Report: Ethereum’s Correlation Risks - Poorly Understood, but Always Present

Report: Ethereum’s Correlation Risks - Poorly Understood, but Always Present

Correlation represents a critical hot-topic and key consideration for ETH stakers. Yet the landscape of correlation risks remains broadly misunderstood.  

A collaboration between Obol Labs and Liquid Collective, the report “Ethereum’s Correlation Risks: Poorly Understood, but Always Present” examines, for the first time, a holistic cross-section of today’s staking correlation risks, key mitigations, and how these dynamics may shift in the future. 

📝 Read the full report here

The report provides insights to support informed decision-making for institutional and retail stakers within a diverse staking ecosystem, including an exploration of:  

  • Correlation penalties: Ethereum’s slashing penalties increase if a significant portion of the network acts harmfully. For instance, if 33.4% of the network’s stake is slashed, 100% of funds on a slashed validator can be lost, making understanding these risks crucial.
  • Client diversity risks: A bug in a popular client like Geth, used by 84% of the network, could cause major disruptions. Diverse client usage helps prevent such single points of failure.
  • Operator diversity risks: Staking with a single, large operator increases risk. Historical examples from across the PoS ecosystem underscore the importance of distributing stake.
  • Geographic and cloud risks: Regional outages and policy changes highlight the need for geographic and cloud diversity to maintain network resilience.
  • Research & upcoming proposals: Upcoming changes to Ethereum, like EIP-7251, and topical ecosystem research, such as how correlation penalties could be refined, may impact correlation risks and network dynamics.