<p dir="ltr">When <a href="https://www.builder.news/crypto-insights/the-merge-a-pivotal-event-for-ethereum" alt="The Merge: A pivotal event for Ethereum" title="The Merge: A pivotal event for Ethereum" target="_blank" rel="" class="">the Merge</a> was successful, the Ethereum network changed its consensus mechanism <strong>from a Proof of Work (PoW) to a Proof of Stake (PoS) one</strong>, making it a less energy-intensive blockchain. The threat of centralization is beginning to surface despite all the merger's apparent advantages. The <strong>Distributed Validator Technology (DVT)</strong>, fortunately, can address the majority of the problems caused by this risk.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11edbe25a17bbe5d8e59028438497b73.jpg" alt="What comes next after The Merge" title="What comes next after The Merge" width="600" height="663" class="lykafe0"></p><p class="prosemirror-p-center"><em>Ethereum’s plan after The Merge (Source: Ethereum)</em></p><p dir="ltr">The duty of validating the blockchain has fallen to staking customers instead of miners. A validator's role in a PoS network is to approve or suggest adding a new block to the blockchain. A minor incentive in ETH is given to the validator if their attestation or proposal is timely and accurate.</p><p dir="ltr">Theoretically, anyone can join the network by setting up a validator node and staking the required amount of ETH. Many would-be validators, however, are actually employing staking services, which come with all of the risks that go along with them. Then why? In this post, we'll examine <strong>the current Ethereum PoS validators' and stakers' concerns and how Distributed Validator Technology can address them.</strong></p><h2>The current context of Ethereum staking</h2><p dir="ltr">The Ethereum PoS mechanism entails a variety of hazards for both stakers and validators. Let's evaluate each of these problems in turn.</p><h3>Centralization</h3><p dir="ltr">Retail users find it challenging to set up and maintain validators, especially if they only have a modest quantity of ETH on hand (Ethereum PoS takes 32 ETH to run a validator). So, it is highly possible that these network users will stake their ETH through staking services.</p><p dir="ltr">Since the majority of cryptocurrency users save their money on custodial platforms like centralized exchanges, they are likely to stake their ETH using a custodial staking service as well. Using custodial staking services comes with several hazards, the main one being centralization, despite their claims of simplicity and convenience. In a global financial network, a centralized authority is not exactly a good thing, and the thought of giving your keys to a manager who is not impervious to harsh penalties, mistakes, hacks, or even censorship can be disastrous for the ecosystem as a whole.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11edbe25a17be0018e59028438497b73.jpg" alt="Total value staked by provider" title="Total value staked by provider" width="600" height="338" class="lykafe1"></p><p class="prosemirror-p-center"><em>Total value staked by provider (Source: Glassnode)</em></p><h3>Single point of failure</h3><p dir="ltr">The management of a validator's private keys is a major issue when a person runs a solo validator. A validator can lose access to their money if they lose control of their private keys. This creates a danger of a single point of failure and a challenging user experience. It's further made more difficult by the Ethereum PoS system, whose guidelines forbid any kind of redundant information. A validator can only sign messages or stay online using a single machine as a result.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11edbe25a17c48088e59028438497b73.jpg" alt="The process of becoming a validator on Ethereum PoS" title="The process of becoming a validator on Ethereum PoS" width="600" height="338" class="lykafe2"></p><p class="prosemirror-p-center"><em>The process of becoming a validator on Ethereum PoS (Source: Consensys)</em></p><p dir="ltr">A validator's stake may be reduced as a result of an attacker's actions if they manage to break into their machine and obtain the private key. The protocol deducts a percentage of the validator's locked cash when a stake is reduced. This ultimately results in a financial loss and exposes the extreme weaknesses of a single point of failure.</p><h3>Validator liveness check</h3><p dir="ltr">Let's suppose that a validator client is unable to sign messages for any reason, be it a faulty network connection, a cloud failure, a software or hardware malfunction, or any combination of these. If so, they pay a price for their idleness. A percentage of their staked balances will be lost.