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

The Ethereum Pectra upgrade went live on March 5, integrating 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 Ethereum Improvement Proposals. The upgrade is scheduled to be deployed to the mainnet on April 8, 2024, contingent upon the successful completion of the upgrade on the testnet.

The Pectra upgrade will be implemented in two phases:

Phase One ( Mid-March 2025 ):

• The Blob capacity on layer 2 has doubled, increasing the number of blocks from 3 to 6.
• Supports account abstraction, allowing the use of stablecoins to pay Gas fees
• The validator staking limit has been raised from 32 Ether to 2,048 Ether.

Phase Two ( by the end of 2025 or early 2026 ):

• Implement Verkle trees to replace Merkle-Patricia for improved efficiency
• Introduce peer data availability sampling (PeerDAS)

Major Improvement Proposals for Pectra Upgrade

1. Account abstraction: allows external accounts to execute part of the smart contract functions, enhancing wallet flexibility.

2. Validator staking increase: Maximum staking balance raised to 2048 ETH, simplifying management

3. Withdrawal Improvement: Simplify the withdrawal process and reduce intermediaries.

4. Validator activation time optimization: reduced from 9 hours to 13 minutes

5. Block size expansion of 50%: Increase transaction processing capacity

6. Improve MEV transparency: Strengthen monitoring of MEV activities

7. Gas fee structure adjustment: optimize the fee mechanism, stabilize fees during peak periods.

8. Governance mechanism optimization: enhance transparency and efficiency

9. Improvement of Validator Penalty Mechanism: Constraining Validator Behavior

10. Smart Contract Performance Optimization: Improve Execution Efficiency and Reduce Gas Consumption

11. Enhanced cross-chain compatibility: supports more cross-chain operations.

The Impact of Pectra on Ethereum

The upgrade of Pectra to Ethereum brings numerous improvements, including more flexible wallet operations, higher staking limits, faster validator onboarding speeds, and larger block capacity. These changes are expected to enhance user experience and improve network performance.

However, significantly raising the staking threshold has also raised concerns about increased centralization. While it may attract institutional investors, it could also raise the participation threshold for retail investors. Ethereum faces the challenge of seeking a balance between narrative capability, centralized pump, and decentralized PoS staking.

In addition, Ethereum still needs to address the challenges brought by the L2 "parasitic" effect. Although L2 has solved some scalability issues, it has also led to a decrease in mainnet transaction fees, an increase in inflation rate, and raised doubts about the value of the mainnet.

In the future, Ethereum may need to clarify its development direction, making a choice between a single high-throughput network and multi-chain aggregation. Meanwhile, how to maintain its leading position in the DeFi space and how to attract more capital and users through innovation will be key issues faced by Ethereum.