Decentralizing Ethereum Validators: A Look at DVT's Impact
Is Distributed Validator Technology a Game Changer? A Closer Look at Its Innovations and Potential
by Hans Xiang
Introduction
The Merge, the transition from Proof of Work to Proof of Stake, has marked a significant shift for Ethereum participants in securing the network as validators. In this model, validators are required to stake their ETH within the existing network and comply with a set of rules to avoid getting penalized, commonly referred to as "slashing."
This fundamental adjustment provides a crucial need for DVT (distributed validator technology), enabling participants to collaborate and pool together as one validator. With DVT, the process of operating and running validators becomes more decentralized and accessible, while improving efficiency, and reducing the risk of punishment.
Distributed Validator Technology (DVT)
As shown above, various validators possess a portion of the validator key. By collaborating and using each piece of the validator key, they act as a collective. By leveraging distributed key generation, multi-party computation (MPC), Shamir's secret sharing, and Byzantine fault-tolerant algorithms, it becomes possible to divide validator duties among multiple nodes while adhering to Ethereum's staking regulations.
In other words, DVT is a layer for staking on Ethereum that is decentralized, enabling users to create and distribute validators across several machines. If any node is offline or faulty, the validator can still work thanks to the fault-tolerant nature of the system. DVT offers extra fault-tolerance for Ethereum validators, preventing potential redundancies like centralization and single points of failure.
The Current Landscape
As the current market continues to grow and expand, ssv.network and Obol, are emerging as market leaders in the DVT space. They are currently in the late stages of development and are preparing to launch their mainnet.
Ssv.network: The SSV network includes a group of smart contracts on a blockchain, a unique SSV token, and SSV validator clients linked through an open public network. These smart contracts oversee the identification, organization, and transactions among those who deposit and those who operate. The SSV token is utilized for payments, while operators run SSV validator clients that join through a peer-to-peer publication/subscription network. These operators collaborate to establish groups based on the terms set by those who deposit, and they complete validator tasks on their behalf. The SSV smart contract makes it simple to pay for these services using SSV tokens.
Obol: Obol's system involves operators who manage validators in separate clusters, using a middleware client and a standard validator client. To ensure operators can collaborate to create a new cluster, Obol has created the DV Launchpad website. Unlike SSV, Obol does not have its own token. Instead, Obol is developing a set of smart contracts that will enable rewards to be distributed directly from withdrawals once the feature is enabled. Until then, operators and stakers must use customized smart contracts to manage payments, or use an off-chain method.
SSV and Obol are two systems that aim to increase the reliability and fault tolerance of Ethereum staking. Obol places a strong emphasis on minimizing correlation and keeping network and software concerns separate. Meanwhile, SSV aims to create a decentralized and permissionless staking network that allows staking duties to be outsourced, and a marketplace for staking services to be established.
Conclusion
DVT is a technology that minimizes network failures and enables the decentralized operation of Ethereum validators, reducing the risks associated with validator availability errors. In addition to enhancing fault tolerance, DVT is a crucial component in achieving the decentralization of the Ethereum network. It enables both professional validators and individual staker communities to run validators more efficiently and provides benefits that improve validator security and efficiency. Market leaders, SSV and Obol are rapidly pushing out their approaches to further make DVT accessible and usable. As DVT keeps evolving, novel use cases can be created using EigenLayer and LSDs.