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

The Pectra upgrade went live on the Ethereum network 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 second-layer scalability, and expand network capacity, introducing 11 Ethereum Improvement Proposals. The upgrade was planned for implementation on the Holesky testnet on February 24, and finally deployed to the mainnet on April 8.

Pectra is another important update following the Dencun upgrade in March 2024, which will be implemented in two phases:

Phase 1 (Mid-March 2025):

• The capacity of the 2-layer Blob has doubled, increasing from 3 blocks to 6 blocks.
• Achieve account abstraction, supporting Gas fees payment with stablecoins.
• The validator staking limit has been increased from 32 Ether to 2,048 Ether.

Phase Two (end of 2025 or early 2026):

• Implement Verkle tree to improve data storage and synchronization efficiency
• Introduce Peer Data Availability Sampling (PeerDAS) to enhance scalability.

Core Improvement Proposal for Pectra Upgrade

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

2. Validator staking increase (EIP-7251): The maximum staking balance has been raised from 32 Ether to 2048 Ether, simplifying management but potentially exacerbating centralization.

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

4. Validator Activation Optimization (EIP-6110): Activation delay reduced from 9 hours to 13 minutes, improving participation efficiency.

5. Block Expansion (EIP-7691): Increases block capacity by 50%, enhancing transaction processing capability.

6. MEV Transparency Improvement (EIP-7516): Provide more MEV-related information to increase transaction fairness.

7. Gas Fee Adjustment (EIP-7549): Optimize the fee mechanism to stabilize transaction costs during peak times.

8. Governance Mechanism Optimization (EIP-7685): Enhance decentralized governance, improve decision-making transparency and efficiency.

9. Validator Penalty Mechanism Optimization (EIP-7021): Adjust the penalty mechanism to balance network security and validator incentives.

10. Smart Contract Performance Optimization (EIP-7683): Improve contract execution efficiency and reduce Gas consumption.

11. Cross-chain compatibility improvements (EIP-6123): Enhancing interoperability with other blockchains.

Impact of Pectra's Dual-Layer Upgrade

Pectra adopts a merged upgrade of the execution layer (Prague) and the consensus layer (Electra) to address synchronization issues. This upgrade has a profound impact on DApp development, the long-term value of Ethereum, and the degree of decentralization.

• DApps development is more convenient, but it faces the challenge of the L2 "parasitic" effect.
• Improve staking and L2 scalability, but the fragmentation issue remains to be solved.
• Raising the staking threshold significantly may exacerbate centralization, becoming a stronghold for institutional investors.

Ethereum's New Challenges

1. Narrative ability: Lack of a clear "North Star" positioning.
2. Centralization and Decentralization Balance: Increased Staking Threshold Sparks Controversy
3. ETF development is hindered: lack of staking yields and clear value attribution.

In the future, Ethereum may focus on ETF staking as a short-term development priority, attempting to enhance its strategic position by attracting institutional funds. However, how to meet the demands of large investors while maintaining the decentralized characteristics of the network will be a key challenge for Ethereum.