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DVT 101: All You Need to Know on ETH Staking with Decentralized Validator Technology

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By Adam Efrima

The crypto space is full of buzzwords and abbreviations, and today, I’ll be discussing one that’s not quite so widespread yet: Decentralized Validator Technology, or DVT. It promises to fix a major worry about how traditional validator setups operate on Ethereum by significantly decentralizing and securing the process.

Validators are the entities that build blocks in Proof-of-Stake (PoS) blockchains, similar to miners in Bitcoin (and other Proof-of-Work (PoW) protocols). Ever since Ethereum moved entirely to PoS in September 2022 with The Merge, the blockchain has been supported by a set of approximately 900,000 validators, which theoretically makes it the most decentralized PoS network currently live.

However, not all that glitter is gold in this space. Multiple issues have been raised regarding how PoS is currently implemented in Ethereum, all of which contribute to making it a bit less decentralized than it would seem. But first, we need to dive into the weeds of what a validator in Ethereum really is.

Ethereum Validators Aren’t Like the Rest

A big difference between Ethereum and other PoS networks is that the validator nodes need to have a stake of 32 ETH — no more, no less. This limit was chosen so that it’d offer a reasonable entry point for average Joes to stake while still not creating too many validators for no reason. Right now, 32 ETH is worth about $95,000, but back when staking was first introduced (first as a separate chain) in 2020, it was closer to $30,000.

If you hold more than 32 ETH though, you’ll need to split your stake between multiple “validators,” which explains the very large number of active validators today. In practice, there are likely 10,000-20,000 independent entities (including companies and indie stakers) who are contributing to Ethereum security.

On a technical level, validators are a special entity controlled by their own private keys, which are activated when a prospective staker bridges 32 ETH to the Beacon chain. This chain manages the consensus process, assigning a portion of validators to propose blocks while others “attest” that these blocks are correct. Behaving improperly, for example, by signing invalid blocks or by being offline, leads to stake slashing (though it’s usually quite soft) or penalties incurred on the ETH principal.

Many PoS systems (a.k.a Delegated-PoS or DPoS) enable stake delegation, where users can natively assign their coins to a particular validator, who they trust to do a good job validating the chain and earning staking yield (a centralizing force). On Ethereum, there are no native mechanisms to do this, meaning that people must either run their own validator (self-custody of keys) or trust a service to do so — that is, until DVT came along.

The Pressing Need to Decentralize Staking

The premise of Proof-of-Stake is that no single entity can control more than a certain percentage of the total stake that is currently engaged in validating a protocol. In that case, they can dictate what is the “majority” chain and start behaving incorrectly without penalties, jeopardizing the functioning of the network.

In Ethereum, currently, the vast majority of the staking power is held by Lido, a decentralized finance protocol that offers a convenient “wrapper” or liquid staking token (LST) of a user’s staked position called stETH. The benefit of this system is that you can just stake on the protocol or even buy the token and start staking to earn yield without doing anything else — the underlying system does everything for you.

Lido as a whole currently controls a bit more than 31% of the ETH staked, which is dangerously close to the 33% threshold needed to prevent Ethereum blocks from being finalized (if Lido wished to do so). This sounds worse than it really is: Lido is a decentralized protocol that spreads its stake over many independent node operators, so it can’t really coordinate easily to perform this attack.

Also, as a decentralized business whose entire model relies on being trusted by the Ethereum community, it has no incentive to do so. Finally, a 33% attack is not the end of the world for Ethereum, as it’d just result in blocks not being finalized — they’d still be correct, and the attacker wouldn’t be able to really exploit this issue.

But despite some caveats, some in the community are uneasy about Lido’s dominance, as ultimately, the node operators it chooses have custody over the staked ETH and control part of the validation process. Lido has, however, started implementing technologies to decentralize its node operations by integrating the Simple DVT module.

These advancements promote increased participation and collaboration, facilitating smaller operators to align with larger counterparts thereby fostering a more diverse and robust network. This inclusive approach sets the stage for a trustless future, allowing even at-home validators to integrate with Lido seamlessly.

Decentralized Validator Technology to the Rescue

If the issue is that validators are custodial and somewhat centralized, the logical solution is to turn this process into a decentralized and trustless mechanism. This is, in a nutshell, what DVT offers today.

