Ethereum's dominance is under threat. Solana and BNB Smart Chain are closing the gap in terms of DEX volumes and fees generated. Contributing factors include slow and expensive transactions, fragmented developer mindshare and liquidity, and reduced value accrual to the L1 due to the rise of L2s.
Pectra and Fusaka upgrades aimed at scaling L2s. The upcoming Pectra and Fusaka upgrades are scheduled to go live on mainnet in May 2025 and late 2025 respectively. Notably, no code changes are aimed at strengthening ETH as “ultrasound money”, nor improving Ethereum as a more censorship-resistant blockchain.
Pectra will center around staking, blobs and account abstraction improvements.
Staking: EIP-7251 will raise maximum effective balance for staking from 32 ETH to 2,048 ETH to address increasing network strain from a large validator size of over 1 million today
Blobs: EIP-7691 will increase target and maximum blob capacity from 3 to 6 and 6 to 9 respectively to enable more data to be posted to the L1 while retaining low costs
Account Abstraction: EIP-7702 will transform Externally Owned Accounts (EOAs) into a smart contract wallet that can benefit from features such as bundled transactions, gas sponsorship, social recovery etc.
Fusaka will center around scaling Ethereum as a data availability layer and potentially upgrading the Ethereum Virtual Machine.
Road to Full Danksharding: PeerDAS, to be introduced in EIP-7594, will be a stepping stone towards full data availability sampling
Upgrading the EVM: the Ethereum Object Format will result in a more structured approach to contract creation while reducing runtime overheads, which should improve developer experience and user safety
Commitment to L2 scaling is a double-edged sword. There are concerns regarding Ethereum’s competitiveness as a data availability layer in this vision, and the sustainability of value accrual to Ethereum the asset.
Competition is strong on the data availability front. Ethereum with full danksharding remains behind the likes of Celestia, EigenDA and NearDA in terms of raw data throughput and cost efficiency. However, Ethereum remains the most secure blockchain which might be the key consideration for data availability.
Path to sustained ETH value accrual remains a topic of active exploration. Suggestions such as repricing the blob market might push L2s to cheaper alternatives, while expecting L2s to support ETH with some percentage of fees is too subjective. Based roll ups support value accrual the most, but is not a priority on the roadmap at the moment.
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