Obol Network, democratizing Ethereum validation by distributing it

When the merge comes, the Obol Network will be there, ready for battle. The Proof-Of-Stake Ethereum isn’t even ready for prime time and Obol Labs is already developing infrastructure to make it more efficient. What are they building, exactly? This blog post defines the Obol Network as, “a protocol to foster trust minimized staking through multi-operator validation. This will enable low-trust access to Ethereum staking yield, which can be used as a core building block in numerous Web3 applications.”

Rest assured, this post will define all of those keywords. Even if they are self-explanatory like “multi-operator validation.” After the merge, not miners but validators will keep the Ethereum network’s blockchain up-to-date. Under normal conditions, those validators would work independently and be required to keep a high percentage of uptime. With Obol, multiple machines will be able to run a validator.

That’s just one of the few decentralizing factors that the Obol Network plans to put in place. Potentially, this could help the Ethereum 2.0 network to become a more decentralized affair. The best thing is that validators will be able to join in a permissionless way using their Distributed Validator Technology or DVT. This opens the technology to the many. If the Obol Network succeeds, validators will no longer represent a single point of failure risk. This strengthens the whole system.

Obol Labs’ practical goal is to build infrastructure for public PoS blockchains. At the moment, they’re focused on Ethereum and on building Obol V1, the first iteration of these ideas. The company’s idealistic goal is to “help Ethereum scale to a billion users by enabling low-trust access to Ethereum staking yield.” Let’s explore that idea further.

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The Problem

The minimum stake to become a validator in the Ethereum 2.0 blockchain is 32 ETH. At today’s heavily discounted prices, that’s still a $35K investment upfront. That leaves the majority of the population out of the validator game… unless…

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Obol’s Solution

Any user that meets minimum equipment requirements can plug into Obol’s Distributed Validator Technology and help run an Ethereum 2.0 validator. They’ll earn a portion of the rewards proportional to their participation, and they don’t even have to stake their own ETH to do it. 

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The Promise

As Obol Lab’s advisor Viktor Bunin put it, ideally, the Obol Network “will enable almost everyone to become a node operator on the network, making eth2 the most decentralized and secure network in the world.” 

A little grandiloquent, maybe, but you get the idea.

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Obol’s trajectory and ideas

In a recent blog post, the company further described the Obol Network and its characteristics. “The network is designed to offer developers, institutions and individuals; such as exchanges, custodians, DeFi protocols, DAOs, financial institutions, and in-home validators, a scalable layer to set up, monitor, and deploy your own multi-carrier staking clusters without the need to coordinate multiple carriers or manage complex infrastructure setups.” It’s a complex product. Can this team deliver?

The Lido DAO seems to think so, Obol recently received a grant from them. In the blog post announcing it, the company went back in time and brought its previous achievements to light. “The Obol team has been researching and building out Proof of Stake Ethereum for three+ years and is responsible for a number of widely used tools and research efforts in the ecosystem such as the Eth2 LaunchPad, the Eth2 Calculator, the thesis of Internet Bonds in Eth2, and early DVT research with the EF.”

Figment is a blockchain infrastructure and services provider that supports Obol’s mission. 

“Members of Figment have volunteered to help build and get the word out about Obol through the Obol Proto Community,” they announced in their evaluation of the project. According to that article, “the Obol Network consists of four core public goods.” 

• 1.- The DV Launchpad, the interface to monitor distributed validators. 
• 2.- Charon, a middleware client that controls the operation. 
• 3.- Obol Managers, the Solidity smart contracts that run the business. 
• 4.- Obol Testnets, the risk-free virtual places that they’re developing and testing all of their technology in.

