Ethereum Pectra Upgrade: From "King of Altcoins" to "Institutional Paradise"?

1. Background of the Pectra Hard Fork

The Ethereum Pectra upgrade went live on March 5, combining the Prague and Electra updates, optimizing the execution layer and consensus layer. This upgrade aims to enhance the ETH staking experience, improve L2 scalability, and expand network capacity, introducing 11 improvement proposals. The upgrade is scheduled to be deployed to the mainnet on April 8, 2024, provided that the testnet successfully completes the upgrade.

Pectra follows the Dencun upgrade implemented in March 2024, which is expected to integrate several important improvement proposals to address challenges in scalability, security, and user experience. The upgrade will be implemented in two phases:

Phase 1: Mid-March 2025

• 2-layer Blob capacity doubled: The Blob capacity in each block increased from 3 to 6, reducing congestion and lowering fees.
• Account abstraction: allows the use of stablecoins to pay for Gas fees, providing more payment flexibility.
• Increase validator staking limit: The staking cap is raised from 32 ETH to 2,048 ETH, allowing for large-scale staking operations.

Phase 2: End of 2025 or early 2026

• Verkle tree implementation: Replace Merkle-Patricia with a more efficient data structure to improve data storage and synchronization.
• Peer Data Availability Sampling (: allows nodes to verify transaction data without storing all the data, improving scalability.

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2. Specific Content of the 11 Improvement Proposals for the Pectra Upgrade

The following are the key proposals included in the 11 EIP) Ethereum Improvement Proposals( of the Pectra upgrade and their impact on the development of Ethereum:

) 1. EIP-7702: Account Abstraction

This proposal allows externally owned accounts to execute partial smart contract functions, making account operations more flexible, such as batch transactions and sponsoring Gas fees. This will greatly enhance wallet functionality and support more operational modes. Account abstraction wallets will become more powerful, capable of not only performing regular transfer operations but also executing some advanced functions.

2. EIP-7251: Validator staking increase

The maximum staking balance for validators has been increased from 32 Ether to 2048 Ether. This simplifies validator management, allows for larger validator nodes, and reduces management complexity. However, the significant increase in staking amounts may exacerbate the centralization of Ethereum, increase the risk of node misbehavior, and raise the difficulty of market profitability.

3. EIP-7002: Withdrawal Improvement

Allow execution layer addresses to trigger withdrawal operations, reducing trust assumptions between the consensus layer and the execution layer, simplifying the withdrawal process and improving network flexibility. This makes the withdrawal operation simpler and more direct, allowing validators to more easily withdraw funds from staking.

4. EIP-6110: Validator Activation Delay Optimization

The activation delay time for validator deposits has been reduced from about 9 hours to about 13 minutes, greatly improving the participation efficiency and flexibility of validators. This significantly accelerates the speed at which new validators join the network and enhances the utilization of Ethereum resources.

5. EIP-7691: Data Block Expansion

Increase the block capacity by 50%, enhance the network's ability to process transactions, and improve overall scalability and transaction throughput. This means the network can handle more transactions, especially during peak times, reducing congestion and increasing transaction speed.

6. EIP-7516: Improve MEV Transparency

Provide more information and transparency about the maximum extractable value ### MEV ( to help users and developers better understand and monitor MEV activities in the blockchain. This increases the transparency of MEV, which may increase the difficulty of arbitrage, but helps to ensure the fairness of transactions.

) 7. EIP-7549:Gas fee adjustment

Adjust the Gas fee structure to further optimize the network's fee mechanism, alleviate the network burden during peak periods, and make transaction fees more reasonable. This means that even during busy network times, transaction fees will be more stable.

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3. Pectra Dual Layer Upgrade

Pectra adopts a merged dual-layer upgrade method with the execution layer )Prague( and the consensus layer )Electra(, solving the synchronization problems that may arise from separate upgrades in the past. The execution layer is responsible for processing user transactions, executing smart contracts, and managing state changes, while the consensus layer manages validators through the PoS mechanism, ensuring block generation and the security of the chain.

Some EIPs require changes to the Ethereum consensus layer and execution layer, reflecting the comprehensiveness and complexity of this upgrade.

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4. The Impact of Pectra on Ethereum and the Cryptocurrency Market

) DApps

The Pectra hard fork introduces smart contract functionality into regular wallets, simplifying the development process and expanding the range of applications. Users can look forward to a more reliable and efficient DApp experience on the Ethereum network. However, Ethereum faces the challenge of the "parasitic" effect of L2 chains, which attract a large amount of DeFi activity, leading to reduced transaction fees on the mainnet and an increase in ETH inflation rate.

the long-term value of Ethereum

The upgrade of Pectra to Ethereum has brought many changes, enhancing the flexibility of wallet operations, validator staking limits, withdrawal, and joining network speeds. However, Ethereum still faces the challenge of fragmented scalability. Whether it should follow a single network high-throughput route rather than relying on the aggregation of multiple chains remains a challenge for future development.

compromise on decentralization

Although EIP-7251 enhances the security and scalability of Ethereum, it may also deepen centralization, turning Ethereum into a playground for large investors and institutions. Whether this shift can attract significant capital investment and boost ETH prices remains to be seen.

New Narrative Polaris

Ethereum seems to be looking for new directions for development. Compared to Bitcoin's "digital gold" and Solana's "on-chain Nasdaq", the future narrative of Ethereum remains unclear. In the short term, Ethereum may focus on ETF staking as a new development priority, trying to attract institutional participants to introduce real assets and develop a tokenization of physical assets that aligns more with Ethereum's characteristics ###RWA(.

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