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Crypto: Here are the Dangers of Ethereum's Pectra Update!

Mon 17 Jun 2024 ▪ 3 min of reading ▪ by Eddy S.
Getting informed Regulation Crypto

As Ethereum prepares for the Pectra crypto update in early 2025, a recent research report published by Liquid Collective and Obol has revealed several associated risks. The report emphasizes the importance of client, operator, and cloud diversity, as well as concerns regarding the low adoption of Distributed Validator Technology (DVT).

Crypto Ethereum

Crypto: The big risk behind Ethereum’s Pectra update!

According to the report, 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 via a single node operator can expose the staked crypto assets to downtime and slashing risks.

The report also critically discussed the need for a broad geographic distribution of validators and cloud providers! Citing “recent outages, such as those at Hetzner and AWS.” It explained that DVT can significantly support this strategy by enhancing “validator resilience by reducing correlated risks.”

The expectations of Pectra for 2025!

Ethereum’s Pectra update combines the Prague and Electra updates, focusing on changes in the crypto network’s execution and consensus layers, respectively. Pectra is scheduled to launch in the first quarter of 2025 and will 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 significant for Ethereum staking. Each 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 setups must prioritize diversity among node operators and validators.

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Eddy S. avatar
Eddy S.

The world is evolving and adaptation is the best weapon to survive in this undulating universe. Originally a crypto community manager, I am interested in anything that is directly or indirectly related to blockchain and its derivatives. To share my experience and promote a field that I am passionate about, nothing is better than writing informative and relaxed articles.

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.