DVT works by splitting an Ethereum validator’s private key into multiple shares via various cryptographic techniques. The shares are encrypted and distributed to node operators, who then simultaneously run the validator to contribute to Ethereum’s security. Because the actual validator key is never seen or controlled by the operators, the process becomes non-custodial, trustless, secure, and much more fault-tolerant.

DVT is only starting out, but it could be a significant part of Ethereum’s future roadmap. As the network pushes for more scalability, there are serious discussions of increasing the 32 ETH limit to make the total validator numbers more manageable. To counteract the increase in centralization, DVT is being proposed as one of the ways to enable fully decentralized staking pools for smaller users.

Author bio

Adam Efrima is the SSV Core team Co-founder, a decentralized validator infrastructure for ETH staking. He has been active in the crypto industry since 2013. Over eight years living in China working in the financial industry and fintech space, Adam has worked in CITIC Bank covering outbound investments for Chinese SOEs. He was also in charge of setting up eToro’s Shanghai operation. Since then, Adam has been deeply involved in Ethereum staking, co-founding the performing staking project Bloxstaking.

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Cryptocurrency

These Altcoins Take Center Stage With Massive Gains as BTC Stalls at $95K (Market Watch)

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Bitcoin experienced some enhanced volatility yesterday when it was rejected at $97,500 and pushed south hard by three grand in hours before it settled at just over $95,000.

In contrast, numerous altcoins have outperformed, charting mindblowing surges, such as ADA, AVAX, TRX, LINK, HBAR, and many others.

BTC Stalls at $95K

It was just a week ago when the primary cryptocurrency slumped hard and fell below $91,000, which became its most violent correction since the Trump-induced rally started in early November. However, the asset didn’t stay there for long and started to recover ground in the following days.

The weekly peak came on Friday as BTC neared $99,000. Nevertheless, the bears managed to defend that level and pushed bitcoin down to approximately $96,500 during the weekend. Monday morning started with a surge to $98,000 but that was short-lived as BTC plunged to $95,000 almost immediately.

Another rollercoaster followed suit with bitcoin jumping to $97,500 before it was driven south once again to $94,500. Despite its recovery attempts since then, BTC now trades just inches above $95,000.

This decline means that BTC’s market cap has remained below $1.9 trillion, but its dominance over the alts has been pushed south hard. The metric is down to just 52% after peaking at nearly 60% weeks ago, according to CoinGecko.

Bitcoin/Price/Chart 3.12.2024. Source: TradingView
Bitcoin/Price/Chart 3.12.2024. Source: TradingView

These Alts Do Good

The past few days belonged to XRP and yesterday was no exception as the asset skyrocketed by another 25% at one point and neared $3 for the first time in almost seven years. Although it has retraced since then to $2.6, its market cap of $150 billion still places it as the third-largest cryptocurrency by that metric.

Other massive gainers over the past 24 hours include ADA, which has soared by 17%, AVAX (11%), TRX (14%), DOT (16%), LINK (27%), SUI (15%), HBAR (42%), and quite a few others.

The total crypto market cap has gained $70 billion since yesterday as it has all gone to the alts. The metric is above $3.6 trillion once again.

Cryptocurrency Market Overview. Source: Coin360
Cryptocurrency Market Overview. Source: QuantifyCrypto
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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.

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Cryptocurrency

Big Cardano Price Predictions as ADA Shoots Up 17% to 3-Year High

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TL:DR;

  • Cardano’s native token has emerged as one of the top performers today, surging to $1.3 to mark a multi-year peak.
  • The community was quick to pick up the move and outline some massive predictions of up to $6.
ADAUSD. Source: TradingView
ADAUSD. Source: TradingView

ADA’s Bull Rally

ADA stood at around $0.32 on November 5, the day of the US elections, and was relatively sluggish at first, even as the rest of the market was charting impressive gains following Trump’s decisive victory.

However, its own rally began that weekend when IOG founder Charles Hoskinson said he will spend a lot of time in 2025 working alongside the Trump administration to establish a more favorable and comprehensive crypto policy in the States.

Cardano’s token exploded to over $0.6 at the time, but more promising hints coming from Hoskinson sent it further north. ADA neared $1 and after a few rejections there managed to break above that level.

