
+	AVPacket packet;
+	av_init_packet(&packet);
+
+	// frame that decoder will decode into
+	AVFrame* dec_frame = av_frame_alloc();
+
+	// main transcoding loop
+	while (!skip) {
+
+		// cache stream index
+		int stream_index = packet.stream_index;
+
+		// retrieve frame from decoder (this will clear the last frame so we don't have to do that)
+		int read_ret = -1;
+		int recfr_ret = -1;
+		do {
+			// read from input file
+			read_ret = av_read_frame(input_fmt_ctx, &packet);
+
+			// handle errors
+			if (read_ret < 0) {
+
+				// AVERROR_EOF means we've simply reached the end of the file, otherwise this is an error
+				if (read_ret != AVERROR_EOF) {
+					qWarning() << "Proxy generation for file" << info.footage->url << "ended prematurely";
+				}
+
+				// either way, we shall abort reading
+				break;
+			}
+
+			stream_index = packet.stream_index;
+
+			// determine whether this frame is from a stream we're transcoding
+			if (input_streams.at(stream_index) == nullptr) {
+				// if we didn't allocate a decoder for this earlier, we just pass it through
+
+				av_packet_rescale_ts(&packet, input_fmt_ctx->streams[stream_index]->time_base, output_fmt_ctx->streams[stream_index]->time_base);
+
+				// write packet to output
+				av_interleaved_write_frame(output_fmt_ctx, &packet);
+
+			} else {
+				// we're going to transcode this packet.
+
+				// send packet to decoder
+				avcodec_send_packet(input_streams.at(stream_index), &packet);
+
+				// use timestamp and stream duration to create a rough estimation of the progress through this file
+				current_progress = qCeil((double(packet.pts)/double(input_fmt_ctx->streams[packet.stream_index]->duration))*100);
+
+			}
+
+			// free packet allocated by av_read_frame
+			av_packet_unref(&packet);
+		} while ((recfr_ret = avcodec_receive_frame(input_streams.at(packet.stream_index), dec_frame)) == AVERROR(EAGAIN) && !skip);
+
+		// error/eof handling - cancel while loop
+		if (read_ret < 0 || skip) {
+			break;
+		}
+
+		// free packet as we're about to use it for encoding
+		av_packet_unref(&packet);
+
+		// rescale input frame timestamp to output timestamp
+		av_rescale_q(dec_frame->pts, input_fmt_ctx->streams[stream_index]->time_base, output_fmt_ctx->streams[stream_index]->time_base);
+
+		// determine if the pix_fmt is different, so if we need to convert
+		bool convert_pix_fmt = (output_streams.at(stream_index)->pix_fmt != input_streams.at(stream_index)->pix_fmt);
+
+		// create reference to the frame to be sent to the encoder
+		AVFrame* enc_frame = dec_frame;
+
+		if (convert_pix_fmt) {
+			// create sws frame for pixel format conversion
+			enc_frame = av_frame_alloc();
+			enc_frame->width = output_streams.at(stream_index)->width;
+			enc_frame->height = output_streams.at(stream_index)->height;
+			enc_frame->format = output_streams.at(stream_index)->pix_fmt;
+			av_frame_get_buffer(enc_frame, 0);
+
+			// convert pixel format to format expected by the encoder
+			sws_scale(sws_contexts.at(stream_index), dec_frame->data, dec_frame->linesize, 0, dec_frame->height, enc_frame->data, enc_frame->linesize);
+
+			// set same pts as dec_frame
+			enc_frame->pts = dec_frame->pts;
+		}
+
+		// send frame to encoder
+		avcodec_send_frame(output_streams.at(stream_index), enc_frame);
+
+		if (convert_pix_fmt) {
+			// free sws frame since we made one before
+			av_frame_free(&enc_frame);
+		}
+
+		// return value for packet receiving
+		int recret;
+
+		// loop through receiving packets
+		while ((recret = avcodec_receive_packet(output_streams.at(stream_index), &packet)) >= 0 && !skip) {
+
+			// set packet stream index to current stream index
+			packet.stream_index = stream_index;
+
+			// write frame to file
+			av_interleaved_write_frame(output_fmt_ctx, &packet);
+
+			// unref old packet
+			av_packet_unref(&packet);
+
+		}
+
+	}
+
+	// free dec_frame
+	av_frame_free(&dec_frame);
+
+	// write video trailer
+	av_write_trailer(output_fmt_ctx);
+
+	// free stream contexts
+	for (int i=0;i<int(input_fmt_ctx->nb_streams);i++) {
+		if (input_streams[i] != nullptr) {
+			// free swscale contexts
+			sws_freeContext(sws_contexts[i]);
+
+			// free input decoding context
+			avcodec_close(input_streams[i]);
