As Ethereum gears up for the Pectra upgrade slated for early 2025, a comprehensive research report from Liquid Collective and Obol has surfaced, shedding light on multiple associated risks.

The report underscores the significance of client, operator, and cloud diversity while expressing concerns about the limited adoption of distributed validator technology (DVT).

In a conversation with Cointelegraph, Matt Leisinger, Chief Product Officer of Alluvial, a software development company backing Liquid Collective, elaborated on these risks:

Client and Operator Risks

The report cautions that a severe bug in a predominant client could precipitate substantial slashing penalties and network instability. It stresses that staking through a solitary node operator could expose staked assets to risks of downtime and slashing. The diversity of operators is vital for maintaining network health and preventing single points of failure.

Leisinger emphasized the necessity of this diversity, stating, “Every staker and service provider must rigorously assess correlation, diversity, and risk mitigation to prevent potential risks, even from trusted node operators.”

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Cloud Diversity Concerns

The report also scrutinizes the importance of a geographically diverse spread of validators and cloud providers, citing recent outages at Hetzner and AWS as cautionary examples. It posits that DVT can bolster validator resilience by mitigating correlated risks.

The Pectra Upgrade

The forthcoming Pectra upgrade amalgamates the Prague and Electra upgrades, focusing on enhancements to the network’s execution and consensus layers. Scheduled for the first quarter of 2025, Pectra will include the Ethereum Improvement Proposal (EIP)-7251.

According to the report, the Pectra upgrade will enable staking providers to consolidate their stakes into fewer validators by increasing the maximum effective balance to 2,048 ETH. This change aims to reduce the number of required validators and alleviate pressure on Ethereum’s communication layer.