Key risks identified in Report

Key risks identified in Report


As Ethereum prepares for the Pectra upgrade in early 2025, a recent research report published by Liquid Collective and Obol has revealed multiple associated risks.

The report highlights the importance of client, operator and cloud diversity alongside concerns regarding the limited adoption of distributed validator technology (DVT).

Speaking with Cointelegraph, Alluvial chief product officer Matt Leisinger, a software development company supporting Liquid Collective, said: 

“Our latest report with Obol highlights the growing importance of addressing Ethereum staking’s correlated risks and protocol-level penalties.”

Obol and Liquid Collective Ethereum’s Correlation Risks research report.

Cointelegraph contacted the Ethereum Foundation but didn’t receive a response before publication.

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Client and operator risks

Regarding consensus and execution clients, the report warned that “a significant bug in a dominant client” could lead to “substantial slashing penalties and network instability.”

As a fundamental element of Ethereum’s consensus mechanism, staking through a single node operator can expose staked assets to downtime and slashing risks.

Correlated Slashing Scenarios indicating repercussions of slashing scenarios.

On staking, the report warned that “operator diversity is crucial for maintaining network health and avoiding single points of failure.”

Leisinger reinforced this statement in the report, telling Cointelegraph:

“Every staker and service provider must rigorously assess correlation, diversity, and risk mitigation to prevent potential risks, even from trusted node operators.”

Related: Spot Ethereum ETFs may begin trading by July 2 — Bloomberg analyst

Cloud diversity concerns

The report also critically discussed the need for a wide geographical spread of validators and cloud providers, citing “recent outages, such as those at Hetzner and AWS.”

It explained that DVT can significantly support this strategy, enhancing “validator resilience by reducing correlated risks.” 

The geographical map of Ethereum validators supporting the Proof-of-Stake consensus mechanism.

Leisinger added:

“For long-term resilience and institutional adoption, it’s critical that staking configurations prioritize node operator and validator diversity.”

Related: Traders: Ethereum is the ‘most bullish altcoin’ as ETH reclaims $3.5K

The Pectra upgrade

The upcoming Ethereum Pectra upgrade combines the Prague and Electra upgrades, focusing on changes to network execution and consensus layers, respectively.

Petra is expected to go live in the first quarter of 2025 and include the Ethereum Improvement Proposal (EIP)-7251. 

According to the report, “the Pectra upgrade will allow staking providers to consolidate their stake into fewer validators by raising the maximum effective balance to 2,048 ETH.”

The change in the staking limit will reduce the number of validators required and ease pressure on Ethereum’s communication layer.

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