In this insightful interview, we sit down with Alex Lipton from SSV Labs, one of the driving forces behind Ethereum's staking future. As Ethereum prepares for the Pectra upgrade, the network faces critical challenges—most notably the risk of stake centralization. With the introduction of Distributed Validator Technology (DVT), SSV Network is addressing these challenges head-on, ensuring that Ethereum’s core values of decentralization, security, and trustlessness are maintained.

Our guest shares insights into their journey from traditional finance into the world of blockchain explains how DVT is reshaping Ethereum staking, and offers a long-term vision for staking in a post-Pectra era. We also dive into the risks posed by large validators, the role of node operators, and SSV Network’s bold mission to decentralize the majority of Ethereum’s staked ETH by the end of next year.

Can you share more about your background and how your past experience has shaped you?

Prior to my crypto career, I worked in Tradfi for 4 years at the largest Asian Capital markets trade association in Hong Kong whose mandate was to represent member global banks and buy-side groups for their regulatory advocacy in the region. My time there coincided with the 2018 bull market which meant that “DLT” was getting a lot of attention from these institutions. I spent some time alongside them to better understand their use cases and opportunities in the space, whether that is opening a custodian/exchange, tokenization of securities, CBDCs, etc. In parallel, I downloaded Metamask and poked around some early defi protocols and immediately saw the future potential of the core technology to transform how we interact with financial services. 

I was then fortunate enough to join Consensys which is often described as like working at a blockchain university. I was able to work hands-on with some very smart people on leading web3 products such as Quorum, Metamask, Infura, Diligence (auditing), and Linea. 

Throughout my journey I have always been drawn to staking as a product class in crypto as to me it is the most explainable source of native yield in Defi and therefore I think it has the potential to enable a brand new class of fixed income products helping investors with saving goals, whilst securing foundational networks such as Ethereum. My curiosity led me to SSV Network to work on DVT, developing the necessary foundation and plumbing to fulfill this ambition.

What is your long-term vision for Ethereum staking space?

I believe the advent of Ethereum staking genuinely marks a major revolution in financial product development. Long term as Ethereum fulfills its ambition as a credibly neutral protocol handling a large scale of global value transfer, staking products will become pivotal to securing the health of the base protocol where everyone is interacting. There will be a long tail of re/staking applications offering different risk, rewards, and ease of use, just in the same way as you have with other asset classes outside of crypto.

For those new to Ethereum staking, can you explain how Distributed Validator Technology (DVT) works in simple terms?

Distributed Validator Technology, or DVT, is designed to make Ethereum staking more secure and reliable by spreading the responsibilities of running a validator across multiple nodes (computers) instead of just one.

Staking essentially refers to the act of securing a proof of stake network such as Ethereum, in return for some yield for providing the service. Traditionally,  a validator is responsible for validating transactions and securing the network, but if that validator goes offline or behaves incorrectly, there’s a risk of penalties or downtime. This ensures that all validators behave honestly. With DVT, the duties of a single validator are shared among several operators. If one operator has an issue, the others can keep working, ensuring the validator stays online and operates properly. This increases the reliability of staking while reducing the risks of slashing or missed rewards.

In short, DVT creates a safer and more decentralized way to run validators, making Ethereum staking more accessible and resilient for everyone, whilst sticking to the core ethos of decentralisation.

The upcoming Pectra upgrade will bring significant improvements in efficiency and scalability to Ethereum, but it also inadvertently favors large validators. What are the primary risks associated with stake centralization following the Pectra upgrade, specifically EIP-7251?

The Pectra upgrade, particularly EIP-7251, introduces the biggest changes to Ethereum staking since the Shapella upgrade in 2023. One key change is the increase in the "MAX_EFFECTIVE_BALANCE" of a validator to 2048 ETH. This is intended to reduce network overhead and improve efficiency, allowing those running validators to consolidate stake into fewer validators. While this helps with economies of scale and infrastructure cost reduction, it disproportionately benefits large staking services.

The risk here is that large staking providers running the most efficient business or protocol could consolidate more stake, further centralizing the network. Validator consolidation also makes penalties, such as missed rewards or slashing, more severe due to the larger stake involved. Consequently, large, highly performant providers may absorb even more of the market, pushing smaller operators out and creating a systemic centralization issue.

Stake centralisation really matters because it differentiates our technology from everyone else. If it becomes too widespread, we run into the risk of losing a fully neutral, credible protocol underpinned by trustlessness and censorship resistance. The Ethereum core ethos is very important to maintain.

At a high level, what roles do node operators play when it comes to validator consolidation and how can they help keep the network decentralized?

Node operators big and small play a very important role maintaining a decentralised ethereum staking landscape. It's not just about staking entities, as there are other vectors of centralisation node operators need to consider including geolocation, client diversity, hosting type ect. As a staking participant, it is always imperative to contribute to the overall security of the network by choosing to run your validator on a setup that doesn’t inadvertently further contribute to centralisation. 

Distributed Validator Technology (DVT) provides a powerful solution which can provide the right balance of incentives to overcome this type of collective action problem. DVT at its core allows for the distribution of validator key shares across multiple, independent node operators. By leveraging QBFT consensus and threshold signatures, DVT ensures that even if one operator's setup fails—due to an issue with, say, a cloud provider or there is a bug in a particular client, the validator can continue functioning just so long as the other operators are using a different set up. DVT natively encourages decentralization by promoting redundancy and fault tolerance, eliminating single points of failure, and making the network more robust.

How does SSV Network plan to leverage DVT as a scalable solution for not only preventing stake centralization but also increasing Ethereum's overall network resilience in the post-Pectra era?

Ethereum thrives on a decentralized validator set and a wide variety of staking options for users. This diversity drives competition and innovation, offering stakers more choice in how and where they stake their ETH. SSV Network plays a key role in supporting this diversity by providing robust developer tools that empower web3 developers to build innovative staking products—whether LSTs, LRTs, in wallet staking, CEX pooled staking, even through ETFs offered by institutions. 

SSV Network is primarily a developer platform that simplifies the process of building staking applications with the latest technologies, fully composable with smart contracts and APIs developed by the SSV community. Post-Pectra, SSV will offer the best infrastructure to ensure validators remain highly resilient and decentralized, especially as stake consolidation increases on individual validators. This is crucial for ensuring that your favorite staking application or partner is contributing to Ethereum’s security and scalability in the long term.

What are some of the key milestones SSV Network has set to ensure a successful transition to a decentralized and resilient staking ecosystem after the Pectra upgrade?

DVT is no longer a "nice-to-have" feature—it’s an absolute necessity to secure staked ETH while optimizing rewards. To realize the vision of a truly decentralized Ethereum staking ecosystem, the SSV DAO has set a bold mission: by the end of next year, ⅔ of all staked ETH to be secured by DVT.

Achieving this goal requires significant technical advancements and community participation. The SSV Labs team has been hard at work ensuring that SSV Network can handle the growing demand to transition from legacy staking setups to DVT. A major milestone on this journey is the Alan fork upgrade, which dramatically reduces resource usage—CPU time by 54% and bandwidth consumption by 80–90%. This upgrade will make it even easier for validators to adopt DVT at scale.

Additionally, SSV has also been running an incentivised mainnet program to spur the further adoption of DVT and add a sense of urgency for the community to transition to a decentralized and resilient staking ecosystem. Validators running on SSV Network can benefit from boosted APY not only from the core technology but also from this campaign. This combination of technical upgrades and community incentives positions SSV Network to play a crucial role in Ethereum’s future.