‍What are Distributed Validators (DVs)?

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Distributed Validators (DVs) add greater resilience to Ethereum staking by distributing the validator key across different servers. This design prevents any single point of failure. If one node fails, the system continues to operate, maintaining the validator’s ability to secure rewards. This redundancy is crucial for avoiding downtime penalties, especially important for institutions managing large-scale staking operations.

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DVs not only mitigate downtime risks but also improve security. The validator key never exists entirely on one machine, making it significantly harder for attackers to compromise the system, or for slashing due to mismanagement. Additionally, DV technology allows operational flexibility. In case of loss of connectivity to a data center, a new machine can be integrated into the existing cluster without risking slashing penalties.

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Obol and SSV lead DV development, each with unique approaches. Blockdaemon, an early investor in Obol, has extensively tested their solutions with a focus on institutional use cases. By leveraging DVs institutions can operate more securely and efficiently, reducing infrastructure costs and improving key management without compromising security.

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Why Use DVs in Institutional Staking?

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DVs offers several key advantages for institutional Ethereum staking:

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1. Redundancy

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DV clusters provide built-in redundancy, critical for minimizing downtime. In a 3-out-of-4 setup, validators continue to operate and secure rewards even if one node fails. This configuration reduces the risk of penalties associated with downtime, guaranteeing consistent operations and reliable staking rewards.

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2. Resilience

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DVs allows seamless recovery from hardware failures without risking slashing or double signing penalties. A new machine can be integrated into the existing cluster, keeping operations online and minimizing disruption.

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3. Operational Security

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Distributing validator keys across multiple servers significantly increases security. The key never exists fully on one machine, making unauthorized access extremely difficult. This robust security is crucial for institutions managing large staked assets.

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4. Infrastructure Efficiency 

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DVs enable institutions to stake more ETH per node, reducing the number of required nodes and lowering infrastructure costs. Improved security may also reduce insurance premiums, offering substantial cost savings for large-scale operations.

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DVs with Ethereum Client & Geographic Diversity 

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To achieve maximum resilience with DVs, institutions can configure clusters with diverse clients, geographic locations, and operators.
Institutions must weigh the added resilience against the potential cost increases due to the operational complexity.

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Client diversity by itself is technically less complex than full geographic or operator diversity, but it primarily safeguards against bugs in specific Ethereum clients. By using multiple clients, institutions can isolate issues to only a portion of their validator fleet, minimizing overall impact. The challenge lies in selecting the right mix of clients over time and managing the increased costs associated with maintenance and infrastructure compared to a single client setup. 

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Blockdaemon’s Experience with DVs

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Blockdaemon has extensively tested Obol’s technology at scale. As an early investor in Obol, Blockdaemon has focused on validating the potential of DVs for institutional usage, testing that it meets the demands of large-scale operations.

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Through these tests, Blockdaemon has demonstrated the backend capability to deploy and manage DV clusters efficiently, maintaining continuous operations despite node failures. Blockdaemon’s expertise in managing these clusters at scale has provided valuable insights into optimizing DV configurations for maximum resilience and efficiency.

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To learn more about Distributed Validators, and Blockdaemon’s Ethereum staking services, book a call with the team using the form below. 

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