</p><p dir="ltr">Double-signing penalties may also be incurred, particularly if a validator abruptly goes offline while signing a message. Hence, validator clients run the danger of having their deposits reduced if they sign the same message twice, use the same key to sign multiple instances, or are offline while others are offline. This promotes expert validators and deters the typical user with the resources from becoming one, resulting in a small number of validators holding the majority of the authority.</p><h3>Private key storage</h3><p dir="ltr">In the crypto sphere, there is a well-known proverb that goes, "<strong>Not your keys, not your coins</strong>". If you don't have control over your private keys, the security of your money is always dependent on custodial service. Participants that do not want to take on the risks of managing a lone validator setup and maintenance directly can opt for staking services, but there is a catch. Users of these services must fully trust the staking service operator because they must give their private keys to the service. They have to have faith in the operator to keep their staking private key secure.</p><p dir="ltr">Key ownership with staking services can be a complex subject. Having control over your private keys as a single validator gives you a feeling of security. You will have to give up that feeling of security while using a staking service because you will have to rely on someone else to handle it. It is not desirable to entrust another person with the custody of your keys in systems where anything can go wrong and dangerous actors lurk behind the façade of honesty.</p><h3>Forking penalties</h3><p dir="ltr">Validator clients connect to Beacon nodes under the PoS regime. A fork will be produced in the uncommon event that a validator-connected Beacon node experiences a problem. Penalties will happen if the validator client is impacted by this anomaly since it will follow the forked chain and seem offline to the main PoS protocol.</p><p dir="ltr">A blockchain that is permissionless and transparent can be defeated by centralization, but the risks to security and the possibility of losing deposits due to penalties are deterrents for everyone. The requirement for Distributed Validator Technology has been caused by these problems. Let's explore Distributed Validator Technology (DVT) and how it intends to address the aforementioned problems.</p><p><em><strong>&gt;&gt;&gt; Read more:</strong>&nbsp;</em><a href="https://www.builder.news/crypto-insights/eth-liquid-staking-x3LfQ" alt="A deep dive into ETH liquid staking" title="A deep dive into ETH liquid staking" target="_blank" rel="" class=""><em><strong>A deep dive into ETH liquid staking</strong></em></a></p><h2>What is Distributed Value Technology?</h2><p dir="ltr">By utilizing threshold cryptography, <strong>Distributed Validator Technology (DVT) is a decentralized open-source protocol that enables numerous nodes to perform the functions of validators instead of a single machine.</strong> In Ethereum, DVT offers a decentralized staking layer that enables anyone to build and distribute validators across several fault-tolerant devices so that the validator can continue to function even if one node is down or malfunctioning. The ability of a system to function even in the face of errors or malfunctions is known as fault tolerance.</p><p dir="ltr">DVT effectively removes the chance of redundancies like a single point of failure, centralization concerns, etc. by adding a layer of fault-tolerance for Ethereum validators.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11edbe25a17c793b8e59028438497b73.jpg" alt="Overview of Distributed Validator Technology" title="Overview of Distributed Validator Technology" width="600" height="408" class="lykafe3"></p><p class="prosemirror-p-center"><em>Overview of Distributed Validator Technology</em></p><p dir="ltr">By combining distributed key generation, multi-party computation, Shamir's secret sharing and Byzantine fault-tolerant algorithms, Distributed Validator Technology enables validator<strong> responsibilities to be distributed across multiple nodes while remaining compliant with Ethereum's staking regulations.</strong></p><p dir="ltr">In addition to spreading out a single validator's responsibilities among numerous computers, distributed validator technology also "distributes" its private keys. Keep in mind that to create or sign messages with its private keys on a single computer, Ethereum needs a validator. DVT avoids the single point of failure, as we will see below, by dividing shares of the private key among various nodes and using a distributed key generation mechanism.</p><p dir="ltr">In order to get ready for Ethereum's switch to PoS, the Ethereum Foundation came up with the concept of DVT. The Active-Passive configuration used by Ethereum validators keeps backup nodes inactive. As there are no automatic switches, downtimes happen when the active node goes offline before the backup node can turn on. DVT now offers validators an <strong>Active-Active</strong> configuration that functions as a multi-signature setup and gets rid of single points of failure.