Alex Lipton: SSV’s Role in Mitigating Stake Centralization After Pectra | ETHSofia 2024

[Music] thanks for joining everyone and um a big shout out to the eia team events been fantastic so far really enjoyed interacting with the Bulgarian ethereum community and it's so lightning to see um so much great stuff stuff happening here um also thanks to will for you know for the shout out on SSV perform the introduction my job is done um I think you uh pitched SSV better than I could but I think I'll Deep dive a little bit more into you know what DVT um is you know in a profound sense especially as ethereum continues to upgrade upon itself um just to introduce myself I'm Alex I manage ecosystem growth Business Development uh SSB Labs we the core contributors and Founders to SSV Network um and those that maybe missed the last talk um SSV is pioneering and founded is working on DVT technology which is distributed validated Tech and really the core idea here is you know how can you take an ethereum validator and distribute the operations of it so you could really you know enhance its security fault tolerance resiliency but also at its heart our mission is very clear it's really to extend the level of decentralization um and security and really keep ethereum as a safe place as a core technology that's incredibly neutral um and really um you know enhances you know everything that we love about it and what binds us all here today so with that said um ethereum's on a cusp of a major transformation at the end of this year and at this or possibly at the start of next year we'll undergo a series of upgrades called the Petra update and whilst at its uh and its background it's really intended to you know make sure that ethereum scales and to really upgrade the techn briging the next hundreds of millions of users which we all want to see it's very well intentioned but what I think doesn't actually get a lot of discourse at the moment and what I would like to share with the room is concerns around stake centralization so at SSV this is a topic that keeps us up late at night and it's why we're working here that's why we're here and I want to share a little bit more about what SSV is doing to mitigate you know some Cloud turns and unintended side effects of Petra with respect to stake centralization so to take a little step back to share a little bit more on what SSV is working on so SSV is a project boor out of a research project of the ethereum foundation and the core idea was you know how do you take the ethereum validator key split it into multiple key shares and then have those key shares operated by independent node operators in a cluster and tying everything together as a qbf consensus and threshold signatures so the idea here is say if I have four key shares operated by independent node operators and one goes down maybe due to client failure or Cloud failure or anything that may cause your your D to go offline no big problem whatsoever because just so long as you have three out of four in your in your in your cluster or seven out of 10 you can keep doing all the attestations of blob proposals and keeping your your node you know 100% of the up up at the time ideally and making sure you know you can get all the stake y that's available to you and that's very important to providing that uh security to the network but what DVT does is that what you can begin to see here introduces really important aspects of decentralization because it inherently provides the incentives to run your your your key shares or node operators in in a decentralized way you really start to harness the benefits of DVT when you use multiple execution and consensus clients you use different Cloud configurations and in the ideal have operators managed by different entities and will showed us a fantastic example of that of how Lio is implementing DVT um so really we eliminate all single points of failure from that respect so through this research from the ethereum foundation um SSV spent many years working with with the staky ecosystem really to battle test the technology and through many years of testet um you know we took this uh idea of uh DVT to the next level that implemented it as a DVT Network which we feel is the most Optimum way to to to to to utilize this technology and we're excited to say that we went live on mayet last year and really the growth has been absolutely phenomenal and well beyond even the most bullish expectations of the core team since we went live last year and really you can see we're working with the entire cross-section of the staking space so a lot of the leading lsts reaking protocols staking service providers institutions and even you know ethereum ETFs um you know that are um running institutional product for for um traditional financial services are beginning to look at DVT as a way to enhance a lot of the security and fault tolerance for their products we're excited to say we actually crossed 1.5 million e um this is already outdated since I I made made the slides um but the growth has really been exponential and it's a true validation excuse the pun of the of the technology um and being getting product Market fit there's a real need for for DVT in the market um there's a sense of urgency to achieve this sense of decentralization keep e ethereum is incredibly neutral platform but also you know benefit from a lot of the the the product features that DVT brings so stakings come really a long way and it's uh incredible to to see that you know stakings only proof of staking products have be only really be around for 5 years at ethereum that's really thanks to a lot of the early Pioneers um 5 years years ago when you know ethereum transitioned from a proof of work chain to a proof of stake chain um there's been a number of um really you know high profile innovations that we've seen particularly with reaking that's emerged in the last year or two and that's the idea that you know we're asking more of of a validator Beyond performing The Core ethereum duties but really how you can secure auxiliary services within the ethereum network um chappella was a was a massive upgrade in 2023 which enabled with draws on the ethereum Chain but what I think really deserves you know a place on um um you know on this time time scale at ARC of uh Innovation on the ethereum is this Petra upgrade which is coming up so what does stakers need to know so if you're in the room potentially you may hold some liquid staking tokens maybe you solo stake or maybe this is just an area within ethereum that you're monitoring quite closely um what are the some key things that you need to know about Petra so they basically you know ethereum under go some hard fors every so often and really what this is is the ethereum community comes together and decides on how we can upgrade some technical specifications and adopt some new rules to scale the technology further um at the end of the year the start of next year when we expect it to go live there's a bunch of eips which um are are tied to it or associated with it these are e theum approvement proposals um there's a few here which really relate to Stak IG and how validators are run but the one I really want to focus in on and the scope of the talk of today is around EIP 7251 and this is increasing max effective balance on the validator so what does this mean increasing max effective balance um so today when you run a validator you have a floor of 32 eth which is a side to each one and the key idea here is that it's what validator what vote um in the ethereum network um but the idea is instead of having you know 32 e we can extend this up to 20 48 eth but still keeping the floor of 32 eth and um really the idea is you know it's going to decrease a lot of the network overhead um it's going