A non-trivial solution to the problems with current protocol staking infrastructure.
What is distributed validator technology?
One of the most critical developments in the Ethereum protocol’s roadmap is distributed validator technology (DVT) also known as SSV. DVT is a relatively new infrastructure primitive that allows splitting a validator key into a multi-signature construct, making it possible for two or more participants to sign messages as a group. The keys created in this process are then securely distributed between independent nodes and operate under consensus to secure the Ethereum protocol and earn rewards.
Advantages of DVT
Distributed Validator Clusters are the multi-operator, fault-tolerant, and geographically redundant by-product of DVT over the traditional validator node infrastructure.
Geographic Redundancy: Existing validators have a single point of failure. Only one validator client instance can be online and sign messages at any time. If two validators with the same private key sign conflicting messages the validator will be slashed.
Key Distribution: Distributed Validator Clusters share one private key, no single node in the cluster has the full private key, and the full private key never exists in full anywhere. This makes validator key compromise more difficult for an attacker.
Fault Tolerance: Distributed Validator Clusters require only a subset of nodes to be online to produce signatures. This allows for fault-tolerant validators to be built and allows a Distributed Validator to remain online despite hardware failure.
Protocol staking infrastructure risk management
We are encouraged by how much concern there is around the concentration risks on the Ethereum protocol. For larger providers gaining more stake, this is a way to distribute key pairs and run multiple validators through a single validator/ node client. By splitting a validator key across different systems, the distributed validator technology enables distributed control and operation of an Ethereum validator.
“When the 32 ETH minimum validator stake is worth $320,000 or $800,000 at an ETH price upwards of $10,000 or $25,000, it’s my belief major financial institutions won’t be willing to accept the counterparty risk associated with solely relying on a single infrastructure provider, especially a provider who doesn’t implement DVT into its offering. The risks will be too great.” – James Parillo, Portfolio Manager at Figment Capital
To create node redundancy and protect stakers from slashing risk, DVT optimizes the overall health and decentralization of the Ethereum protocol. We’ll likely see a surge in implementation use cases in the coming years. We believe that DVT (or SSV) will quickly become the standard ‘layer 0’ decentralized infrastructure for ETH protocol staking. The technology decentralizes the Ethereum security layer without compromising validator performance. Obol and ssv.network’s rapid growth reflects distributed validator technology’s value in further decentralizing Ethereum. Outside of creating more decentralized protocol staking pools, DVT can be leveraged across our Ethereum protocol staking solution to improve our safety and liveness.