> In case of AZ with participant goes down, can I dynamically, promote 
> observers to participants? What are the pitfalls of this approach?

No, this won't work. There's no way to tell if an AZ is down or just
unreachable. So if you have 3 in a unreachable AZ, and you "promote" 3
observers in the second AZ to participants, both can in theory make
writes to the log and you'll end up with a split brain scenario.

-Ivan

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