+			avcodec_free_context(&input_streams[i]);
+
+			// free output encoding context
+			avcodec_close(output_streams[i]);
+			avcodec_free_context(&output_streams[i]);
+		}
+	}
+
+	// close output file handle
+	avio_closep(&output_fmt_ctx->pb);
+
+	// close output file
+	avformat_free_context(output_fmt_ctx);
+
+	// close input file
+	avformat_close_input(&input_fmt_ctx);
+
+	// set footage to use newly generated proxy
+	info.footage->proxy = true;
+	info.footage->proxy_path = info.path;
+
+	qInfo() << "Finished creating proxy for" << info.footage->url;
+	mainWindow->statusBar()->showMessage(tr("Finished generating proxy for \"%1\"").arg(info.footage->url));
+
+}
+
+// main proxy generating loop
+void ProxyGenerator::run() {
+	// mutex used for thread safe signalling
+	mutex.lock();
+
+	while (!cancelled) {
+		// wait for queue() to be called
+		waitCond.wait(&mutex);
+
+		// quit thread if cancel() was called
+		if (cancelled) break;
+
+		// loop through queue until the queue is empty
+		while (proxy_queue.size() > 0) {
+
+			// grab proxy info
+			const ProxyInfo& info = proxy_queue.first();
+
+			// create directory for info
+			QFileInfo(info.path).dir().mkpath(".");
+
+			// set skip to false
+			skip = false;
+
+			// transcode proxy
+			transcode(info);
+
+			// we're finished with this proxy, remove it
+			proxy_queue.removeFirst();
+
+			// quit loop if cancel() was called
+			if (cancelled) break;
+
+		}
+	}
+
+	mutex.unlock();
+}
+
+// called to add footage to generate proxies for
+void ProxyGenerator::queue(const ProxyInfo &info) {
+	// remove any queued proxies with the same footage
+	if (!proxy_queue.isEmpty()
+			&& proxy_queue.first().footage == info.footage) {
+		// if the thread is currently processing a proxy with the same footage, abort it
+		skip = true;
+	}
+
+	// scan through the rest of the queue for another proxy with the same footage (start with 1 since we already processed first())
+	for (int i=1;i<proxy_queue.size();i++) {
+		if (proxy_queue.at(i).footage == info.footage) {
+			// found a duplicate, assume the one we're queuing now overrides and delete it
+			proxy_queue.removeAt(i);
+			i--;
+		}
+	}
+
+	// add proxy info to queue
+	proxy_queue.append(info);
+
+	// wake proxy thread loop if sleeping
+	waitCond.wakeAll();
+}
+
+// to be called from another thread to terminate the proxy generator thread and free it
+void ProxyGenerator::cancel() {
+	// signal to thread to cancel
+	cancelled = true;
+	skip = true;
+
+	// if signal is sleeping, wake it to cancel correctly
+	waitCond.wakeAll();
+
+	// wait for thread to finish
+	wait();
+}
+
+double ProxyGenerator::get_proxy_progress(Footage *f) {
+	if (proxy_queue.first().footage == f) {
+		return current_progress;
+	}
+	return 0.0;
+}
+
+// proxy generator is a global omnipotent entity
+ProxyGenerator proxy_generator;
diff --git a/io/proxygenerator.h b/io/proxygenerator.h
new file mode 100644
index 000000000..b6bcaf294
--- /dev/null
+++ b/io/proxygenerator.h
@@ -0,0 +1,50 @@
+#ifndef PROXYGENERATOR_H
+#define PROXYGENERATOR_H
+
+#include <QThread>
+#include <QVector>
+#include <QMutex>
+#include <QWaitCondition>
+
+struct Footage;
+
+struct ProxyInfo {
+	Footage* footage;
+	double size_multiplier;
+	int codec_type;
+	QString path;
+};
+
+class ProxyGenerator : public QThread
+{
+public:
+	ProxyGenerator();
+	void run();
+	void queue(const ProxyInfo& info);
+	void cancel();
+	double get_proxy_progress(Footage* f);
+private:
+	// queue of footage to process proxies for
+	QVector<ProxyInfo> proxy_queue;
+
+	// threading objects
+	QWaitCondition waitCond;
+	QMutex mutex;
+
+	// set to true if you want to permanently close ProxyGenerator
+	bool cancelled;
+
+	// set to true if you want to abort the footage currently being processed
+	bool skip;
+
+	// stores progress in percent of proxy currently being processed
+	double current_progress;
+
+	// function that performs the actual transcode
+	void transcode(const ProxyInfo& info);
+};
+
+// proxy generator is a global omnipotent entity
+extern ProxyGenerator proxy_generator;
+
+#endif // PROXYGENERATOR_H
diff --git a/mainwindow.cpp b/mainwindow.cpp
index 5f756fd4c..08af530c9 100644
--- a/mainwindow.cpp
+++ b/mainwindow.cpp
@@ -2,6 +2,7 @@
 
