Why ‘Layer 0’ staking infrastructure is going to be the next area of explosive growth

The Ethereum network has many engineering challenges that still remain. The transition to PoS and the progress of scaling solutions have been stealing the spotlight, but there are projects on the ETH 2.0 roadmap that are silently solving Ethereum’s lesser-known problems. ‘Layer 0’ staking infrastructure, including the Secret Shared Validators (SSV) technology, is one such critical solution.

Ethereum staking infrastructure, as it exists today, is seriously flawed. Most validators are run through centralized, custodial services. Getting slashed (from user error, client bugs, or wild edge cases) is a large risk and fear. And a single staking client is used by a majority of validators, which would be catastrophic if a critical bug revealed itself.

Luckily, these problems were foreseen, and some solutions are already nearly complete. For the issues listed above, the SSV network will be the first fix. SSV is trustless, decentralized, and non-custodial staking infrastructure that uses a multi-party computation scheme to split the operation of an ETH validator across multiple operators. Consensus is required between operators, which dramatically increases robustness and fault tolerance.

There are huge benefits of this. Most importantly, it reduces slashing risk to virtually zero (i.e. multiple operators would have to get slashed simultaneously). The effect is the same for attestations and proposals, where a validator will never miss its attestation duties, unless several operators go down at once. And it solves the ongoing staking client diversity problem because each validator will run on multiple clients simultaneously. These advantages are so significant that all major staking providers are expected to transition to this or another similar layer 0 infrastructure as their back-end.

This project, again called the Secret Shared Validators Network, is governed by a DAO using the governance token ($SSV), which was launched very recently. See the project website and the whitepaper for details. They have a functional testnet (that will be giving free SSV to testers) and will likely launch to mainnet in Q1 of 2022.

Another project, Obol Network, seems to be developing an identical secret shared validators network, but they do not yet have a roadmap, testnet, DAO, or any code that is public. Therefore, their launch seems like it will be far in the future, but they will be adding value nonetheless.

But the power and potential of ‘layer 0’ goes far beyond solving these existing staking problems. This infrastructure is flexible and extensible, and there will be many features and projects constructed upon them. For example, the SSV infrastructure can be augmented to natively allow decentralized, non-custodial staking pools that share the same benefits listed above. And transparent and fair MEV implementations can be constructed as another layer, which will prevent staking providers from using opaque MEV strategies that secretly steal users’ income.

Just like we saw an explosion of Layer 2 solutions, I believe we will also see the same for Layer 0. There is too much value for it not to be used, and the potential for innovation is so large that solutions will continue to appear on the scene over the coming year. This is an exciting time for Ethereum on all fronts. I hope you all follow every piece of the amazing network that this community is building together.