You guessed right. Context switching is expensive, and the default stack size default is in the megabyte range. So if you want to have 10K connections open, it takes about 10GB memory. You can of course shrink the stack size, but you have to measure your programs stack usage before doing that and it is quite cumbersome.

With an event driven architecture you only have to hold the session information per connection in memory which can be as low as 4K, therefore you are able to maintain (depending on the complexity of the protocoll) n*100K connections.

The only drawback that you have to write and think your whole program event driven; you write callbacks for each io and timer operation and the control flow won't be clear if you read the program.