Quick and Easy Guide to Understanding SSV 2.0

The Ethereum Validator's Side Hustle Guide

SSV 2.0 is a game-changer in the world of decentralized finance (DeFi). At its core, it's about enabling Ethereum's validators, the "security guards" of the network, to not only protect the main Ethereum chain, but also to extend their services to a variety of new applications, called "Based Applications" (bApps). This allows validators to earn more, all while keeping their initial stake (32 ETH) secure. This is a possible future envisioned by SSV Labs and presented to the SSV Network DAO.

Key Concepts:

• What are Based Applications (bApps)?

  • Imagine bApps as new "shops" in a digital mall. Instead of building their own security systems, they hire the mall's existing security guards (Ethereum validators) to keep everything safe.

  • Examples include:

    • Oracles: Think of oracles as the 'information verifiers' in the mall; they use validators to ensure that the prices and data in the shops are accurate.

    • Cross-Chain Bridges: Cross-Chain Bridges are like the 'traffic police' in the mall; they ensure that funds and assets can safely move between different shops (blockchains).

    • Rollups: Rollups are like the 'highways' within the mall; they use validators to ensure the safety of transactions on these high-speed routes.

• Reutilizing Validators (A New Asset Class):

  • Think of Ethereum validators as 'multi-skilled security guards'. Instead of just guarding the main entrance of the mall, they can also work 'side hustles' by securing multiple different shops (bApps), earning extra income without any added risk to their core job.

  • The validators don't need to invest more money to do their side hustles. They just show their 'security badges' (validation keys) while their main savings (32 ETH) remains safely in their own account.

  • This creates an 'infinite-sum game' where every new shop in the mall creates more opportunities for security guards. The more shops, the more side hustles for security guards, leading to more business and value for everyone.

  • By utilizing the validator as an asset class, SSV2.0 unlocks a new kind of decentralized application – the based application (bApp).

• The Bootstrapping Problem:

  • Existing methods to bootstrap off-chain services involve self-bootstrapping or restaking.

  • Self-bootstrapping is resource-intensive and complex, while restaking presents risks like yielding withdrawal credentials, cascading risks, and high costs.

  • bApps solve this by leveraging Ethereum’s validator set for enhanced security, scalability, and operational resilience.

• Slashable vs. Non-slashable Assets:

  • Slashable assets can be penalized for misbehavior, while non-slashable assets cannot.

  • bApps utilize the validation keys of Ethereum validators, leaving their staked ETH untouched, creating a larger base of non-slashable assets.

• Risk Expressive Model (REM):

  • Imagine REM as a 'risk assessment system' for security guards. Some shops might need guards to be on duty all the time with more scrutiny, while other shops might have lower risk requirement.

  • Each bApp can set its own "risk preference," meaning that new bApps might offer higher risk/reward, while established bApps might require stricter operator commitment.

  • The model allows operators to allocate risk dynamically across multiple bApps, incentivizing responsible behavior and maintaining fairness.

• Based-Applications Chain (bApps Chain):

  • Think of the bApps chain as the 'mall's operation center'. It's where everything is organized to coordinate all activities inside the mall, connecting all the different shops.

  • The bApps chain is a dedicated chain that will encompass DVT contracts and bApp operations. It is designed to address the scale, cost, and multi-chain limitations of Ethereum.

  • The bApps chain is a credibly neutral coordination layer that enables validators from various L1 blockchains to participate without being tied to any specific chain.

  • It uses light clients for efficient participation, reducing storage and processing requirements.

• New Tokenomics (Ultra-Sound SSV):

  • The SSV token is like a 'membership card and deposit' for security guards to work in the mall. They need to stake some SSV to show their commitment and may get penalized if they misbehave.

  • The fee structure is like the rent system of the mall. It consists of three kinds of fees:

    • F1 (L1 Staking): A fixed rent charged per validator, similar to a bank fee.

    • F2 (bApp Participation): Fees for every shop they work in.

    • F3 (Transaction Fees): The charges for each activity performed on the mall.

  • A portion of the collected fees will be burned, decreasing the circulating supply.

  • The new token model aims to make SSV a deflationary token.

Ethereum Aligned:

• SSV2.0 ensures the validator is always safe and prevents cascading risk to Ethereum from slashing.

• bApps protect validators from penalties, fostering a safer environment and allowing validators to increase rewards without additional risk.

Use Cases:

• bApps have a wide range of potential use cases, including DeFi services, data availability solutions, off-chain computation, cross-chain communication, economic security extensions, and validator commitments.

Roadmap:

• The SSV2.0 launch will follow a phased approach.

Conclusion:

SSV 2.0 creates a sustainable foundation for proof-of-stake applications to bootstrap their security by combining these elements and introducing a deflationary token model. The protocol's capital-efficient design and risk-aware approach make it an attractive solution for both established validators and new applications.

This version incorporates the requested examples, highlights key concepts in bold, and uses bullet points for clarity. It aims to be comprehensive and easily understandable for a wider audience.

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