</p><h2>How does Distributed Value Technology work?</h2><p dir="ltr">As previously indicated, Distributed Validator Technology integrates Byzantine Fault Tolerance in Istanbul, Shamir's Secret Sharing, multi-party computation, and distributed key generation. DVT can be viewed as a multi-signature scheme, but instead of confirming transactions, it is employed to carry out the blockchain's consensus-required validator tasks.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11edbe25a17c9efe8e59028438497b73.jpg" alt="Working overview of steps involved in the DVT consensus mechanism" title="Working overview of steps involved in the DVT consensus mechanism" width="600" height="362" class="lykafe4"></p><p class="prosemirror-p-center"><em>Working overview of steps involved in the DVT consensus mechanism</em></p><h3>Distributed key generation</h3><p dir="ltr">A distributed key generation (DKG) scheme is the first and one of the essential parts of DVT. DKGs entail sharing a private key that is calculated by several parties so that no one member has complete control over the secret key. All participants share an encrypted copy of the private key.</p><p dir="ltr">These nodes are typically non-trusting, allowing for considerable fault tolerance because their operators don't need to be acquainted. The threshold signing system replaces DKG.</p><h3>Shamir's secret sharing and threshold signing</h3><p dir="ltr">The private key can then be divided using Shamir's secret sharing such that each validator client that participates only has a portion of the private key, and no one share is enough to sign messages. Shamir's secret sharing uses a threshold that is often predefined rather than requiring everyone to be present to reform the secret or sign messages. This allows the validator client to stay online even if there is a malfunctioning or malevolent member.</p><p dir="ltr">For instance, suppose the threshold for signing messages is three out of four operators in a DVT arrangement. Three nodes can continue to sign messages even if one goes offline or is unreliable. There is no single point of failure because the private key is distributed among four nodes.</p><p dir="ltr">It should be noted that Ethereum PoS employs BLS signatures, which permit aggregation. As a result, it can detect several signatures associated with the same key and merge these transactions into a single transaction. Hence, the BLS signature method combines all signatures when all parties sign a transaction without needing to completely recreate the private key.</p><h3>Multi-party computation</h3><p dir="ltr">Distributed Validator Technology heavily relies on secure multi-party computation. Contributing operators can use their secret shares through MPC to execute computations and sign messages without having to rebuild the secret on a single device. The distributed validator setup's decentralized nature is maintained, and the risk of centralizing the private key during computation is eliminated with MPC.</p><h3>Consensus</h3><p dir="ltr">A consensus mechanism among Beacon nodes that utilizes threshold signing algorithms to ensure fault tolerance is the final component of the puzzle. The Beacon nodes that ETH validators are connected to come to a consensus. Assignment of tasks to validator clients is done via beacon nodes.</p><p dir="ltr">A private key is encrypted and distributed among the Beacon operator nodes using threshold cryptography. Any commands must meet a threshold (3 out of 4, 5 out of 7, etc.) before they may be sent to a validator client. This would prevent any one operator of a Beacon node from having complete control over a validator.</p><p dir="ltr">The Istanbul Byzantine Fault Tolerance method selects one Beacon node in the DVT configuration as the leader who will propose the block and share it with other Beacon nodes to build a consensus about it. The block is added to the blockchain if more than 66% of the Beacon nodes concur that it is genuine.</p><p dir="ltr">The Istanbul Byzantine Fault Tolerance method will delegate the role to another DVT Beacon node within twelve seconds if the leader goes offline or is compromised in a DVT environment.</p><h2>Distributed Value Technology use cases</h2><p dir="ltr">DVT has been successfully developed by two key players since its proposal in 2019: <strong>Secret Shared Validator Technology</strong> and the <strong>Obol Network</strong>. Below are the main potential uses of distributed validator technology, but these are direct initiatives with DVT at their core:</p><h3>Decentralized staking pools</h3><p dir="ltr">The majority of staking pools in use today rely on a single validator node with a single key, are custodial and have single points of failure. The difficulty of being subjected to cuts and fines everywhere is an additional hurdle to the risk of a single point of failure.