Diva testnet is about to open, meet the financing stars of the LSD track

Original author: Jack
Original source: Blockbeats
The Ethereum Shanghai upgrade is coming in March this year. After this upgrade, stakers will be able to withdraw previously pledged ETH. Recently, expectations for upgrades have also brought a lot of enthusiasm to the Liquidity Staken Derivatives (LSD) track. Leading projects such as Lido and RocketPool have experienced sharp increases, and Diva, a new player in the track, will also open its doors in the near future. Testnet.
On January 17, the Diva team announced the completion of a US$3.5 million seed round of financing. A&T Capital, Gnosis, Bankless, OKX and other first-tier players participated, making Diva the "financing star" on the LSD track. What are the highlights of this newcomer to the track? What opportunities can it bring to us?
Issues and Opportunities on the LSD Track
As Ethereum enters PoS mode, ETH becomes the decisive asset to ensure the security of its network. Although PoS brings multiple advantages, the minimum staking requirement of 32 ETH also creates excessive economic costs, preventing many Ethereum users from playing a leading role in securing the Ethereum network. This situation has further led to an increasingly centralized landscape of Ethereum staking.
Current Ethereum staking operates in a highly centralized manner, with large CEXs like Coinbase and Binance holding the verification keys and having full control over block production, transaction review, and MEV selection. As the amount of funds in these staking pools gradually increases, single nodes become more and more powerful and erode the decentralized value of Ethereum. At the same time, the entire Ethereum network is only protected by about 5,000 beacon chain nodes. And most of these nodes are concentrated in jurisdictions with higher regulatory risks.
Obviously, it is unrealistic to allow most Ethereum users to run their own "32 ETH verification nodes". Not only are the costs prohibitive, but the technical skills required are also high. In this case, the Ethereum Liquidity Staking Protocol (Liquid Staking) was born. By aggregating users' ETH and staking it uniformly, the liquidity staking protocol eliminates the threshold of 32 ETH. At the same time, users can also obtain liquidity staking certificates (LSD), and obtain Ethereum's liquidity while maintaining their original liquidity. Staking rewards. Of course, these are commonplace topics for crypto players who follow the Ethereum ecosystem.
At present, Lido is the absolute leader in the LSD track, and it completely hands over the control of verification node keys to a small group (currently about 30) of the node operators included in its whitelist). RocketPool, the second place on the LSD track, maintains validator keys with each node operator and incentivizes honest behavior of nodes by issuing "16 ETH bonds", making node operation more decentralized. However, Lido’s excessive monopoly on the LSD track also poses significant risk challenges to the decentralization and security of Ethereum. Currently, the total value of ETH pledged through Lido reaches $6 billion, accounting for 30% of all pledges, far exceeding RocketPool. Clearly, the market needs more decentralized staking solutions, which provides potential space for nascent protocols like Diva.
Diva uses DVT Distributed Validator Technology, which has only recently entered the field of vision of market participants. DVT is a high-quality solution to the over-centralization of the current Ethereum staking operators. Many people regard it as the new standard for the Ethereum staking track. Since Lido has not yet deployed this technology, this also provides new players in the LSD track. Provides an excellent opportunity to overtake.
Although DVT solutions have been available for some time, many staking protocols do not have mature integrations with them. As a middleware for liquidity staking, DVT has no economic mechanism to connect staking users and node operators in a trustless and permissionless manner. Diva provides an economic model that combines the interests of both parties, reward distribution and punishment, and operator staking, which is more mature than other protocols.
At the same time, the upcoming Ethereum Shanghai upgrade in March this year will further bring more heat to the LSD track, which is also a huge deployment opportunity for latecomers to the track. In January this year, A&T wrote in "A&T Family: Why We Invest in Diva": "Assuming that the token price of ETH reaches $10K in the next bull market, and 50% of the entire network's ETH is staking, the annual income of the ETH staking market will exceed $35B. For a service-oriented platform like Diva, the annual market revenue can reach $3.5B, which is a huge space.” It can be seen that we must maintain continuous attention to new LSD projects like Diva.
Diva technical components
"Diva" means distributed verification. It aims to establish the most flexible liquidity staking protocol and provide a more flexible incentive mechanism for Ethereum stakers and node operators in a more decentralized manner. The team believes that creating a distributed peer-to-peer network to collaboratively run validator nodes is the best alternative to a single node (minimum stake of 32 ETH).
Diva's technical components include a decentralized node network, a non-upgradeable smart contract, and an oracle (expected to be discontinued after EIP-4788). Like most Ethereum liquidity staking protocols, Diva's pledgers have no minimum pledge requirements. After staking ETH, users will receive Diva's liquidity pledge voucher diveETH, which can be used for reception, harvesting, etc. in other DeFi applications to obtain Extra income.
Diva's node operators form a P2P subnet through DVT technology. Anyone can create verification nodes without permission and use shared keys to manage validator clients. According to Diva’s official documentation, Diva operators will only need 1 ETH to set up and run a validator’s own node, which is much lower than the minimum 32 ETH requirement for a single Ethereum node.