Its rally was stalled for a few days but the bulls are back in charge now as they pushed ADA to just over $1.3 earlier today, which meant a 20% surge at one point. This became the asset’s highest price point since mid-January 2022.

Consequently, ADA has overtaken USDC and is now the eighth-largest cryptocurrency by market cap, as the metric stands above $45 billion.

ADA to $6?

ADA’s breakout led many analysts to speculate on its future price growth. Some of the more modest predictions indicated that the asset could rise up to $1.5 next, which sounds achievable even for the short-term, given the recent price developments in the market.

Popular analyst Ali also outlined the same target following ADA’s price surge above $1.25, which invalidated a previous forecast for a 20% correction.

While $1.5 seems very plausible at the moment, others made some big claims that ADA could peak at $6 during this cycle. AllInCrypto’s analyst based this prediction on ADA’s behavior during the 2017 and 2021 bull runs. It’s worth noting that such a price tag would put Cardano’s market capitalization at over $210 billion. In the current environment, this sounds slightly exaggerated as this would make ADA the third-largest digital asset.

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Smile Shop Joins Conflux PayFi Ecosystem with BitUnion Prepaid Card

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[PRESS RELEASE – New York, United States, December 3rd, 2024]

Smile Shop, the premier Asian e-commerce platform, has partnered with Conflux Network, China’s only regulatory-compliant public blockchain, to launch the BitUnion prepaid card. This partnership signifies a major expansion into global digital asset payment with cards welcome in 183 countries and regions.

The BitUnion prepaid card operates on the recently launched UnionPay International USD prepaid card framework. UnionPay International, the world’s second-largest card payment processor, ensures seamless financial transactions. Users can load funds onto the card to make online purchases, use it at point-of-sale machines, or withdraw cash from UnionPay ATMs across 183 countries. The card can also be linked with popular third-party payment platforms like Alipay and WeChat Pay. Whether offline or online, transactions are settled at real-time exchange rates between local currencies and USD. The account approval process is quick, and management fees are waived during the initial launch period.

As a key product in Conflux’s PayFi ecosystem, the prepaid card incorporates experienced security authentication systems from traditional finance. User data is managed by professional institutions, ensuring security and compliance. Fiat assets are held within the UnionPay account system, guaranteeing absolute security and reliability. The BitUnion prepaid card has obtained the highest-level financial security certifications, including 3DS and PCI-DSS, comprehensively protecting cardholders’ payment security.

The prepaid card will support digital asset transactions and transfers within the Conflux Network, leveraging the blockchain-based PayFi system to overcome limitations in traditional payment infrastructure. Introducing traditional financial models (from credit cards to invoice financing and reverse factoring) into blockchain creates a more integrated value network. Conflux’s PayFi (Pay Finance) addresses inefficiencies in traditional payment systems while keeping financial operations aligned with real-time data, creating a large-scale model for blockchain consumer application ecosystems.

As a high-performance Layer1 blockchain, Conflux has been at the forefront of technological advancements, particularly in the development of Stablecoins. They are now expanding their focus to encompass a comprehensive Payments infrastructure and cultivate the PayFi ecosystem. Aiming to become the blockchain of choice for consumer-grade Payments in the future, Conflux Foundation has committed 500 million CFX from the ecosystem fund to fuel the growth of PayFi stack components.

About Smile Shop 

Smile Shop is a super e-commerce platform under Smile Shop Holdings Pte (Singapore), targeting Southeast Asian markets with the vision of becoming Southeast Asia’s most trusted fintech super e-commerce platform.

About Conflux Network 

Conflux Network is a permissionless Layer 1 blockchain that connects decentralized economies worldwide. It utilizes a hybrid PoW/PoS consensus mechanism, ensuring a fast, secure, and scalable blockchain environment. Conflux operates without congestion, maintains low fees, and prioritizes network security.

Being the leading regulatory-compliant public blockchain in China, Conflux offers advantages for projects entering the Asian market. In its partnerships, Conflux collaborates with global brands and government entities including, Shanghai, China Telecom, Little Red Book (China’s Instagram), McDonald’s China, and Oreo. These noteworthy collaborations serve as a testament to Conflux’s unwavering dedication to driving blockchain and metaverse initiatives.

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