How DVT Technology is Transforming the Ethereum Network

How DVT Technology is Transforming the Ethereum Network

By SimpleSwap | SimpleSwap Blog | 22 May 2024


Ethereum, like all decentralized networks, grapples with what's known as the "blockchain trilemma." This concept posits that a network needs three key elements – scalability, decentralization, and security – to thrive, but it can only fully support two at any given time. Dropping one of these elements entirely can spell disaster for the system. So, developers are always on the lookout for new ways to maintain this precarious yet vital balance, like Distributed Validator Technology, or DVT, which excites the Ethereum (ETH) community. Let’s see how DVT is changing the game.

What is DVT All About?

DVT is designed to address the decentralization issue. To boost Ethereum’s throughput, Liquid Staking (LSD) and Restaking protocols were developed. However, they shifted control of network nodes to large operators, undermining decentralization. 

DVT reimagines the Proof-of-Stake (PoS) architecture that Ethereum relies on. In PoS, validator nodes are responsible for:

  • Processing transactions
  • Approving blocks
  • Storing private keys
  • Managing nodes

Liquid staking handed control of these nodes to professional operators, making the network faster but also centralizing power. These operators manage thousands of key pairs, posing risks like hacks, failures, and sanctions. DVT aims to replace these centralized operators with a network of interconnected nodes, each holding only a fragment of a private key.

How Does DVT Work?

Fighting centralization through smart division isn't easy. Here’s how DVT tackles it:

  1. Threshold Signature Scheme. Determines how many participant signatures are needed for a valid consensus.
  2. Distributed Key Generation. Splits a private key into fragments, distributing them among nodes.
  3. Confidential Computing. Ensures that each node knows only its own signature fragment.
  4. Shamir’s Secret Sharing. Combines key fragments from nodes into an aggregated BLS signature.

To keep everything running smoothly, DVT uses internal consensus algorithms like Istanbul Byzantine Fault Tolerance (IBFT) or Quorum Byzantine Fault Tolerance (QBFT).

How DVT Works in Practice

Here’s the step-by-step process:

  1. Block Creation. An algorithm randomly selects a cluster participant to create a new block.
  2. Block Verification. Other cluster members verify the block.
  3. Voting. Verifiers vote on whether to sign the new block.
  4. Fragment Collection. Nodes that approve the block send their signature fragments to the network.
  5. Aggregation and Validation. The fragments are combined and sent to the validator.

This approach means each participant only holds a part of the key, making it harder for hackers to steal it. DVT operates as an additional validator layer on top of Ethereum’s core code, ensuring it doesn’t interfere with the network’s base functionality.

Leading DVT Projects in Ethereum

  1. ssv.network. This project offers "DVT as a service." Stakeholders and operators are the main participants—stakeholders own Ethereum validators, and operators manage clusters. Stakeholders choose clusters whose members hold the key fragments. The project’s simplicity and modularity help create robust decentralized structures from scratch.
  2. Obol. Similar to ssv.network, Obol provides software and tools for launching and managing decentralized validator networks. It's designed for both professional operators and solo stakers interested in DVT.
  3. Diva. Diva integrates DVT with liquid staking. Users lock their ETH or stETH tokens to receive divETH, a liquid token. They earn staking rewards and can use divETH in DeFi or to launch DV nodes. Clusters of 16 DV nodes connect to Diva validators.

Conclusion

Distributed Validator Technology is one of the groundbreaking solutions addressing the long-standing blockchain trilemma of scalability, decentralization, and security. By breaking up the centralized control of validators into a network of interconnected nodes, DVT enhances decentralization without sacrificing performance or safety. This innovation is particularly impactful for Ethereum, as it continues to evolve and adapt to growing demands.

Projects like ssv.network, Obol, and Diva are leading the way, demonstrating how DVT can be effectively implemented and leveraged for a more robust and resilient network. These initiatives highlight the potential for DVT to transform the way we think about blockchain infrastructure, offering new levels of security and decentralization.

DVT is poised to elevate Ethereum to new heights. It maintains network throughput without compromising security, bringing us closer to solving the blockchain trilemma. As the technology matures, we can expect to see a more balanced and resilient Ethereum network.

If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Ethereum Price Analysis Amid ETFs Approval Rumors” and “Can Blockchain Combat Fake News?”.

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