A Primer on Distributed Validator Technology
Introduction to Distributed Validator Technology (DVT)
Distributed validator technology is a nascent technological innovation that allows a single Ethereum validator to be run across multiple machines, which improves overall validator resiliency, security, and decentralization. Underlying DVT is a distributed validator cluster that coordinates what each validator signs and reconstitutes the partial signature into an aggregate signature for the Distributed Validator. This cryptographic signature scheme is called the BLS Signature which ensures that no one party within the cluster has the full private key.
Should less than 33% of participating nodes in a DV cluster go offline, the remaining active nodes can still come to a consensus on what to sign and can produce valid signature for their staking duties. This is known as Active/Active redundancy, a common pattern for minimizing downtime in a system.
Why is DVT coming under the spotlight recently?
There is an increasing need for DVT after Lido’s recent meteoric rise to control close to 33% of staked ETH. The consequences of it:
A party controlling > 1/3 of the stake could initially inhibit Ethereum’s finality however the attack would be temporary since Ethereum’s inactivity leak would eventually penalize this bad behavior enough for the chain to finalize.
Should it control >50%, it could censor transactions and conduct a short-term reorganization of the chain, allowing for the possibility of harmful MEV extraction.
Should it control >67%, the attacker can finalize on their preferred chain without needing the consensus of other validators. It will also be able to censor transactions and reorg the chain at will.
Benefits of a DVT
- No single node operator has access to the full private key of the validator private key. In a validator cluster, multiple entities/operators run the validator node (staking service diversity, geo-location diversity).
- Improves the uptime and effectiveness of dedicated at-home validators and this importance can be reflected during the Beacon Chain downtime in May 2023. A diversity in clients (images below) through the use of DVT will mitigate such issues.
- Benefits LSPs by reducing their slashing risks and lowering cost of insurance.
Possible Risks of DVT
- Execution layer and consensus layer client compatibility, latency, etc. With many validator clients adopting a variety of incompatible DV implementations, this can cause homogeneity issues between the validator clients and distributed validator protocols.
Key Players in DVT
Obol Network:
Obol network is a provider of distributed validator technology for scaling the consensus layer while preserving decentralization. Charon, Obol’s implementation of DVT, is a middleware client that enables validator clients to work together in a cluster. Uses BLS signatures to split private key into shares such that no single operator is able to control the network validation.
Fundraising: The company behind Obol network, Obol Labs, has recently raised US$12.5M co-led by Pantera and Archetype, bringing the total funds raised to US$19M.
SSV Network:
An infrastructural provider of DVT solution that powers Ethereum staking apps built on the network, enhancing decentralization, security, and scalability. Like Obol, it also uses BLS signature scheme to split up private key into shares to distribute the operational and key management tasks across multiple users. The recent launch of its mainnet focuses on dApp partners that leverage its DVT for Ethereum staking. The launch includes partners such as Stader, Ankr, Metapool, StakeTogether among others. Stader and Ankr were previously grant recipients of the SSV ecosystem fund.
Fundraising: has raised US$10M with investors including Digital Currency Group, Coinbase Ventures, Lukka, OKX among others.
Case Study: Lido’s DVT endeavors + Stakewise
Lido: recently passed a proposal (99.9%) on 3 Nov to implement a simple DVT using Obol and SSV DVT technology.
Implication of the addition of a simple DVT module to Lido:
• A major benefit that Lido receives from DVT is that its node operator set now increased and becomes more diversified and decentralized.
• Lido can create DV clusters that include solo stakers and community validators since previously only whitelisted node operators by Lido DAO are allowed.
• However, while DVT brings the aforementioned benefits, the current proposal will only allow 0.5% of Lido’s stake which could be increased later by DAO voting. It would also introduce for a start, 24 clusters with 5 validators per cluster. In the short term, this would probably have limited impact on decentralization.
- Expected to only see the first batch of community stakers in the Lido protocols in early 2024.
Additionally, Stakewise announced the launch of its v3 which promises to introduce more DVT elements from providers such as Obol and SSV networks. Some of the benefits from v3 include:
- Stakewise V3 will decompose staking into multiple heterogenous vaults that stakers can choose to delegate amongst.
- Operators can permissionlessly deploy new vaults with customized features including the node operators, infrastructure details (eg. DVT, MEV usage, client mix etc). This opens up opportunities for individuals, communities, and companies to easily open up staking pools for the users of Stakewise.
- Introduction of new LST- osETH: slashing resistant, accrues reward every second, stake and unstake anytime, decentralized. rETH2 and sETH2 will be gradually phased out → there will be no more liquidity and incentives for these tokens.
That’s it for the short primer on DVT, hope it has been insightful! And once again, thank you for reading my articles and supporting me!
