Major risks are identified in the report
As Ethereum prepares for a Pectra upgrade in early 2025, a recent research report published by Liquid Collective and Obol has revealed a number of associated risks.
The report highlights the importance of customer, operator and cloud diversity, alongside concerns about the limited adoption of distributed verification technology (DVT).
Speaking to Cointelegraph, Matt Leisinger, Chief Product Officer of Alluvial, the software development company that supports Liquid Collective, said:
“Our recent report with Obol shows the growing importance of addressing Ethereum's share-related risks and protocol-level penalties.”
Cointelegraph contacted the Ethereum Foundation but did not receive a response prior to publication.
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Customer and operator risks
Regarding mutual understanding and killing clients, the report warned that a “significant error in a primary client” could lead to “significant outage penalties and network instability.”
As a fundamental part of Ethereum's consensus mechanism, staking through a single node operator allows for timed outages and reduced risks of held assets.
“Operator diversity is critical to maintaining network health and eliminating single points of failure,” the report warned.
Leisinger reinforced this statement in his report, telling Cointelegraph:
“Each stakeholder and service provider must rigorously assess connectivity, diversity and risk mitigation to prevent potential threats, even from trusted node operators.”
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Cloud diversity concerns
The report cites “recent disruptions like Hetzner and AWS” and critically discusses the need for broad geo-authenticators and the proliferation of cloud providers.
DVT explains that it can significantly support this strategy, “by reducing associated risks and increasing the resiliency of the insurer.
Leisinger added:
“For long-term resilience and institutional adoption, it is critical that staging configurations prioritize node operator and verifier diversity.”
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Pectra update
The upcoming Ethereum Pectra update combines Prag and Electra updates, which focus on changes in network performance and consensus layers.
Petra is expected to go live in the first quarter of 2025 and includes Ethereum Improvement Proposal (EIP)-7251.
According to the report, “Pectra's update increases the maximum effective balance to 2,048 ETH, allowing share providers to consolidate their stake into fewer validators.”
The change in the share limit reduces the number of validators required and eases the burden on Ethereum's communication layer.
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