Published
5 months ago on
November 28, 2023
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Distributed Validator Technology (DVT), a solution for decentralizing and strengthening Ethereum validators, is starting to see significant adoption. SSV.Network, the best known project working on the technology, has reported some impressive benchmarks. Just two months after launching, it’s attracted $109M of staked ETH and over 2,000 validators.
With the liquid staking sector, which includes other Proof of Stake chains such as Solana and Polygon, growing steadily, DVT is expected to become ubiquitous. Infrastructure providers, such as liquid staking protocols, like it because it allows a wider validator set to be used without introducing material security risk. As a result, the underlying network becomes more decentralized and more resilient to attack.
SSV Does DVT
DVT may be another abbreviation for the crypto community to master, but it’s one worth remembering. If growth of DVT-based protocols, led by SSV, continues at its current rate, sometime next year a major chunk of the Ethereums staking ecosystem will be secured with Distributed Validator Technology. The tech was developed with the goal of assigning key management to multiple parties. This might sound like a slender security improvement, but in the case of validators, it yields several key benefits.
As ethereum.org explains, “this makes it very difficult for attackers to gain access to the key, because it is not stored in full on any single machine. It also allows for some nodes to go offline, as the necessary signing can be done by a subset of the machines in each cluster. This reduces single points of failure from the network and makes the whole validator set more robust.”
Liquid Staking Dominates TVL
Liquid staking is the largest DeFi sector by total value locked (TVL) and Lido is the largest dapp or protocol within that category. Lido is currently in the process of implementing DVT itself, using a version developed by SSV.Network. Because SSV’s protocol is open source, anyone can build on it, which is something the project is actively encouraging at present.
The next phase in SSV.Network’s evolution will include disbursing grants for building applications that utilize its technology. It’s expected that different developers will create apps targeted at different Ethereum user groups. Some may target solo stakers, for example, while others will create software that allows node operators to introduce DVT without requiring serious coding. This will allow infrastructure providers to enjoy the benefits of DVT without raising their surface attack area.
CoinGecko calculates the size of the liquid staking market for Ethereum to be $20B, with Lido Staked Ether (stETH) accounting for around 90% of that total. It’s followed by liquid staking ETH tokens issued by Coinbase and Ankr. The rapid growth of SSV.Network, just two months after its launch, is testament both to the interest in DVT and demand for liquid staking. As more institutions bring funds onchain to capitalize on the steady yield available from staking ETH, Distributed Validator Technology will prove its worth in eliminating single points of failure.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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