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> "You should never be logging on to a server as root."

Can someone explain me, let's say I disabled password logins and only allow login via a key, what are potential downsides of logging in as a root?

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Well for one, every command you run has root privileges (instead of requiring sudo). Every process you spawn has root privileges. You're safer keeping your privileges limited and sudoing when required. Also you lose your real-life audit log if multiple people log in as root.

Also good reading is: https://en.wikipedia.org/wiki/Principle_of_least_privilege

But when I tried using a regular user to run anything on a server - it still requires me to do sudo, so the process will anyway have root privileges, no? So I end up typing sudo most of the times becauase most of processes do not work without root priveleges

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