As Ethereum prepares for the Pectra crypto update in early 2025, a recent research report published by Liquid Collective and Obol revealed several associated risks. The report highlights the importance of customer, carrier and cloud diversity, as well as concerns over low adoption of distributed validator technology (DVT).
Crypto: The big risk behind Ethereum's Pectra update!
According to the report, a “significant bug in a dominant client” could result in “substantial slashing penalties and network instability.” As a fundamental part of Ethereum's consensus mechanism, staking through a single node operator can expose staked crypto assets to risks of downtime and slashing.
The report also critically discussed the need for a wide geographic distribution of validators and cloud providers! Citing “recent outages, such as those at Hetzner and AWS.” He explained that DVT can significantly support this strategy, improving “validator resilience by reducing correlated risks.”
Pectra’s expectations for 2025!
Ethereum's Pectra update combines the Prague and Electra updates, focusing on changes in the execution and consensus layers of the crypto network, respectively. Petra is expected to launch in the first quarter of 2025 and include Ethereum Improvement Proposal (EIP)-7251. According to the report“the Pectra update will allow staking providers to consolidate their stake into fewer validators by increasing the maximum effective balance to 2,048 ETH”.
Finally, the report highlights the correlated risks and protocol-level penalties that are increasingly important for Ethereum staking. Every staker and service provider must rigorously evaluate correlation, diversity, and risk mitigation to prevent potential risks, even from trusted node operators. While long-term institutional adoption is critical, staking setup must prioritize diversity of node operators and validators.
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