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Key concepts To Understand Obol

• Trust Minimized Staking - To accomplish this, the Obol Network uses Secret Shared Validators or SSV. In the previously quoted article, Viktor Bunin defines them as “SSV is a new infrastructure primitive that enables a validator key to be split between independently operating validator instances, enabling Active Active redundancy across Eth2 infrastructure deployments.” The Lido DAO grant’s objective is to study this precise technology.
• Distributed Validator Technology - This blog post defines it better, “DVT enables a new kind of validator, one that runs across multiple machines and clients simultaneously but behaves like a single validator to the network.  This enables your validator to stay online even if a subset of the machines fail, this is called Active/Active fault tolerance.”
• Multi-Operator Validation -  In Ethereum 2.0’s proposed system, validators have to keep optimal uptime 24/7, forever. Under Obol’s system, the responsibility rests on many shoulders. Multi-Operator Validation means that the other members of your validator cluster can cover for you if your machine goes through technical difficulties. And you can do the same for them. Being a validator doesn’t have to be a full-time job. 

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How does The Obol Network work?

• A number of individual validators pull together their resources and team up to run a distributed validator.
• In a “Distributed Validator Key Generation Ceremony,” each of them generates its own private key. All of them together form the group key that connects their distributed validator to the Ethereum network.
• In the middle of the whole operation sits Charon, an Obol-produced middleware that allows multiple clients to act as a single validator and communicate with the consensus clients as a unit. 
• Up to a third of the individual validators can be offline at any given time. The distributed validator will continue to perform uninterrupted.

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The Proto Community, what is it?

This project is picking up steam. And as it does, it generates an ever-growing community of people willing to help build and maintain the network. “We quickly found that the most important area we could invest in was unique ways to effectively scale an increase in the community while also scaling research, code, and testing....simultaneously.” 

Obol wrote that in a blog post announcing the Proto Community, “which will fuse our different sub communities into the backbone of Obol.” So, Obol has been cultivating these communities for a long time. And the company considers that “The project has reached the point where increasing the community interaction, participation, and ownership distribution will drive significant impact on the growth of the core technology.”

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The Lido Grant, further details

Recently, Obol Labs received a $100K grant in LDO tokens from the Lido DAO. The objective is that they continue researching “trust minimized infrastructure technology.” In the post announcing the grant, the Lido DAO specified exactly what they are expecting:

“SSVs are still under active development and in our opinion not ready yet for production. Both Blox Staking and Obol are actively working on and researching SSVs for their own protocols. Having multiple teams working on different implementations of this technology is a good thing - the same as having a variety of ETH 2.0 node clients and diversity in staking setups between node operators.”

In Obol’s separate post announcing the deal, the company surprises everyone by announcing what they plan to do with the grant money. 

“The Obol core team will be using the granted LDO to become active participants in Lido’s governance system. We appreciate the vote of confidence from the Lido community and look forward to voting and making proposals to help the community decentralize its governance.

The Obol core team will continue our work building multi-client and multi-operator DVT technology for the public good.”

Does that read like Obol is not going to spend their LDO, but instead they’re going to keep it locked to participate in Lido’s governance system? That’s a confident play for a company that doesn’t have a product yet, and whose success is dependent on Ethereum accomplishing the merge. Maybe Obol knows something that we don’t. And the company seems to already have the money to develop the technology that they’re promising. Maybe the process is more advanced than they’re letting on. 

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Final Observations

If the Obol Network works as intended and the general population adopts it, it could be huge. That’s a big if, though. Even though the advantages are there. Multi-Operator Validation will reduce downtime and thus the penalties that validators get for not being online. If the Obol Network grows to become widely used, the whole Ethereum 2.0 network will become more fault-tolerant and decentralized.

The democratization of validators is positive for everyone. It will distribute the reward money while increasing security at the same time. However, a lot of things have to go just right for the Obol Network to take over. And, even if it does, it will always face competition from similar systems. Even Ethereum itself could upgrade into something like this if the Obol Network provides a proven use case.

Come merge time, this is definitely one of the projects to watch.

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Buy/No Buy recommendation

This one is easy.

If you believe the Ethereum team will accomplish the merge in time, buy.
If you believe the merge will be pushed back once again, skip.