Criticisms towards the consolidation of Ether (ETH) staking pools may finally be addressed by a new staking infrastructure that prioritizes private key security and reduces validator downtimes and slashing penalties. Alon Muroch, the founder of SSV.network, spoke exclusively to Cointelegraph about how their distributed validator technology (DVT), developed in partnership with the Ethereum Foundation, aims to decentralize ETH staking pools and validators.
On September 14, SSV.network launched its public mainnet with more than 10 staking decentralized applications deploying their platforms on the network. The main goal of DVT is to decentralize the current landscape of staking providers, which is currently dominated by a few ETH staking pools that control a significant share of the locked ETH in the Eth2 staking contract.
Muroch explained that their technology is a validator security approach that distributes key management and signing responsibilities across multiple parties, thereby reducing single points of failure and increasing validator resilience. The private key used to secure a validator is split across a cluster of computers, enhancing security and allowing for some nodes of a validator cluster to go offline without compromising the network. This improves the robustness of validator sets and further reduces potential failures.
To elaborate on the impact of DVT, Muroch stated, “By splitting keyshares between a diverse set of nodes in a cluster, validators become much more decentralized. Staking pools that use DVT can decentralize their own infrastructure or delegate it to SSV.network node operators.”
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Data from blockchain analytics firm Nansen highlights that Lido Finance currently accounts for 32% of the ETH locked in the Beacon Chain deposit contract. Other major contributors include Coinbase with 8% and Binance with 4% of the staked ETH.
SSV.network pointed out that centralized exchanges like Coinbase, Binance, and Kraken hold around 18% of the total staked ETH, while liquid-taking pools such as Lido, RocketPool, Stader, and Stakewise account for over 36% of the total market share. These liquid staking pools gained significant popularity in anticipation of Ethereum’s Shanghai upgrade in July 2023. This upgrade allowed Ethereum users to withdraw their staked ETH from the Beacon contract for the first time.
SSV.network intends to offer alternative liquid and centralized staking pools that it describes as “fundamentally centralized and custodial.” By leveraging their technology, SSV aims to enhance validator private key security and maximize rewards through a high-performance and fault-tolerant setup that eliminates slashing penalties for offline validators.
Back in January 2023, SSV.network garnered attention by announcing a $50 million ecosystem fund to support projects that utilize DVT. This technology was previously highlighted as a crucial component of Ethereum’s scaling roadmap, as outlined by co-founder Vitalik Buterin in December 2021.
In conclusion, SSV.network aims to address the criticism surrounding the centralization of ETH staking pools through their distributed validator technology. By decentralizing the infrastructure and improving security measures, SSV.network aims to provide a more robust and resilient ecosystem for ETH staking. With the launch of their public mainnet and the support received from the Ethereum Foundation, SSV.network is poised to make a significant impact on the decentralization of ETH staking.