to allow large validators who are who are running their infrastructure at scale to consolidate onto less machines really allowing them to benefit from cost cost improvements but for the network itself it's really decreasing the peer-to-peer messages and it's a fantastic way really to scale the network forward so it all sounds good right with these things there's a double sword so what this means is that um you know economies of scale are going to become ever more important and if we take a step back and look at the you know the large staking business today we can really see that not a lot of businesses are making are not making money margins are really compressed so when we add this extra emphasis on operating with economies of scale you know we could really see the you know added incentives here to you know consolidate validators even further which could be self perpetuating because if we have extra emphasis on economies of scale we could potentially see more m&a in the validation business um which would potentially you know increase St centralization further there's one other point here which is important to note to know is that when you miss an attestation today on your validator you get penalized the amount of the reward that you would receive and when ethereum pumps out blocks every 10 seconds and you miss an attestation no big deal whatsoever like the you're not going to be penalized very much obviously we strive to get 100% performance on the validator but it's not really an issue but when we have 2048 e on a single validator people are really going to start to feel the pain and especially for a lot of you know large staky products or pools that you know have U you know potentially even node operator committees that really look after this it's um you know something that we really need to to focus on and how do we F the The Sweet Spot here so um you know we really need to find ways that you know one make sure that validators are per Performing up to 100% of the time but also those that doesn't increase centralization in the staking space so just to take a look at what the state of stake centralization looks like today um you know actually it's not in a fantastic place our starting point isn't isn't brilliant to say the least um so 52% of are controlled by just five companies 50% are located in three countries namely in Western Europe or in North America and what we do is actually when we have such few companies holding all the stake typically their devops team have a set of preferences or you know experience and actually how they run their validator stack um typically you know they may be very comfortable in using one cloud or or infrastructure setup or or even um you know the type of clients that they run possibly P for performance so today you know we have um you know a lot of um uh uh concentration of the cons consensus clients and execution clients that people are using and what we could possibly predict is that if we enter a world where there's less uh less and less entities uh uh validating in the ethereum network they'll Converge on you know a set of uh um um clients that they're comfortable using and this is really bad because you know if one client goes down it could potentially be a systemic risk and bring the whole network down with it um which is something we really want to avoid so how does DVT help in this context um so DVT itself you know we're really mitigating large single points of failure and it has that inherent incentivization to really mix and match the uh how you design your operator really build bulletproof infrastructure to protect your validators so for those that are are running validators um like many validators with 2048 eth on it um you know they could mix and match the clients that they use um the geolocation where they run it the type of Hosting that they do um and really make sure that you know they're being a good um citizen of the ethereum network and you know bringing this out of decentralization um to to the space as well um yeah again it's really leveling the play playing field for smaller operators itself could really help the you the Grassroots operators solo stakers compete against the big boys make sure you know you're attaining that 100% performance which you know is going to be ever more important to compete against you know the large staking service providers in the space but by and large you know DBT is really here is infrastructure to provide that redundancy a bulletproof security that after Petra um you know that's going to be ever more important and finally I want to talk a little bit about you know decentralization as a community effort and the Milestones that SSV has put in place um you know to achieve um you know a resilient and robust sticky ecosystem after Petra so the SSV Dow has actually put a really ambitious mission that by the end of next year we would like to see 2third of all eth um rather uh 2third of all validators rather got DVT and this isn't just a nice admission to have it's really a necessity um it's really a necessity to make sure that we have a decentralized place um to to interact to do value transfer make sure you know there's a place where there's a level Level Playing Field we have censorship resistance and all of these nice qualities that make our technology different from everyone else and make sure we're you know solving the real world problems what bides us all here today so there's a few things here what SSV is doing to achieve this ambition that um they're both um on the the technical side and also the community side so on the technical side SSV itself we're going through our own fork and that's um you know a series of upgrades that's going to reduce um you know the CPU time and bandwidth consumption to actually run a distributed validator on SSV itself so today you actually need quite beefy Hardware to run a Val data on SSV uh on on the ethereum network but combined with Petra and combined with the Alan F to run it on a DBT setup it's actually never been a better time to be a solo Staker or a Grassroots Staker on the ethereum network itself on the community side SSV has an incentivized main net program and basically what that means is if you're running a validator on ethereum um but you run it on SSV Network the SSV Dow will boost your API apy a certain percentage um as a W for doing so and the idea here is really to Spur the adoption and accelerate DVT which is you know extremely urgent for um you know the the time we're in to decentralize the ethereum validator set as a whole further um but I think in a nutshell um it's really never been a better time to be a solo Staker or a Grassroots Staker a DVT is one of those tools that's going to level the playing field and allow everybody to to compete against each other and ethereum in a nutshell really thrives um when you have a long tail of many different staking applications so everyone in the room could decide how they want to stake who they want to stake where they want to stake and make sure there's a there's a variety of competition for everybody so to tie everything together in a nutshell um the P upgrade um it could lead to systemic risks around stake centralization I think it's um very well thought through in the in the sense that it's uh you know really going to scale ethereum and make sure um we decrease a lot of the network over ahead but as a community we do really need to make sure we keep centralization in check um it's really important to to power ethereum forward DBT is really one of those tools that when adopted at a mass scale is really going to help decentralize the netw further make sure we mitigate single points of failure and F and give that in built fault tolerance for the NW so thank you very much everybody [Music] n [Music]