Pectra Upgrade: A Reshaping Opportunity for the Ethereum Ecosystem?

The Ethereum network welcomed the Pectra major upgrade on March 5, which integrates improvements on two levels: Prague and Electra, aimed at comprehensively optimizing Ethereum's execution layer and consensus layer. The goal of the Pectra upgrade is to enhance the ETH staking experience, boost L2 scalability, and expand network capacity. This upgrade introduces 11 Ethereum Improvement Proposals, scheduled for official deployment to the mainnet on April 8, 2024.

The Pectra upgrade will be implemented in two phases:

First stage ( mid-March 2025 ):

• Increase the Blob capacity of each block from 3 to 6 to reduce network congestion and lower fees.
• Introduce account abstraction, allowing the use of stablecoins to pay for Gas fees
• Raise the validator staking limit from 32 Ether to 2,048 Ether

The second phase ( by the end of 2025 or early 2026 ):

• Implement Verkle trees to improve storage and synchronization with a more efficient data structure.
• Introduce peer data availability sampling (PeerDAS) to improve scalability.

The Pectra upgrade includes 11 important Ethereum Improvement Proposals (EIP):

1. EIP-7702: Allows external accounts to execute certain smart contract functions, enhancing wallet flexibility.

2. EIP-7251: Increase the maximum staking balance for validators to 2048 Ether, simplifying management but potentially increasing centralization risks.

3. EIP-7002: Simplifying the withdrawal process and reducing trust assumptions between the consensus layer and execution layer.

4. EIP-6110: Reduces the validator activation delay time from 9 hours to 13 minutes, improving participation efficiency.

5. EIP-7691: Increase block data capacity by 50% and enhance transaction processing capability.

6. EIP-7516: Improve MEV transparency to help users and developers better understand blockchain activities.

7. EIP-7549: Optimize the Gas fee structure to make transaction costs more reasonable.

8. EIP-7685: Optimizing the network governance mechanism to enhance transparency and efficiency.

9. EIP-7021: Improve the validator penalty mechanism to balance network security and validator incentives.

10. EIP-7683: Optimize smart contract execution efficiency and reduce Gas consumption.

11. EIP-6123: Enhance cross-chain compatibility to promote interoperability between blockchains.

Pectra adopts a dual-layer upgrade method with the execution layer (Prague) and the consensus layer (Electra), addressing the synchronization issues that may arise from separate upgrades in the past. This approach helps to more comprehensively optimize network performance and functionality.

The Pectra upgrade may have a profound impact on the Ethereum ecosystem and the cryptocurrency market:

1. DApp development will become simpler, and user experience is expected to improve.

2. The long-term value of Ethereum may be reassessed, but it still faces the challenge of the L2 "parasitic" effect.

3. Significantly raising the staking threshold may deepen centralization, making Ethereum more inclined towards institutional investors.

4. Ethereum faces a new "impossible triangle": narrative capability, centralized pumping, and decentralized PoS staking.

5. Ethereum needs to clarify its "North Star" positioning and may shift towards ETF staking as a new direction in the short term.

Overall, the upgrade of Pectra to Ethereum has brought many positive changes, but it has also sparked discussions about network decentralization and future development directions. Whether Ethereum can reshape the ecological landscape through this upgrade still requires further market validation.