 #include "io/config.h"
 #include "io/path.h"
+#include "io/proxygenerator.h"
 
 #include "project/footage.h"
 #include "project/sequence.h"
@@ -219,6 +220,7 @@ MainWindow::MainWindow(QWidget *parent, const QString &an) :
 	statusBar->showMessage(tr("Welcome to %1").arg(appName));
 	setStatusBar(statusBar);
 
+	// populate menu bars
 	setup_menus();
 
 	if (!data_dir.isEmpty()) {
@@ -235,9 +237,14 @@ MainWindow::MainWindow(QWidget *parent, const QString &an) :
 		autorecovery_timer.start();
 	}
 
+	// set up panel layout
 	setup_layout(false);
 
+	// set up output audio device
 	init_audio();
+
+	// start omnipotent proxy generator process
+	proxy_generator.start();
 }
 
 MainWindow::~MainWindow() {
@@ -1002,6 +1009,9 @@ void MainWindow::updateTitle(const QString& url) {
 
 void MainWindow::closeEvent(QCloseEvent *e) {
 	if (can_close_project()) {
+		// stop proxy generator thread
+		proxy_generator.cancel();
+
 		panel_effect_controls->clear_effects(true);
 
 		set_sequence(nullptr);
@@ -1051,8 +1061,8 @@ void MainWindow::paintEvent(QPaintEvent *event) {
 	if (!demoNoticeShown) {
 #ifndef QT_DEBUG
 		DemoNotice* d = new DemoNotice(this);
+		connect(d, SIGNAL(finished(int)), d, SLOT(deleteLater()));
 		d->open();
-		connect(d, SIGNAL(finished()), d, SLOT(deleteLater()));
 #endif
 
 		demoNoticeShown = true;
diff --git a/olive.pro b/olive.pro
index 334fafcb9..ca8c48050 100644
--- a/olive.pro
+++ b/olive.pro
@@ -138,7 +138,8 @@ SOURCES += \
     io/crossplatformlib.cpp \
     effects/internal/vsthost.cpp \
     ui/flowlayout.cpp \
-    dialogs/proxydialog.cpp
+    dialogs/proxydialog.cpp \
+    io/proxygenerator.cpp
 
 HEADERS += \
         mainwindow.h \
@@ -240,7 +241,8 @@ HEADERS += \
     io/crossplatformlib.h \
     effects/internal/vsthost.h \
     ui/flowlayout.h \
-    dialogs/proxydialog.h
+    dialogs/proxydialog.h \
+    io/proxygenerator.h
 
 FORMS +=
 
diff --git a/panels/project.cpp b/panels/project.cpp
index 1de84dec2..cb7e804a4 100644
--- a/panels/project.cpp
+++ b/panels/project.cpp
@@ -966,6 +966,10 @@ void Project::save_folder(QXmlStreamWriter& stream, int type, bool set_ids_only,
 					stream.writeAttribute("out", QString::number(f->out));
 					stream.writeAttribute("speed", QString::number(f->speed));
 					stream.writeAttribute("alphapremul", QString::number(f->alpha_is_premultiplied));
+
+					stream.writeAttribute("proxy", QString::number(f->proxy));
+					stream.writeAttribute("proxypath", f->proxy_path);
+
 					for (int j=0;j<f->video_tracks.size();j++) {
 						const FootageStream& ms = f->video_tracks.at(j);
 						stream.writeStartElement("video");
diff --git a/playback/cacher.cpp b/playback/cacher.cpp
index ae08fbb69..0f29b290b 100644
--- a/playback/cacher.cpp
+++ b/playback/cacher.cpp
@@ -673,7 +673,19 @@ void open_clip_worker(Clip* clip) {
 	} else if (clip->media->get_type() == MEDIA_TYPE_FOOTAGE) {
 		// opens file resource for FFmpeg and prepares Clip struct for playback
 		Footage* m = clip->media->to_footage();
-		QByteArray ba = m->url.toUtf8();
+
+		// byte array for retriving raw bytes from QString URL
+		QByteArray ba;
+
+		// do we have a proxy?
+		if (m->proxy
+				&& !m->proxy_path.isEmpty()
+				&& QFileInfo::exists(m->proxy_path)) {
+			ba = m->proxy_path.toUtf8();
+		} else {
+			ba = m->url.toUtf8();
+		}
+
 		const char* filename = ba.constData();
 		const FootageStream* ms = m->get_stream_from_file_index(clip->track < 0, clip->media_stream);
 