</p><p dir="ltr">Staking pools can transition to a decentralized model, cut down on fines and downtime, and diversify their present services by using a distributed validator configuration.</p><h3>Staking infrastructure providers</h3><p dir="ltr">We first need to comprehend the distinction between Active-Active and Active-Passive settings to grasp how stake infrastructure providers can use DVT to provide more resilient services.</p><p dir="ltr">There are essentially two ways to configure connections when it comes to cloud infrastructure: Active-Active and Active-Passive. Traffic is divided among interfaces in an Active-Active arrangement dependent on flow. All traffic is directed through the other connection if the first one goes down. One connection manages traffic while the other is on standby in an Active-Passive arrangement.</p><p dir="ltr">Businesses that offer infrastructure for institutional or individual staking require solutions for cloud provider redundancies with Active-Passive settings. Infrastructure providers can promote dynamism in deployments and configurations by enabling Active-Active cluster redundancy with DVT setups.</p><h3>Solo validator setups</h3><p dir="ltr">Single validators who were previously deterred from participating due to high entrance hurdles and the dangers involved with ETH staking can now take part utilizing a DVT configuration.</p><p dir="ltr">In-house validators can split their signature power over several nodes in an Active-Active cluster redundancy configuration using a distributed validator architecture. As a result, they reduce the possibility of failure and fines brought on by delays, double signatures, etc.</p><h2>Distributed Value Technology future</h2><p dir="ltr">DVT appears to have a bright future with possible applications across numerous industries. <a href="https://www.builder.news/crypto-insights/general-knowledge-about-defi-1yU8n" alt="General knowledge about Decentralized Finance" title="General knowledge about Decentralized Finance" target="_blank" rel="" class="">Decentralized finance (DeFi)</a> is one industry that is anticipated to have tremendous expansion in the future. DeFi, a rising paradigm in finance, uses the security and transparency of the Internet to deliver financial services in a decentralized and trustless manner. DVT in DeFi has the potential to lower the cost of conventional financial services, enhance access to financial services, and give users more control over their financial assets.</p><p dir="ltr">Supply chain management is another area where DVT is expected to have a big influence. By making it safe and clear to follow the flow of materials and goods along the supply chain, distributed validator technology can improve accountability and transparency. This might result in a more effective and environmentally friendly supply chain, as well as greater openness and confidence among stakeholders. Also, the development of new decentralized applications and services that may make use of the security, transparency, and decentralization offered by the technology, as well as the facilitation of more secure and effective voting systems, may be facilitated by DVT. These are only a handful of the many potential futures uses for distributed validator technology, which will likely have a big impact on a lot of different fields and applications as it develops and matures.</p><h2>Conclusion</h2><p dir="ltr">Decentralized systems and blockchain technology have advanced significantly as a result of distributed validator technology. By offering a safe and open method to validate transactions and uphold consensus in a decentralized system, the technology increases security and lowers the chance of single points of failure. DVT has the potential to upend many industries, from finance and supply chain management to voting systems and beyond, by enhancing transparency and accountability.</p><p dir="ltr">Although there are still issues with scalability and interoperability to be resolved, the future of DVT seems bright and offers much interesting potential for innovation and advancement. Technology has the potential to develop into a vital building block for a safer, more open, and more decentralized future as it continues to develop and mature.</p><div class="pr-block-special"><strong>Disclaimer:</strong><br>This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.</div>

Distributed Value Technology (DVT) is a distributed validator technology designed to solve the challenges of staking ETH and reduce the entry barrier for the average person on Ethereum.

Distributed Value Technology: Multisig for consensus votes