The Ethereum ecosystem protocols Liquid Collective and Obol Network have jointly released a risk report related to Ethereum staking, which includes concerns about client, operator, and cloud diversity, as well as potential risks associated with the 2025 Pectra upgrade.
Client and Operator Risks
Cloud and Geographic Diversity Issues
Pectra Upgrade
Decentralized liquidity staking protocols Liquid Collective and decentralized validator technology (DVT) protocol Obol Network jointly released a report on Ethereum staking risks, which includes concerns about client, operator, and cloud diversity, as well as potential risks associated with the 2025 Pectra upgrade.
According to Cointelegraph, Matt Leisinger, Chief Product Officer of Alluvial, the software development company of Liquid Collective, stated in an interview:
The report indicates that issues with clients and operators could put Ethereum at risk, specifically naming the 84% market share clients:
Major errors in mainstream clients could lead to “severe penalties” and “network instability.”
Staking, as an important component of Ethereum’s consensus mechanism, may face downtime and penalty risks when staking assets are operated through a single large node operator.
84% of the network is using popular clients like Geth and Nethermind, and an error in one of them could result in significant disruptions.
Therefore, the report emphasizes the importance of operator diversity in maintaining network health and avoiding single points of failure.
Leisinger also explained to the media:
Clients
refer to the software running on the blockchain network. These clients are responsible for implementing the rules of the blockchain protocol, processing transactions, and participating in the consensus mechanism, such as Geth and Nethermind.
Operators
refer to the individuals or organizations responsible for running this client software. They ensure that node software runs in appropriate hardware and network environments, and are responsible for maintaining the normal operation of nodes, including software updates, troubleshooting, and resource management.
The report also analyzes the geographical distribution of validators and cloud providers, noting that overly centralized distribution can lead to related interruption risks. Additionally, the report cites recent service interruptions at Hetzner and AWS as examples.
Furthermore, the report suggests that decentralized validator technology (DVT) can effectively improve cloud and geographic diversity. It can be used for multi-operator staking configurations and as a failover technology for a single operator. Geographic diversity also helps to avoid interruption issues caused by natural disasters or wars.
On the other hand, the Ethereum “Pectra upgrade” scheduled for the end of the first quarter of 2025 will introduce EIP-7251 (maxeb, increasing the maximum effective balance for validators from 32 to 2,048 ETH, incentivizing staking operators to merge validators into a super validator).
However, the report warns that increasing the maximum effective stake for a single validator to 2,048 ETH will reduce the total number of validators on Ethereum, thus reducing the number of P2P messages and BLS signatures that need to be aggregated in each epoch. This means that reducing validators could increase the risk of single points of failure and affect the network’s decentralization:
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