DVT Technology in Detail What DVT Projects are Currently Available?

A Comprehensive Look at DVT Technology What Projects are Currently Available?

Author: Overcollateralized, Co-founder of Web3MTL; Translation: LianGuai0xjs

Is Distributed Validation Technology (DVT) the new era of liquidity collateral?

First, we must understand what DVT is and what it brings to Ethereum Staking. Which projects are implementing DVT?

DVT is the decentralized future of Ethereum staking.

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Why do we need DVT for the current Ethereum staking status?

Before diving into DVT, let’s understand the current state of Ethereum staking and why people are so interested in more decentralized validators.

To run a validator node on the Ethereum mainnet, one must stake 32 ETH. At the time of writing, this is valued at around $51,000 USD.

Clearly, not everyone can lock up $51,000 of capital. This has opened up the market for liquidity collateral derivatives, allowing investors to:

1. Earn staking rewards without locking up funds. 2. Participate in ETH staking with an amount less than 32 ETH.

Currently, there are dozens of liquidity collateral derivatives (LSD) providers, of which 5 hold over 1% of the LSD market share.

Lido Finance: 8.83 million ETH

Rocket Pool: 0.973 million ETH

Binance: 0.765 million ETH

frax finance: 0.275 million ETH

Coinbase: 0.191 million ETH

From the above data, it can be seen that Lido currently dominates the LSD market, holding a 78% market share. Even more concerning is the fact that it currently controls over 30% of all staked Ether on the network. This poses serious risks to decentralization.

The most significant concern of having an LSD provider in control of the main supply of staked ETH is that it concentrates voting power in the hands of a few node operators. In other words, many of Lido’s validator nodes each hold 32 ETH and are operated by a selected group of entities.

Aside from the issue of validation capacity, what about attack scenarios? What if a node operator’s infrastructure fails and is unable to validate blocks anymore? No matter how you look at it, there are too many single points of failure when you are a node operator.

These concerns have led builders to explore “what if we decentralize node operators?” This is where Distributed Validation Technology (DVT) comes into play.

A closer look at DVT technology

DVT allows Ethereum validators to be distributed across a cluster of nodes.

DVT consists of 4 parts: Distributed Key Generation (DKG), Shamir Key Sharing with BLS signatures, Secure Multiparty Computation (MPC), and the DVT BFT Consensus Layer.

Basically, DVT is a middleware that provides infrastructure elasticity for the validator infrastructure used in the Ethereum proof-of-stake network. With DVT, you can decompose the key signed by the validator and distribute it to many people, similar to multi-signature.

What are the benefits and drawbacks of DVT?

1. Reduces the risk of attacks due to key fragmentation between different parties;

2. Better uptime as validators rely on more node operators that serve as fault-tolerant entities (e.g., if one out of four node operators fails, three can still sign), reducing slashing risk.

3. Decentralization in node operations.

All these advantages alleviate concerns about a single liquid staking derivatives project dominating the majority of Ethereum validators.

No innovation comes without drawbacks.

1. Distributed node operators add complexity to the validation process and introduce smart contract and other risks;

2. Increasing the number of participants increases operating costs, leading to decreased profitability;

Now that we have a good understanding of what DVT is, here is a non-exhaustive list of projects actively working on DVT:

Current DVT Projects

Obol Network, SSV Network, Stader Labs, Diva Staking

Obol Network:

Building a DV ecosystem for Ethereum, allowing node operators to generate and distribute keys and deploy DV on their network. They have partnered with many well-known enterprises in the industry to test their network.

Current Status: Mainnet Alpha, 40 node operators

SSV Network:

SSV Network has also built infrastructure to facilitate the launch of DV. Their focus seems to be on a liquidity staking protocol to enable decentralized node operators.

Current Status: Permissioned Mainnet, 40 operators, 353 validators

Stader Labs:

Stader Labs has decided to directly implement DVT into their own liquidity staking derivatives protocol. Users can stake their ETH in exchange for Stader’s LSD ETHx. Currently, Stader has $34.6 million worth of ETH staked. Stader also supports liquidity staking on other networks.

Diva Staking:

Diva Staking has performed a vampire attack on other LSD. They are currently running an Early Staker program, encouraging users to deposit ETH or stETH into their treasury in exchange for DIVA.

Current status: Testnet and accepting deposits on the mainnet

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