Distributed Validator Technology and Ethereum Long-Term Decentralization

Ethereum is committed to achieving decentralization through scalability, and a specialized modular blockchain approach is gaining momentum. In this model, the blockchain is divided into execution layer, data layer, and consensus layer. The execution layer has been developed through technologies such as optimistic and ZK rollups, making it more mature and refined. The current research focus has shifted to the data layer, where data availability sampling methods are an important innovation.

The consensus layer is another key factor of blockchain, including the consensus mechanism and its scalability. In September 2022, Ethereum transitioned from a proof-of-work to a proof-of-stake network. Over the past 8 months, the number of validators has increased from 400,000 to 598,000. The current focus is on making Ethereum staking more decentralized, scalable, simple, and secure, as well as more friendly to independent stakers, while reducing penalty risks. Distributed validator technology (DVT) is a promising solution. This article will analyze DVT and its contribution to the decentralization of Ethereum.

Ethereum Staking Ecosystem

DVT simplifies the process of running Ethereum validators on multiple machines. It is important to understand the current Ethereum staking architecture. The Beacon Chain coordinates the validation process and generates new blocks. The consensus client and execution client have different roles in adding new blocks. Node operators are responsible for running the infrastructure required for network participation. Validators or service providers handle the complexities of staking, including private key management, among others. Individuals can also choose to become independent stakers.

However, the current architecture has a risk of single points of failure and lacks sufficient Decentralization. Issues such as insufficient client diversity, careless private key storage, or node failures can lead to financial losses. This is where DVT can add significant value.

DVT Working Principle

DVT allows validators to run on multiple machines. Distributed Key Generation (DKG) is an important technology that enables participants to collaboratively generate a private key without a single member accessing the complete key. Each participant generates a private key shard, which, when combined, derives the complete private key. This ensures that validators can distribute key shards across multiple nodes, and even if some shards are offline, the remaining shards can still be used for signing.

DVT also requires a coordination mechanism to ensure secure verification and communication between nodes. Threshold signature schemes are a common method, requiring a specified number of validators to cooperate in signing transactions. In terms of consensus, certain networks utilize Byzantine Fault Tolerance (BFT) protocols to achieve signature consensus.

Users can flexibly allocate key shards based on factors such as geographical location, data center, and client implementation. Multiple client implementations are crucial for the long-term survival of the Ethereum network, reducing the risk of disruptions caused by a single client.

Some companies are actively developing DVT as a coordination layer for staking infrastructure. Their non-custodial middleware ensures that the protocol itself does not have key custody, with only the validator clients holding the private keys. This design enhances security.

Beneficiaries of DVT

DVT brings benefits to the majority of stakeholders in the staking ecosystem. Liquid staking pools can share validators among multiple operators, reducing the risk of single points of failure. Independent stakers can mitigate the impact of network or power interruptions. Institutional staking products can lower operational and hardware costs, improving efficiency. Overall, the widespread advantages of DVT make it attractive to the staking ecosystem.

Value Proposition of DVT

DVT brings immense value to ETH staking. It reduces the likelihood of node failures, enhances key security, and increases client diversity. This lowers risks, reduces penalties, and boosts the confidence of stakers. However, this is only part of realizing the vision of Ethereum's decentralization, scalability, and security, and further collaboration with other stakeholders is needed.

Combining liquidity staking pools can lower the entry threshold for ETH staking. Requiring node operators to provide collateral can reduce collusion risks. Adding secure key storage and redundant node support can further lower risks and enhance validator confidence. Future technological innovations are expected to make Ethereum more secure and reliable.

Future Challenges

Adopting DVT also faces some challenges. First, the coordination involving multiple nodes increases system complexity. The BFT consensus mechanism may encounter performance and security issues in large-scale networks. Currently, the number of key shards is still limited. DVT may increase system latency, as transactions require signatures from multiple nodes. It may also increase the requirements for node redundancy, raising the costs for node operators.

Conclusion

DVT represents an important advancement in the staking ecosystem, providing a secure, flexible, and decentralized infrastructure for staking. It has the potential to change the staking landscape and become a key player in the future of Ethereum staking. As the ecosystem evolves, DVT is capable of meeting the changing demands and advancing blockchain technology. This promising technology will create exciting opportunities for the blockchain community.