The Beacon Chain is the core of the new Ethereum Proof-of-Stake (PoS) consensus mechanism. The Beacon Chain went live on Dec. 1, 2020 at noon UTC.
The Beacon Chain is a PoS blockchain that stores and manages the registry of validators in order to support the new consensus system. It is constantly scanning, validating, collecting votes and rewarding validators that correctly attest to blocks. On the other hand, it deducts rewards for those validators not online and slashes Eth rewards from malicious actors.
Eth2 is referred to as the "consensus layer.” It ensures that validators adding blocks to the Beacon Chain are behaving according to the rules that describe what nodes should do to reach consensus about transactions broadcast over the network. It also handles the generation and verification of new blocks.
Eth1 is also referred to as the "execution layer", where smart contracts and network rules reside.
Custodial staking risks include: severe slashing penalties, reduced overall rewards, and increased likelihood of attack on user keys as they are held in a centralized store by the staking service.
D-Marketing, or decentralized marketing, is a brand new term referring to marketing and related efforts being carried out by community (DAO) members instead of a centralized team. Items that need attention are posted to a “bounty board” and community members can take ownership of these tasks and earn rewards for completing them successfully.
DAO (Decentralized Autonomous Organization)
A DAO is an entity with no central leadership, usually related to a cryptocurrency. The community governs the protocol, and community members steer it by voting on proposals submitted to the DAO. They are organized around a specific set of rules enforced on a blockchain. DAOs are internet-native organizations collectively owned and managed by their members.
The ssv.network forum is the home of the SSV DAO all things related to it, including proposals, grants, and verified operators.
Distributed Key Generation
A cryptographic process calculated by the operators running an SSV node that generates a shared public and private key set. Each operator owns a single portion of the private key, known as a KeyShare, ensuring that no single operator can reproduce the entire private key and make decisions alone on behalf of a validator.
DVT (Distributed Validator Technology)
DVT can be used interchangeably with SSV (Secret Shared Validator). Both are referring to an Ethereum validator running on multiple non-trusting nodes for fault tolerance and security.
Epochs & Slots
An epoch is a measure of time on the Ethereum blockchain and lasts approximately 6.4 minutes. An epoch includes 32 slots, each lasting 12 seconds. A slot is the time period where a validator is randomly selected to propose a block.
Ethereum Staking Keys
Ethereum Staking Services
Staking services offer a streamlined way for users to participate in Ethereum staking. When considering an Eth staking service, it is important to understand how the service manages private user keys. In general, the more the service is centralized (custodial), the greater the security risks and penalties its users may face. This is especially true if the staking service participates in malicious behavior or goes offline for an extended period.
EVM (Ethereum Virtual Machine)
The Ethereum Virtual Machine is a computation engine that acts like a decentralized computer having millions of executable projects. It is the virtual machine that solidifies Ethereum's entire operating infrastructure.
Formerly known as an Eth1 client. An execution client manages the transaction pool for the Ethereum blockchain and runs the EVM. It provides execution data to consensus clients for inclusion in blocks. Examples of execution clients include Go-Ethereum, Nethermind, and Erigon.
Execution Layerp class="mt-0">The "execution layer" is also referred to as Eth1. It is where smart contracts and network rules reside.
Also see Consensus Layer (Eth2)
Fault tolerance enables a system to continue operating properly in the event one or more of its components fails.
In terms of ssv.network, this refers specifically to multiple KeyShares running a validator on non-trusting nodes. SSV’s ability to recreate a data signature even if one of those nodes is offline provides a fault-tolerant infrastructure for reliable, worry-free Eth staking.
A grant is the physical funding given by an entity for a project to be completed, based on a set of pre-defined requirements and outputs. The ssv.network DAO makes significant funds available as grants to staking services, developers, and other contributors in the space that want to build apps on top of the SSV protocol.
Istanbul Byzantine Fault Tolerance Consensus
The consensus layer of SSV is based on the Istanbul Byzantine Fault Tolerance (IBFT) algorithm. This algorithm randomly selects a validator node (KeyShare) responsible for proposing a block and shares that information with the other participants. Once the predefined threshold of KeyShares determines that the block is valid, it is added to the chain. WIth SSV, consensus can be reached even if some operators are experiencing problems or go offline. IBFT ties Distributed Key Generation, Multi-Party Computation, and Shamir Secret Sharing together.
KeySharep class="m-0">Using Distributed Key Generation, the SSV protocol encrypts and splits a validator key into multiple “KeyShares”. The KeyShares are distributed to multiple non-trusting nodes run by operators. This allows the validator key to be generated once and stored securely offline while the KeyShares that represent it run the validator and sign data transactions.
Liquidation can occur when a staker’s SSV balance drops below the “threshold balance”. (see Liquidation Collateral) This will trigger the operators in the validator's SSV node cluster to terminate its services and stop managing the validator.
Liquidation Collateralp class="mt-0">Liquidation collateral is a deposit stakers are required to make in $SSV to ensure operators are always compensated for their efforts, and to keep the network solvent.
This collateral covers the operator costs for a set number of blocks, known as the “threshold balance”.
Liquidation collateral serves as the incentive for liquidators to monitor the network and liquidate accounts that are in default. (see Liquidation)
The DAO Multi-Sig Committee members are the “gatekeepers” of ssv.network.
The committee’s main responsibilities are to:
- Execute transactions that pass the DAO voting process.
- Exercise veto power over proposals they determine are not in the best interest of the network.
- Reject ‘high-risk’ operators for the protection of SSV protocol users.
- Force malicious and/or negligent operators to exit the network (i.e operators that do not perform their duties or have low performance rates over time).
