The popularity of a few staking providers on the Ethereum network presents centralization risks. Distributed validator technology (DVT) aims to address this by sharing signing responsibilities with multiple parties.
Read on to learn how distributed validator technology works, explore its use cases, and understand its advantages and disadvantages.
What Is Distributed Validator Technology?
Distributed validator technology (DVT) is an open-source protocol that enables a group of network validators to act collectively as a single validator. The protocol takes a private key belonging to one validator and splits it into multiple key shares, after which it distributes them across numerous nodes organized into a cluster.
During transaction validation, a subset of nodes uses their key shares, with the protocol determining the necessary threshold. Attackers targeting the key find it impractical to do so since no single node has the complete private key.
Breaking network rules as a validator leads to node slashing. Consequently, an operator staking a significant amount of ETH could put their funds at risk if they break network rules. Groups relying on these operators to act within the rules would lose their funds. DVT distributes the responsibility from a single node to multiple parties to eliminate such risks.
How Does Distributed Validator Technology Work?
Distributed validator technology essentially functions like a multisig set for running a validator, where multiple parties manage individual nodes that communicate with each other and fulfill their validator duties together.
More specifically, DVT utilizes five key components in its operations:
- Consensus Protocol: The protocol assigns the block proposer role to one node, which shares the block with the other nodes in the same cluster. The nodes in that cluster then add their key shares to the signature. Reaching a threshold level of key shares leads to the block proposal on the network.
- Multiparty Computation (MPC): Every party only knows their part of the validator key, with multiparty computation generating the full key in secret.
- Distributed Key Generation (DKG): DVT uses a cryptographic process to generate key shares and distribute them to the nodes in a cluster.
- Threshold Signature Scheme: The scheme determines the minimum number of key shares needed to sign a transaction.
- Shamir’s Secret Sharing: This cryptographic algorithm securely distributes shares without disclosing the contained information to any unauthorized parties.
Use Cases of Distributed Validator Technology
Now, let’s explore some areas where DVT could potentially be used.
The current state of staking pools presents trust challenges. In the absence of valid options for spreading the risk and responsibility, single operators take on the key management role. DVT solutions allow more node operators to get involved in the decision-making process. Risks such as malicious acts and downtime significantly decline when employing DVT solutions.
Staking as a Service (SaaS)
DVT can help institutions minimize their risk by decentralizing key management responsibilities. Each node operator can employ unique software configurations and use different hardware to improve attack resilience.
Users can engage in non-custodial staking by securing the complete key offline, following the distribution of validator key shares across multiple nodes. The primary validator may not necessarily need hardware since the transaction validation responsibility falls to the node operators.
Benefits and Drawbacks of DVT
Below, we explore some of the pros and cons of distributed validator technology.
- Eliminates single point of failure: Aside from protocols with a high concentration of staked ETH potentially unduly influencing the network, their validation keys are in the hands of individual operators. DVT minimizes the associated risks to protect users while protecting funds from attacks.
- Security: The additive BLS digital signatures that Ethereum validators use allow the reconstruction of the key from the individual key shares. This means a staker can safeguard the “master” validator key in cold storage away from attackers.
- Decentralization: DVT eliminates the need for individual node operators to take key management responsibilities on behalf of groups. The protocol shares the responsibility and risk among multiple operators to uphold the principles of decentralization.
- Increased costs: Multiple nodes perform operations previously the responsibility of a single node. Each operator incurs hardware and software costs, which increases the operating costs.
- Latency: The consensus protocol at the center of DVT operations may lead to delays in waiting for enough nodes to sign a transaction to meet the threshold.
As increased adoption requires efficient scaling of the Ethereum network, the need for a solid foundation to safeguard all operators’ interests is paramount.
Distributed validator technology addresses concerns such as single points of failure that risk assets with significant value. Robustness is key, and solutions such as DVT are necessary at every step to ensure the network maintains its decentralization principles as adoption increases.