Ethereum Startup Obol Labs Raises $12.5M to Decentralize Validators
When Ethereum last summer switched to proof-of-stake, its new system for processing transactions, it handed control of the network from crypto miners to validators.
In the midst of the crypto bear market, startup Obol Labs has raised $12.5 million in venture funding to build out decentralized validator technology (DVT), a kind of tech that it believes solves some of the biggest pain points for Ethereum’s new validator class.
Among those on board with Obol Labs’ vision are crypto VC stalwarts Pantera Capital and Archetype, who co-led the series A round. Led by alums of Ethereum research and development firm ConsenSys, Obol Labs has now raised a total of $19 million.
“DVT is a technology primitive that allows an Ethereum Proof-of-Stake validator to be run simultaneously on more than one node or machine,” Obol explained in a statement shared with CoinDesk. “The major breakthrough is the ability to split up a single validator key, making it possible for a group of people to share validation rights of an Ethereum validator.”
Validators, which earn rewards for operating the network of nodes that keeps Ethereum up and running, face challenges ranging from high capital requirements (you must “stake” 32 ETH to become a validator) and technical complexity (validators can pay penalties if they screw up or go offline).
Due to these barriers, power over the network has flowed into the hands of just a few big actors, including crypto exchanges like Coinbase (Coinbase Ventures participated in the Obol series A) and Binance. Also among the largest validators is the decentralized autonomous organization (DAO) Lido – a kind of validator collective that pools user funds and distributes them across a network of professional node operators.
Obol says it is already working with Lido and StakeWise, a similar service, to use DVT to more securely and efficiently distribute user funds across operators.
Coinbase, Binance and Lido have all faced scrutiny as of late due to concerns that if any of these parties gain enough control over the network, it could theoretically meddle with how it processes transactions.
In addition to providing software that can make outages and mishaps less likely for validators large and small, Obol thinks it will be able to ameliorate some of the issues with centralized control. “Today we think of validators as individuals or single entities,” Oisín Kyne, CTO at Obol Labs told CoinDesk. “We think validators should actually be run by communities," he continued. "Instead of only being able to run a validator alone, we want to enable you to run validators with a community of other stakers cooperatively.”
Obol is not the only company taking a swing at DVT. The concept – far from unique to any specific company – is included in the Ethereum roadmap shared by network co-founder Vitalik Buterin, with “distributed validators” included as a core ingredient for ensuring a successful proof-of-stake network.