Ethereum staking is crucial to securing the Ethereum network and allowing it to operate. Many traditional staking approaches are centralized with validators. This overreliance introduces many single points of failure and is antithetical to the very decentralization and security that the network strives to maintain. Obol Network is directly addressing these concerns. They want to use the OBOL token and Distributed Validators (DVs) to help build a more decentralized and resilient Ethereum staking ecosystem.

Obol’s approach to decentralized staking presents a win-win opportunity for individual node operators and the Ethereum network as a whole. Obol increases security in the staking process by decentralizing validator keys through multiple nodes. This method cuts out all single points of failure. This method leads to greater decentralization as well since it lessens extremes of power from being concentrated among a handful of rich players.

The OBOL Token: A Governance and Coordination Engine

The OBOL token currently serves as the governance and coordination engine for the Obol network. This ecosystem is secured by a decentralized network of 800+ active node operators, securing over $1 billion in ETH across some of the most prominent protocols and institutions. It is an important part to aligning incentives and enabling efficient decision making in the Obol ecosystem.

Obol provides a new liquid staking mechanism, in partnership with Tally. This design serves as a brilliant mechanism where OBOL holders can stake their tokens and, in return, receive a liquid staked governance token. The token unlock follows a targeted strategic airdrop. It was given to thousands of Ethereum solo stakers, Rocketpool node operators, and Ethereum ecosystem contributors making for a very widespread distribution to the people actively working to secure the network. Obol is a founding member of the Proof of Stake Alliance (POSA) and Node Operator Risk Standard (NORS). This organization is further leading the charge in designing the technology and policy frameworks that will institutionalize staking into the future.

Distributed Validators: Enhancing Security and Resilience

Obol's core technology is Decentralized Validator Technology (DVT), which has transformed the staking landscape by enabling:

  • Lido to expand from 36 to over 200+ operators
  • EtherFi to create Operation Solo Staker, onboarding home stakers to the protocol
  • Solo stakers to outperform professional operators in validator performance
  • Institutional-grade staking entities to lower their operating costs while improving performance

DVT addresses this by spreading validator keys over many nodes to remove all single points of failure. So when one data center fails, the other nodes continue to operate. This keeps the validator incentivized to remain online. DVT employs cryptographic techniques such as Shamir’s Secret Sharing and multi-party computation. By splitting a private key into multiple “key shares,” it greatly increases the difficulty for attackers to breach the system. With DVT, only ⅓ of the validators can be down or misbehaving, and the system will still run smoothly. This would allow the rest of the validators to go offline, misbehave or even get compromised without incurring high costs. This change reduces validator downtime from 36 minutes a day to an average of only 8.6 seconds per day. Because of this, validators are always online and actively validating and proposing new blocks.

Benefits of Obol's Approach

The Obol protocol uses DVT to facilitate decentralized, trust-minimized, and resilient staking operations. Obol’s model includes these as distributed validator clusters. This design disperses transaction validation responsibilities among dozens of different operators, drastically reducing the chance of centralization. Obol’s Charon middleware enables operators to better collaborate and cooperate with each other. This enables them to coordinate at validation speed without relying on on-chain bandwidth or computational resources. In addition to lowering the financial barrier to entry with a much higher ETH granularity, Obol enables operators to share the 32 ETH requirement to stake. Obol, in turn, gets paid rewards in stETH which it distributes to node operators through the use of a splitter contract.

Increased Availability

DVT has the potential to greatly minimize validator downtime so that validators are never offline and unable to validate or propose blocks.

Freedom from Single Point of Failure

With DVT, you can distribute your validator keys across multiple nodes. This ensures that if one data center has a failure, the other data centers can continue to operate the service, avoiding any single point of failure.

Improved Decentralization

DVT spreads validator keys over several nodes. Creating a more level playing field minimizes the concentration of power among the few large, rich participants and fosters decentralization, which this approach actively encourages.

Enhanced Security

DVT employs cryptographic techniques to divide a private key into multiple “key shares.” This method has a tremendous impact on security, increasing the difficulty for attackers to compromise the system.

Reduced Penalties

With DVT, you just need 2/3+ of the validators to remain operational. The rest can go out of service, function sub-optimally, or even get cyber attacked without any major consequences.

Potential Risks and Challenges

Obol’s deliberate approach makes a world of difference. We need to be realistic about the risks and challenges that could come with decentralized staking.

  • Regulatory risk: One of the risks associated with Ethereum staking is regulatory risk.
  • Counterparty risk: When relying on a third party to manage your stake, you face counterparty risk.
  • Technical expertise and maintenance: Running a validator node requires technical expertise and continuous maintenance.
  • Minimum staking requirement: The minimum staking requirement is 32 ETH tokens, which is around USD 113,016.32 at the time of writing.
  • Slashing penalties: There are two main types of slashing penalties:
    • Correlated slashing penalty: After the initial slashing penalty, a validator may receive a second penalty based on the total amount of stake slashed during the 18 days before and after the slashing event.
    • Double vote slash: A more serious offense that happens when a validator votes twice on the same block, or votes on conflicting blocks at the same time.

Therefore, it is vital for node operators to understand and assess these risks and challenges before engaging with and providing decentralized staking.

Obol’s OBOL token is a notable development in the emerging Ethereum staking ecosystem. The addition of the DV play into further decentralization and resilience. Notably, Obol’s approach removes single points of failure and creates a push toward decentralization. This increases security while providing unique advantages to both node operators and the Ethereum network as a whole. As with all things, while risks and challenges are certainly present, the upsides of decentralized staking more than make up for any issues.