diff --git a/playback/playback.cpp b/playback/playback.cpp
index f6757612b..af4d03f72 100644
--- a/playback/playback.cpp
+++ b/playback/playback.cpp
@@ -13,6 +13,7 @@
 #include "project/media.h"
 #include "io/config.h"
 #include "io/avtogl.h"
+#include "io/proxygenerator.h"
 #include "debug.h"
 
 extern "C" {
@@ -28,6 +29,8 @@ extern "C" {
 #include <QOpenGLTexture>
 #include <QOpenGLPixelTransferOptions>
 #include <QOpenGLFramebufferObject>
+#include <QPainter>
+#include <QCoreApplication>
 
 #ifdef QT_DEBUG
 //#define GCF_DEBUG
@@ -270,14 +273,55 @@ void get_clip_frame(Clip* c, long playhead, bool& texture_failed) {
 			uint8_t* data_buffer_1 = target_frame->data[0];
 			uint8_t* data_buffer_2 = nullptr;
 
-			size_t frame_size;
+			size_t frame_size = size_t(target_frame->linesize[0])*size_t(target_frame->height);
+
+			// if proxy is currently being generated, show an on-screen message of its progress
+			if (c->media->to_footage()->proxy
+					&& c->media->to_footage()->proxy_path.isEmpty()) {
+				// create buffers to draw on
+				data_buffer_1 = new uint8_t[frame_size];
+				data_buffer_2 = new uint8_t[frame_size];
+
+				memcpy(data_buffer_1, target_frame->data[0], frame_size);
+
+				// wrap data in a QImage for painting
+				QImage img(data_buffer_1, target_frame->width, target_frame->height, QImage::Format_RGBA8888);
+
+				// create QPainter process
+				QPainter p(&img);
+
+				// set font color to white
+				p.setPen(Qt::white);
+
+				// set font size relative to frame size (divided by 12)
+				QFont overlay_font = p.font();
+				overlay_font.setPixelSize(target_frame->height/12);
+				p.setFont(overlay_font);
+
+				// generate overlay text
+				QString proxy_overlay_text = QCoreApplication::translate("Playback", "Generating Proxy: %1%").arg(proxy_generator.get_proxy_progress(c->media->to_footage()));
+
+				int text_height = p.fontMetrics().descent() + p.fontMetrics().height();
+
+				// draw semi-transparent black background
+				p.fillRect(QRect(0,
+								 target_frame->height-text_height,
+								 p.fontMetrics().width(proxy_overlay_text),
+								 text_height),
+						   QColor(0, 0, 0, 128)
+					);
+
+
+				// draw text
+				p.drawText(0,
+						   target_frame->height-p.fontMetrics().descent(),
+						   proxy_overlay_text);
+			}
 
 			for (int i=0;i<c->effects.size();i++) {
 				Effect* e = c->effects.at(i);
 				if (e->enable_image && e->is_enabled()) {
 					if (data_buffer_1 == target_frame->data[0]) {
-						frame_size = size_t(target_frame->linesize[0])*size_t(target_frame->height);
-
 						data_buffer_1 = new uint8_t[frame_size];
 						data_buffer_2 = new uint8_t[frame_size];
 
diff --git a/project/footage.cpp b/project/footage.cpp
index c5cdc94e9..82ecc5915 100644
--- a/project/footage.cpp
+++ b/project/footage.cpp
@@ -18,7 +18,8 @@ Footage::Footage() :
 	in(0),
 	out(0),
 	speed(1.0),
-	alpha_is_premultiplied(false)
+	alpha_is_premultiplied(false),
+	proxy(false)
 {
 	ready_lock.lock();
 }
diff --git a/project/footage.h b/project/footage.h
index 56ae6cace..6e5219078 100644
--- a/project/footage.h
+++ b/project/footage.h
@@ -56,6 +56,10 @@ struct Footage {
 	double speed;
 	bool alpha_is_premultiplied;
 