In addition, the ssv.network treasury is controlled by the multi-sig committee.
Stakers are required to pay a network fee, a fixed cost determined by the ssv.network DAO. The fee is charged per validator, and added to the overall yearly cost of the SSV node. The network fee will flow directly into the DAO treasury and will be used to fund further development of the ecosystem and other activities that have passed the DAO voting process.
Non-Custodial Staking Service
A service that provides streamlined Ethereum validator set-up and management. A non-custodial staking service does not hold user private validator or withdrawal keys. This allows stakers to maximize their returns and mitigates security risks as they retain complete control over their keys and assets.
Individuals or institutions that provide the hardware infrastructure, run the SSV protocol, and manage validator KeyShares on behalf of stakers. Operators charge stakers a fee in $SSV for operating their validator(s). Each operator is ranked on a scale of 0-100% based on the overall quality of service they provide, to provide a transparent view to stakers on the network.
Proof of Stake (PoS)
Proof of Stake (PoS) is a newer consensus mechanism than Proof-of-Work (PoW). It is designed to improve security, scalability, and energy efficiency. Instead of relying on miners competing to add blocks to the chain which uses large amounts of computing power and energy, Ethereum PoS relies on validators running on staked Ethereum (Eth) on the Beacon Chain. These validators are randomly selected to propose and attest to the addition of blocks to the chain. Validators receive rewards for performing their duties correctly and face penalties if they are offline or act maliciously.
Proof of Work (PoW)
The Ethereum main chain, in its current form, is based on a consensus mechanism known as Proof of Work (PoW). PoW relies on miners competing to see who can solve complex equations the fastest to add blocks to the chain. However, in competing to solve the equations the fastest, miners use an enormous amount of computing power and energy. As more blocks are added to the chain, more computing power, time, and energy are needed to process transactions and grow it. Ethereum is transitioning to a newer consensus mechanism called Proof-of-Stake (PoS) in the near future.
Companies and developers can submit proposals to the DAO for a discussion. If the proposal idea passesa the initial discussion phase, it will be sent to snapshot for a vote. When a proposal passes the voting process, the multi-sig committee members are responsible for ensuring that the details of the proposal are executed by the DAO in a timely manner.
Semi-Custodial Staking Service
An institutional staking service that claims to be non-custodial, but holds validator private keys. Although this type of service does not hold withdrawal private keys and cannot access a user’s staked Eth deposit or earnings, semi-custodial staking risks include severe slashing penalties and reduced overall rewards if the service is offline for extended periods or acts maliciously.
Shamir Secret Sharing
Shamir Secret Sharing reconstructs a validator key to sign data using a predefined threshold of KeyShares. Eth2 validator keys use BLS signatures and BLS signatures allow the combination of multiple partial signatures to recreate a full validator key signature. For security, individual KeyShares sign data by themselves, yet not all of them are needed to recreate the signature. If one SSV node is offline or experiencing a problem, the rest of the KeyShares will respond to handle the request, resulting in a fault-tolerant system.
If an Ethereum validator behaves maliciously, it risks losing a significant amount of staked Eth, up to the entire 32 Eth deposit. In addition, the validator can be forcibly removed from the network. Slashing protection is an important component of validator client software, especially for DIY stakers, and should be an integral part of a staking service’s service offering. This offers protection against a validator accidentally partaking in a slashable offense.
The four non-trusting operators that manage and operate a validator on behalf of a staker. When SSV encrypts and splits a validator key into four KeyShares, they are distributed to the non-trusting operators managing the validator. Non-trusting means the operators do not need to know or trust each other to perform duties on the validator’s behalf.
An SSV node is responsible for the following:
SSV Token ($SSV)
SSV token or $SSV is the native token for ssv.network. It has three uses:
- Governance - Token holders can vote on DAO proposals, grant requests, and verified operators.
- Fees - Stakers pay operators a fee in $SSV to manage their validators for them, along with a network fee to stake their Eth using the SSV protocol.
- Grants - The DAO provides funding for grants, in part with $SSV tokens. Grants are available to network developers, contributors, and testers who apply and pass a DAO vote.
Staking is the action of depositing 32 Eth to run a validator on the Ethereum PoS blockchain. Validators earn Eth rewards for attesting to and adding blocks to the chain. A validator risks being “slashed”, or incurring penalties that decrease their stake, by participating in malicious behaviors or for extended time spent offline or disconnected from the network.
The threshold balance refers to the amount of collateral a staker must keep in their account to cover operator costs for a set number of blocks. It ensures operators are always compensated for their efforts and keeps the network solvent. Accounts that fall below the threshold balance become subject to liquidation.
Total Value Locked (TVL)
A validator is responsible for confirming transactions and adding new blocks to the Ethereum PoS blockchain (Beacon Chain). To run a validator, one must put 32 Eth ‘at stake’, which will increase as the validator performs its assigned duties. A validator is different from the comparable concept of a miner on the legacy Ethereum PoW chain. Validators are called upon by the PoS protocol to propose and validate emerging blocks rather than compete for their generation.
An SSV validator is one that runs on ssv.network and employs the SSV protocol. It splits the validator key into four KeyShares so the validator can run on multiple nodes (SSV node) for redundancy and fault-tolerance, while adhering to Ethereum’s strict protocol rules.
A lightweight piece of software that runs a validator to propose new blocks and participate in committees by signing attestations on blocks proposed by other validators within the committee. Examples of validator clients include Prysm.
Validator Key (Private)
Withdrawal Key (Private)
A key that is only used for transferring or withdrawing staked Eth. This key should always be safely stored offline.
Please note: transfers and withdrawals will not be available until later phases of the network upgrade, after The Merge takes place.