Distributed node network
Diva's verification nodes mainly run the Ethereum execution client, the Ethereum consensus client, and the Diva client. The Diva client is open source and allows nodes to register in Diva smart contracts, synchronize client data, etc. Each Diva validator is a distributed validator operating from a randomly composed subnet to promote node diversity and decentralization. Nodes coordinate their operations with other nodes by holding different shared keys.
Unlike other LSD solutions, Diva node operators cannot access the funds or private keys of verification nodes at any time, and signatures require multiple operators to reach consensus on actions by sharing keys. Diva uses DKG Distributed Key Generation technology (Distributed Key Generation) and MPC Multi-Party Computation (Multi-Party Computation) technology to split the verification node key into a shared key signed using the BLS threshold (Boneh–Lynn–Shacham). All node actions require consensus signatures from at least two-thirds of the nodes in the subnet committee to reduce the risk of collusion attacks and private key loss, and improve the fault tolerance rate for node failures. Because of this, Diva node operators do not require advanced server management skills and have greater flexibility.
In addition, node operators need to provide a certain amount of ETH as a deposit before they can be assigned to operate a validator to ensure that the interests of the operator and staking users are consistent. If an operator misses any verification duties, the deposit will be transferred to the staking users as compensation for their potential losses, while operators who perform their duties correctly will receive a percentage of the staking rewards. The reward obtained by the operator is the sum of its own staking income and the income distribution of staking users.
Diva smart contract
The main functions of the Diva smart contract are to stake and withdraw ETH, mint divETH and package wdivETH. In addition, operators also register shared keys for new validators through smart contracts. The staking user deposits ETH and obtains the interest-bearing certificate divETH at a ratio of 1:1, and uses divETH to apply to the node to withdraw ETH.
divETH is a rebased interest-bearing asset. It is the liquidity pledge certificate of staking users. 1 diveETH will always be backed by 1 ETH, and staking rewards will accumulate over time. As Ethereum blocks and staking rewards are generated, a staking user's diveETH balance will continue to grow to reflect the potential reward value of their staked ETH. The Diva smart contract automatically updates the divETH balance of the user's wallet every day, and staking users passively receive rewards without any obligations to the Diva protocol. It is expected that after the Ethereum Capella upgrade on March 23, users will be able to cancel their pledges at any time and exchange divETH for ETH.
Users can also package divETH into wdivETH through the Diva smart contract. wdivETH is a non-rebasing asset, mainly used to promote the composability of divETH with the broader Ethereum ecosystem. The balance of wdivETH will not change over time and the accumulation of staking rewards, and its value will appreciate over time and the accumulation of staking rewards compared to ETH. So wdivETH in the user's wallet will be a static value that will only change when the user makes a transaction. When users want to withdraw ETH, they need to unpack wdivETH into divETH first, and then further decrypt their ETH.
As a public infrastructure, all of Diva's infrastructure and smart contracts are open source, but the contracts themselves are not upgradeable and are designed to maintain the predictability of the protocol to minimize potential attack risks. If something goes wrong with a smart contract, there are protection mechanisms in place to minimize the potential impact on all parties.
P2P Network & Oracle
Diva also creates a P2P network between nodes for node discovery. Communication in the network will occur directly between nodes, which to a certain extent avoids potential delays that affect verification performance and minimizes single points. Fault. Through this P2P approach, Diva also remains decentralized and censorship-resistant. Additionally, the P2P network allows DKG to execute in a completely decentralized manner, thus protecting the privacy and security of all data transfers.
For now, the operation of Diva still requires the assistance of oracles. Because the execution layer (execution of blocks, transactions and smart contracts) and the consensus layer (verification and consensus mechanism) of Ethereum are separated, this makes the Diva smart contract unable to directly access the status of the verification node without receiving information from the consensus layer. In this case, Diva cannot directly check the execution of its validator nodes. Ethereum’s EIP-4788 proposal will solve this problem very well, but until then, Diva still needs to use oracles.
Expectations for the popularity of Shanghai’s upgrade
According to official documents, Diva will open the testnet in the near future and gradually release the initial version of Diva. The mainnet is expected to be released in the next few months. After the Diva mainnet goes online, it will be launched in two phases. In the first phase, staking users will receive 100% of the staking rewards, and operators will need to meet higher reliability and security requirements. In the second phase, staking users and operators will share the staking rewards equally, and operators will also be able to operate in a completely trustless manner.
The upcoming Ethereum Shanghai upgrade in March this year will allow users to withdraw mortgaged ETH, which will lead to a significant increase in the number of pledged ETH in the following months and provide greater room for growth for LSD track projects. Until then, following Diva and continuing to interact with its testnet may bring considerable benefits. At the same time, BlockBeats reminds readers that protocols in the testnet stage often experience unpredictable failures, and users should pay attention to related risks.
(The above content is excerpted and reprinted with the authorization of partner MarsBit, original text link | Source: Blockbeats)
Statement: The article only represents the author's personal views and opinions, and does not represent the objective views and positions of the blockchain. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and Blockchain Client will not be held responsible for any direct or indirect losses caused by investors' transactions.
This article Diva testnet is about to open, meet the financing stars of the LSD track. First appeared on Blockchain.