+	// proxy config
+	bool proxy;
+	QString proxy_path;
+
 	PreviewGenerator* preview_gen;
 	QMutex ready_lock;
 
diff --git a/project/sourcescommon.cpp b/project/sourcescommon.cpp
index 18462b889..0c7f55fcd 100644
--- a/project/sourcescommon.cpp
+++ b/project/sourcescommon.cpp
@@ -3,13 +3,17 @@
 #include "panels/panels.h"
 #include "project/media.h"
 #include "project/undo.h"
+#include "playback/playback.h"
 #include "panels/timeline.h"
 #include "panels/project.h"
 #include "project/footage.h"
 #include "panels/viewer.h"
 #include "project/projectfilter.h"
+#include "project/sequence.h"
 #include "io/config.h"
 #include "dialogs/proxydialog.h"
+#include "ui/viewerwidget.h"
+#include "io/proxygenerator.h"
 #include "mainwindow.h"
 
 #include <QProcess>
@@ -19,6 +23,8 @@
 #include <QMessageBox>
 #include <QDesktopServices>
 
+#include <QDebug>
+
 SourcesCommon::SourcesCommon(Project* parent) :
 	editing_item(nullptr),
 	project_parent(parent)
@@ -76,11 +82,11 @@ void SourcesCommon::show_context_menu(QWidget* parent, const QModelIndexList& it
 	connect(show_sequences, SIGNAL(triggered(bool)), panel_project->sorter, SLOT(set_show_sequences(bool)));
 
 	if (items.size() > 0) {
-		Media* m = project_parent->item_to_media(items.at(0));
-
 		if (items.size() == 1) {
+			Media* first_media = project_parent->item_to_media(items.at(0));
+
 			// replace footage
-			int type = m->get_type();
+			int type = first_media->get_type();
 			if (type == MEDIA_TYPE_FOOTAGE) {
 				QAction* replace_action = menu.addAction(tr("Replace/Relink Media"));
 				QObject::connect(replace_action, SIGNAL(triggered(bool)), project_parent, SLOT(replace_selected_file()));
@@ -100,14 +106,19 @@ void SourcesCommon::show_context_menu(QWidget* parent, const QModelIndexList& it
 			}
 		}
 
-		// duplicate item
+		// analyze selected footage types
 		bool all_sequences = true;
 		bool all_footage = true;
+
+		cached_selected_footage.clear();
 		for (int i=0;i<items.size();i++) {
+			Media* m = project_parent->item_to_media(items.at(i));
 			if (m->get_type() != MEDIA_TYPE_SEQUENCE) {
 				all_sequences = false;
 			}
-			if (m->get_type() != MEDIA_TYPE_FOOTAGE) {
+			if (m->get_type() == MEDIA_TYPE_FOOTAGE) {
+				cached_selected_footage.append(m->to_footage());
+			} else {
 				all_footage = false;
 			}
 		}
@@ -129,9 +140,52 @@ void SourcesCommon::show_context_menu(QWidget* parent, const QModelIndexList& it
 			QObject::connect(delete_footage_from_sequences, SIGNAL(triggered(bool)), project_parent, SLOT(delete_clips_using_selected_media()));
 
 			QMenu* proxies = menu.addMenu(tr("Proxy"));
-			proxies->addAction(tr("Create Proxy"), this, SLOT(open_create_proxy_dialog()));
-//			proxies->addAction(tr("Modify Proxy"));
-//			proxies->addAction(tr("Restore Original"));
+
+			// special case if one footage item is selected and its proxy is currently being generated
+			if (cached_selected_footage.size() == 1
+					&& cached_selected_footage.at(0)->proxy
+					&& cached_selected_footage.at(0)->proxy_path.isEmpty()) {
+				QAction* action = proxies->addAction(tr("Generating proxy: %1% complete").arg(proxy_generator.get_proxy_progress(cached_selected_footage.at(0))));
+				action->setEnabled(false);
+			} else {
+				// determine whether any selected footage has or doesn't have proxies
+				bool footage_without_proxies_exists = false;
+				bool footage_with_proxies_exists = false;
+
+				for (int i=0;i<cached_selected_footage.size();i++) {
+					if (cached_selected_footage.at(i)->proxy) {
+						footage_with_proxies_exists = true;
+					} else {
+						footage_without_proxies_exists = true;
+					}
+				}
+
+				// if footage was selected WITHOUT proxies
+				if (footage_without_proxies_exists) {
+					QString create_proxy_text;
+
+					if (footage_with_proxies_exists) {
+						// some of the footage already has proxies, so we use a different string
+						create_proxy_text = tr("Create/Modify Proxy");
+					} else {
+						// none of the footage has proxies
+						create_proxy_text = tr("Create Proxy");
+					}
+
+					proxies->addAction(create_proxy_text, this, SLOT(open_create_proxy_dialog()));
+				}
+
+				// if footage was selected WITH proxies
+				if (footage_with_proxies_exists) {
+
+					if (!footage_without_proxies_exists) {
+						// if all the footage has proxies, we didn't make a "Create/Modify" above, so we create one here (but only "modify")
+						proxies->addAction(tr("Modify Proxy"), this, SLOT(open_create_proxy_dialog()));
+					}
+
+					proxies->addAction(tr("Restore Original"), this, SLOT(clear_proxies_from_selected()));
+				}
+			}
 		}
 
