DVT technology: how to make ETH staking more secure?

Original author | DeFI Saint

compile | Odaily Planet Daily 0xAyA

! [Brief analysis of DVT technology: how to make ETH staking more secure?] ](https://piccdn.0daily.com/202310/17023153/9tg3kclell55d2zt.jpg!webp)

One of the key ways to improve the resiliency of validators and reduce any points of failure for node operators (NOs) is through distributed validator technology (DVT).

@staderlabs_eth is applying DVT to its multi-pool architecture to make the Ethereum staking ecosystem more secure and decentralized.

Here's what you need to know about DVT, compiled by Odaily:

Why do you need DVT?

When securing a POS network, an authenticator/node operator is required to perform this task, as any single point of failure can alter the activity of the network. Just like a navigation system, it needs to be online around the clock, and not only does it need to be online, the system must also be robust and resistant to any form of attack. What do you think happens when a single point of failure in a navigation system leads to inactivity can cause serious confusion in areas that require constant communication?

This is the same as in blockchain, where the system needs to be online around the clock and be able to withstand any form of attack.

There can be many reasons why a node goes offline, and sometimes it can be something that the node operator can't control, but we don't need to make excuses. Therefore, we need a technology to deal with this situation where, even if a node goes offline, it does not interfere with the activities of the blockchain it secures, and these node operators are able to withstand such attacks.

Why do I need to defend against attacks?

If the entire system relies on a single node for key management and signing, and an attacker gains access to the system, the entire system is doomed. Therefore, key management and signing need to be spread across multiple parties/computers in the cluster so that attackers cannot easily gain access to the system. Even if one node is offline, subnet machines in each cluster can sign operations.

! [Brief analysis of DVT technology: how to make ETH staking more secure?] ](https://piccdn.0daily.com/202310/16213136/2lgoga3l2416gw35.png!webp)

Imagine a missile being controlled to hit a specific target, but the system is offline at any given moment, or another malicious entity gaining access to the system.

Advantages of DVT

Security

Initially, the validator generates two public-private key pairs: a validator key that participates in consensus and a withdrawal key that accesses funds. The verifier's private key needs to be online 24/7 at all times, while the withdrawal key is always stored and kept securely in cold storage.

Thus, DVT protects the validator's private key by allowing the staker (in this case, the validator) to participate in staking while keeping the validator's private key in cold storage (offline). The master key is encrypted and securely stored offline and split into shared nodes.

This generally improves security and reduces penalties.

Decentralization

Ethereum is known for decentralization because it improves security and reduces single points of failure.

DVT will allow the presence of significant network operators holding large amounts of staked assets while maintaining the decentralization of staking as keys are distributed across multiple nodes.

No single point of failure

DVT will allow validators to remain stable in the face of any challenge, even if a single node is offline or inactive. It also extends resiliency to other points of failure caused by software or hardware failures.

It does this by using diverse software and hardware configurations in the cluster, so that even if one of them fails, the other validators can continue to provide the required services.

The size of the cluster is mathematically calculated using the following formula:

3 n+ 1, where n = number of failed nodes that the cluster can tolerate.

Therefore, for n = 2, two failed nodes can be tolerated, but at least five nodes need to be online to verify the network.

Other aspects of DVT

Forming the core components of DVT:

• Threshold Signature Scheme (TSS)

• Shamir's secret sharing

• Multi-Party Computation (MPC)

• Distributed Key Generation (DKG)

• Consensus protocol

DVT is mainly used for the following:

• Individual staking

• Staking as a service (SaaS)

• Staking pools

Some disadvantages of DVT:

• Potential increased latency

• Operating costs

• Requires additional components

Risks and challenges of using DVT:

• MEV theft: It is possible for a cluster to steal the MEV of validators it is running on.

• In a permissionless DVT cluster, if an entity controls a threshold number of key shares, it can gain influence on behalf of the validator, and any malicious behavior can result in penalties and compromise the staker's assets.

Practical use cases of DVT

Now let's dive into the utilization of staking pools using Stader Ethereum as a case study after the release of its DVT solution for $ETHx. Take a look at the current Ethereum staking ecosystem versus Stader Ethereum We can see that the main challenges currently facing are:

• Decentralization

• Capital requirements

• Single point of failure

! [Brief analysis of DVT technology: how to make ETH staking more secure?] ](https://piccdn.0daily.com/202310/16213136/5rbz5sa5nujaybd7.jpg!webp)

Looking at the current situation, we can see that only a few entities account for the majority of the staked ETH.

This is not conducive to decentralization, as the ideal situation for Ethereum is to have as many independently operating validators as possible.

These entities control more than 50% of Ethereum staking.

This also introduces the risk of centralization, as any single point of failure in any one of these entities can lead to downtime in terms of cybersecurity.

In addition, it does not promote capital efficiency in terms of capital demand, which is higher for ordinary permissionless nodes.

Stader Ethereum has addressed this issue with its 4 ETH + 0.4 SD bond requirement.

Faced with the risks and challenges in DVT, Stader Ethereum mitigated this risk by running 3 rd pools in a DVT cluster.

The 3 rd pool consists of the following:

• Splitting the authenticator key into a cluster of 4 or 7 nodes, where 1 or 2 nodes offline does not affect the system.

• Licensed and unlicensed clusters

For a 4-node cluster, there are 2 licensed and 2 unlicensed node operators (NOs).

For a 7-node cluster, there are 4 unlicensed NOs and 3 licensed NOs.

! [Brief analysis of DVT technology: how to make ETH staking more secure?] ](https://piccdn.0daily.com/202310/16213226/lmyl90ooy5bgm71i.jpg!webp)

This setup ensures that a single entity cannot control the network and requires 3 NOs together for malicious behavior in the case of 4 nodes and 5 NOs together for malicious behavior in the case of 7 nodes.

In addition, in the case of a single point of failure, at least 3 nodes need to be online to validate the network for a 4-node cluster, and at least 5 nodes online for a 7-node cluster.

Stader Ethereum also adds the following security measures to protect staked funds:

• Verifier ownership risk

In a 4-node cluster, there are 2 unlicensed and licensed NOs, so if one entity has all the unlicensed NOs, improper use of MEV or cuttable violations will not occur because consensus is required for 3 NOs and one licensed NOs is missing.

The same is true for licensed NOs, as well as for a 7-node cluster.

• MEV theft

Individual NOs in the cluster cannot control the withdrawal and EL reward addresses, in which case individual NOs cannot steal MEVs.

Even if any licensed or unlicensed entity decides to change the address, they cannot do so because there is no consensus.

• Reduce the likelihood of validators going offline

The risk of validators going offline is reduced.

Stader Ethereum has also introduced these features into its DVT solution.

This is even more beneficial for unlicensed NOs due to the risk of cutting in DVT, as the bond requirement for validators is now a combination of 2 ETH, which includes ETH and SD

This, in turn, lowers the barrier to entry for NOs and helps decentralize the Ethereum ecosystem.

For NOs returns

! [Brief analysis of DVT technology: how to make ETH staking more secure?] ](https://piccdn.0daily.com/202310/16213136/rbv4ek38h8ci2urn.jpg!webp)

Since DVT reduces the bond amount of NOs, for a 4-node cluster, NOs will return 47% higher than standalone staking and 9% higher than the ETHx reward.

For a 7-node cluster, the return will be 54 % higher than standalone staking and 14 % higher than the ETHx reward.