Pectra Hard Fork: A Reshaping Opportunity for the Ethereum Ecosystem?

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 Ethereum Improvement Proposals. The upgrade process was implemented on the Holesky testnet on February 24, with plans to deploy to the mainnet on April 8, provided that the testnet successfully completes the upgrade.

Pectra follows the Dencun upgrade implemented in March 2024, which is expected to integrate several important Ethereum Improvement Proposals to address challenges such as 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 limit has been raised from 32 Ether to 2,048 Ether, allowing for large-scale staking operations.

Phase 2: End of 2025 or early 2026

• Verkle tree implementation: replacing Merkle-Patricia with a more efficient data structure to improve data storage and synchronization.
• Proof-of-Availability Sampling: Improves scalability by allowing nodes to verify transaction data without storing all the data.

2. The 11 Improvement Proposals for the Pectra Upgrade

The Pectra upgrade includes 11 EIPs aimed at improving the network's scalability, security, account abstraction, and validator staking mechanisms. Here are some key proposals and their potential impacts:

1. EIP-7702: Account Abstraction Allow external accounts to execute certain smart contract functions, making account operations more flexible. This will enhance wallet functionality and support more operation modes.

2. EIP-7251: Validator Staking Increase The maximum staking balance for validators has been raised from 32 Ether to 2048 Ether. This simplifies validator management, but may increase the level of centralization.

3. EIP-7002: Withdrawal Improvement Allow execution layer addresses to trigger withdrawal operations, simplifying the withdrawal process and enhancing network flexibility.

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, improving participation efficiency.

5. EIP-7691: Data Block Expansion Increase the block size by 50% to enhance overall scalability and transaction throughput.

6. EIP-7516: Improve MEV Transparency Provide more information related to MEV to help users and developers better understand and monitor MEV activities.

7. EIP-7549: Gas Fee Adjustment Optimize the network fee mechanism to alleviate the network burden during peak hours, making transaction fees more reasonable.

8. EIP-7685: Governance Mechanism Optimization Enhance the decentralized governance mechanism to improve the transparency and efficiency of the governance process.

9. EIP-7021: Optimized Validator Penalty Mechanism Adjust the validator penalty mechanism to ensure that validator behavior aligns with the interests of the network.

10. EIP-7683: Smart Contract Performance Optimization Increase the execution efficiency of smart contracts, reduce Gas consumption, which may benefit DeFi applications.

11. EIP-6123: Cross-Chain Compatibility Improvement Enhance the cross-chain compatibility of Ethereum with other blockchains to promote interoperability.

3. Pectra Dual Layer Upgrade

Pectra adopts a merging upgrade approach with the execution layer (Prague) and the consensus layer (Electra) to resolve synchronization issues that may arise from separate upgrades.

• Execution Layer (Prague): Handles user transactions, executes smart contracts, and manages state changes.
• Consensus Layer (Electra): Manages validators through PoS mechanism to ensure block generation and chain security.

Some EIPs require changes to the consensus layer or execution layer, such as EIP-6110, EIP-7002, etc.

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

DApps

The Pectra upgrade will streamline the development process and expand the scope of applications. Users can expect a more reliable and efficient DApp experience. However, Ethereum faces the "parasitic" effect of L2, which may affect mainnet transaction fees and the ETH inflation rate.

the long-term value of Ethereum

The Pectra upgrade to Ethereum brings numerous improvements, including more flexible wallet operations, increased staking limits, and faster network joining speeds. However, Ethereum still faces the choice problem of fragmented scaling and high throughput on a single network.

compromise on decentralization

EIP-7251's increase in staking limits may deepen Ethereum's centralization, transforming it into a stronghold for large investors and institutions. This could impact Ethereum's decentralized attributes and pose new challenges.

New Narrative's North Star

Ethereum seems to be looking for new development directions. Compared to Bitcoin's "digital gold" and Solana's "on-chain Nasdaq", Ethereum's positioning is still unclear. In the future, it may attract institutional participation through methods such as ETF staking, developing a version of RWA that is more in line with Ethereum.