 		// delete media
@@ -301,8 +355,46 @@ void SourcesCommon::item_renamed(Media* item) {
 }
 
 void SourcesCommon::open_create_proxy_dialog() {
-	QVector<Footage*> selected_footage;
-
-	ProxyDialog pd(mainWindow, selected_footage);
+	// open the proxy dialog and send it a list of currently selected footage
+	ProxyDialog pd(mainWindow, cached_selected_footage);
 	pd.exec();
 }
+
+void SourcesCommon::clear_proxies_from_selected() {
+	QList<QString> delete_list;
+
+	for (int i=0;i<cached_selected_footage.size();i++) {
+		Footage* f = cached_selected_footage.at(i);
+
+		if (f->proxy && !f->proxy_path.isEmpty()) {
+			if (QFileInfo::exists(f->proxy_path)) {
+				if (QMessageBox::question(mainWindow,
+									  tr("Delete proxy"),
+									  tr("Would you like to delete the proxy file \"%1\" as well?").arg(f->proxy_path),
+										  QMessageBox::Yes | QMessageBox::No) == QMessageBox::Yes) {
+					delete_list.append(f->proxy_path);
+				}
+			}
+		}
+
+		f->proxy = false;
+		f->proxy_path.clear();
+	}
+
+	if (sequence != nullptr) {
+		// close all clips so we can delete any proxies requested to be deleted
+		closeActiveClips(sequence);
+	}
+
+	// delete proxies requested to be deleted
+	for (int i=0;i<delete_list.size();i++) {
+		QFile::remove(delete_list.at(i));
+	}
+
+	if (sequence != nullptr) {
+		// update viewer (will re-open active clips with original media)
+		panel_sequence_viewer->viewer_widget->frame_update();
+	}
+
+	mainWindow->setWindowModified(true);
+}
diff --git a/project/sourcescommon.h b/project/sourcescommon.h
index aa740f1d9..1eb816129 100644
--- a/project/sourcescommon.h
+++ b/project/sourcescommon.h
@@ -3,6 +3,7 @@
 
 #include <QModelIndexList>
 #include <QTimer>
+#include <QVector>
 
 class Project;
 class QMouseEvent;
@@ -10,6 +11,8 @@ class Media;
 class QAbstractItemView;
 class QDropEvent;
 
+struct Footage;
+
 class SourcesCommon : public QObject {
 	Q_OBJECT
 public:
@@ -27,7 +30,10 @@ private slots:
 	void reveal_in_browser();
 	void rename_interval();
 	void item_renamed(Media *item);
+
+	// proxy functions
 	void open_create_proxy_dialog();
+	void clear_proxies_from_selected();
 private:
 	Media* editing_item;
 	QModelIndex editing_index;
@@ -35,6 +41,9 @@ private:
 	Project* project_parent;
 	void stop_rename_timer();
 	QTimer rename_timer;
+
+	// we cache the selected footage items for open_create_proxy_dialog()
+	QVector<Footage*> cached_selected_footage;
 };
 
 #endif // SOURCESCOMMON_H
diff --git a/ui/renderthread.cpp b/ui/renderthread.cpp
index a8ef4fee5..b85a3d349 100644
--- a/ui/renderthread.cpp
+++ b/ui/renderthread.cpp
@@ -58,7 +58,6 @@ void RenderThread::run() {
 					ctx->functions()->glGenFramebuffers(1, &back_buffer_2);
 				}
 
-
 				// gen texture
 				if (front_texture == 0 || tex_width != seq->width || tex_height != seq->height) {
 					// cache texture size