Blog - Investing in Obol | Pantera

Investing In Obol

January 19, 2023 | William Reid & Tony Sakich

2022 was a landmark year for Ethereum. The platform finally switched from a proof-of-work consensus mechanism to proof-of-stake. This change greatly reduced the Ethereum network’s carbon footprint (by ~99.98%) and created a new means of securing the network through staked ETH. 


Obol is creating a core piece of infrastructure to support the burgeoning staking ecosystem called Distributed Validator Technology (DVT). DVT is considered so integral to the Ethereum stack that Vitalik Buterin included it as a key milestone in “The Merge” section of the Ethereum roadmap


At its core, Obol is creating a low-cost risk management software for Ethereum stakers that serves two core functions: reducing “slashing” risk and the risk of yield losses due to validator downtime.



The risk of “slashing” – or losing part or all of one’s staked ETH due to malicious intent or accident – is seen as such a material risk that Lido DAO (Lido is the market leader in ETH staking) was at one point spending 25% of its revenues on slashing insurance. 


Obol’s DVT solution significantly mitigates this risk. We believe it could enable a new wave of institutional staking adoption in the medium to long-term. 


DVT also has broad-based appeal for all types of validators, types which can be split into three categories:


Large Validators: DVT allows larger validators to run more validation nodes with fewer machines, reducing hardware costs and increasing efficiency. Additionally, it provides active redundancy and reduces slashing risk (which significantly reduces slashing insurance costs!). With DVT, validators can run multiple nodes in a group, diversifying the risk of failure and increasing their overall reliability.


Liquid Staking Protocols (LSPs): DVT’s ability to increase efficiency and reduce risk allows for higher operator participation, which is crucial for LSPs. With the added redundancy provided by DVT, LSPs can remove their dependency on any one operator, reducing the chance of network downtime. By organizing operators into different clusters, even if one goes down, the full validator node is unaffected, as other active operators will meet the thresholds for attestation. This ultimately improves the performance of the protocol for stakers, making it more reliable and efficient.


Community & At-Home Validators: DVT also benefits smaller validators and users, who can now run their nodes with more confidence, delivering uptime and efficiency that is comparable to larger validators. This can be achieved by at-home validators working together as a community – and not relying on any single machine. Furthermore, the ETH requirement for running a node is lowered, as multiple nodes can be grouped together to meet the 32 ETH requirement for validation. With this, DVT has the potential to greatly increase participation from at-home validators, which would result in a more decentralized and resilient network for all.


We’re also excited that Obol is planning on expanding its core DVT solution to alt-L1s (alternative Layer-1s) like Cosmos. Obol is also planning on exploring the decentralization of various other components of the Layer-2 stack (such as the block builder, sequencer, or prover). 


As an integral part of the emerging “Ethereum middleware” sector (alongside re-staking pioneer Eigenlayer and MEV R&D powerhouse Flashbots), we’re thrilled to support Obol’s mission of continuing to de-risk and decentralize the core components of Layer-1 and Layer-2 blockchain infrastructure.


Learn more about Obol at Obol.Tech, follow them on Twitter @ObolNetwork and join Obol’s Discord community here.

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