We will learn about everything related to "Distributed Validator Technology" in this final episode of the Merge series hosted by SSV Network, including why all pools must use it and its prospects, the staking market, what OFAC means, and everything else.
You'll learn about the perspectives of some gigabrainds who join us from @LidoFinance and @Rocket Pool, including @AmMuroch @ vshapovalov + @langerstwit + Dave Rugendyke + @IsdrsP.
We can already see how many of the use cases for cryptocurrencies appear to be novelties, such as speculation on virtually anything. There are undoubtedly debates about how much value speculation actually adds to the world, regardless of whether it involves various tokens or NTFs.
But we're all optimistic that they will eventually, and it kind of fits the pattern of something beginning as a novelty, only being utilized by a small portion of the population, or perhaps only having one or two use cases, and then growing over time.
Not only has the OFAC been unfriendly to us, but so has the SCC, and governments outside of the United States have not been any friendlier. In a sense, China is prohibited.
Miners (or validators/block producers) build blocks and embed transactions within them. Additionally, there has recently been a lot of discussion on Twitter about whether or not these block producers should be able to include or exclude any transactions they choose from a block.
→ This is a decentralized network; nobody controls it.
The protocol's developers argue that we should not intervene because otherwise, the sanctions and prosecution of a single individual will become increasingly severe. Businesses are free to make their own decisions, but the protocol and those who care about it should keep in mind that big businesses with huge stakes are vulnerable, and that vulnerability makes everyone else vulnerable as well. As a result, there is a systemic risk associated with all of us using the same protocol. The centralization needs to be not just technical and technological but also human in nature. As a result, we must ensure that we use technology to reduce systemic risks.
For the first time, we can measure it using proof-of-work. Systemic risk is significant, but Sassal believes that we can solve it or, at the very least, mitigate it to a large extent with technology. The healthiest beacon chain is one that is not dominated by a single type of stake and is, ideally, globally distributed, as in they are located in various countries. There will be the tools required to enable this healthy beacon chain, because that is how we will achieve the decentralization that we all desire.
What is DVT?
DVT (or Distributed Validator Technology) is a new infrastructure primitive that allows a validator key to be split between independently operating validator instances, enabling Active redundancy across ETH 2.0 infrastructure deployments. DVT does not accept deposits less than 32 Ether and only accepts full validators.
Consider this an iteration in validator setup resiliency, allowing your validator to operate like a multi-sig, eliminating single points of technical failure such as Availability Failure and Validating Key Compromise. With threshold signature schemes, which allow for a portion of the instances to be offline (for example, 2 of 7), fault tolerance is improved over current validator setups.
The DVT primitive can be utilized by staking pools, DAO treasuries, financial institutions, large scale validator operators, and especially for at home validators. DVT products such as SSV are developed as middleware applications; at the moment, it appears that SSV.Network is really for developers, home users as well as services can and are using it by integrating it to their services.
Lido and Rocket Pool?
Rocket Pool and Lido both offer staking as a service. In essence, users trade their ETH for the protocol's tokens (rETH or stETH), which act as a proxy for the ETH staked on the protocols.
While Lido and Rocket Pool may be the same to end users , the two are fundamentally different when it comes to adding new validators to the network. While Lido requires more trust than Rocket Pool, its model is inherently more scalable and capital efficient because validators do not need to stake users' deposits with the validator's own ETH collateral match.
Why these pools will have to run on DVT
DVT does not use a fractional deposit system; instead, it works with whole validators to enhance liveness. RP and Lido both have fractional deposit systems, but they don't have the same slashing protection and liveness guarantees that DVT does.
→ To increase liveliness and prevent slashing, Rocket Pool and Lido are very likely to integrate a DVT solution.
In exchange for depositing assets into liquid staking protocols (Lido/Rocket Pool), users receive a staking derivative (stAsset/rAsset). This tokenized claim on the stake pool effectively unlocks the liquidity of staked assets while they continue to secure their respective networks and earn rewards.
Liquid staking derivatives generate network effects from a variety of sources, including market cap (ie popularity/trust), liquidity (ie confidence of being able to exit at par), and, most importantly, defi integrations (ie stacking defi yield on top of staking yield)
→ LSD tokens can be used in other DeFi protocols just like Ether.
The Merge will take place in two weeks, and there are numerous topics to consider, all of which are covered in the SSV Network's eight-week The Merge Series. All records are available on the SSV Network's official Twitter.
The Merge Series, one of the most educational Twitter spaces on the market, has come to an end. I strongly suggest that everyone listen to this at least once. Thank you for sticking around these days, indicating that you are truly interested in learning. See you soon in the next series!