I summarized what you should know about Ethereum's #Pectra (Prague) upgrade in the first quarter of this year, and what opportunities are lurking?
1⃣ What is an Ethereum upgrade?
Ethereum upgrades are technical upgrades to the Ethereum network itself, aimed at enhancing Ethereum's decentralization, security, and scalability, making Ethereum more practical.
EIP stands for Ethereum Improvement Proposal, which refers to community proposals for improving Ethereum that help it evolve.
2⃣ What did historical upgrades mainly do?
Berlin Upgrade — The Berlin Upgrade optimized the gas costs of certain Ethereum Virtual Machine operations and increased support for various types of transactions.
London Upgrade — The London Upgrade introduced EIP-1559 (opens in a new tab), which reformed the transaction fee market and modified the refund handling for gas fees and the Ice Age schedule.
Paris Upgrade — Ethereum transitioned from POW (Proof of Work) to POS (Proof of Stake), enhancing network security while being more environmentally friendly. This is currently the most significant upgrade for Ethereum.
Shanghai Upgrade — The Shanghai Upgrade introduces staking withdrawals to the execution layer. The Shanghai Upgrade occurs simultaneously with the Capella Upgrade, allowing blocks to accept withdrawal operations, enabling stakers to withdraw Ether from the Beacon Chain to the execution layer.
Cancun Upgrade — Replaces Calldata with Blob data types, significantly reducing transaction costs for Ethereum Layer 2.
3⃣ What is the Pectra (Prague) upgrade?
The Prague and Electra upgrades were initially launched separately but later merged into one upgrade—Pectra—to improve efficiency and synergy.
The Pectra upgrade includes updates to both the execution layer (where smart contracts and dapps run) and the consensus layer (where the Proof of Stake mechanism resides) of the Ethereum network.
Expected to be implemented in the first quarter of 2025, with some EIPs potentially being canceled for various reasons during the upgrade implementation process.
4⃣ What are the corresponding EIPs?
Pectra Upgrade introduces 20 Ethereum Improvement Proposals (EIPs), including 9 standard EIPs that address specific features or functionalities, and 1 Meta EIP that bundles 11 additional EIPs together for easier implementation.
Let's take a closer look at some key EIPs:
EIP-2935 – Enhances the process of verifying Ethereum historical data by storing the hash values of recent blocks. This is a step towards stateless execution, where nodes do not need to store the entire history of the blockchain, further improving network efficiency.
EIP-7002 – Allows validators to manage their staked ETH more flexibly. With EIP-7002, they can initiate withdrawals or partial withdrawals directly through their execution layer credentials, opening possibilities for new staking strategies and improving liquidity.
EIP-7251 – Increases the maximum balance of validators from 32 ETH to 2048 ETH. This helps large node operators consolidate their stakes and reduce the total number of validators required. This simplification can improve network efficiency and reduce the computational burden on individual nodes.
EIP-7594 – Introduced the PeerDAS mechanism to optimize layer 2 (L2) solutions. By sampling data availability across nodes, PeerDAS can simplify transaction processing and enhance the scalability of L2 networks, ultimately benefiting users with faster and cheaper transactions.
EIP-7692 – This Meta EIP is a bundle of 11 proposals focused on improving the Ethereum Virtual Machine (EVM) object format (EOF), a structure used to represent Ethereum smart contracts. By optimizing this format, EIP-7692 aims to make contract deployment and execution faster and more efficient, benefiting both developers and users.
5⃣ What benefits do upgrades bring to Ethereum?
In terms of user experience: Emphasizing account abstraction, simplifying the use process of Ethereum to make it more intuitive and accessible. Introduction of seamless gas payments, batch transactions, and customizable security options reduces interaction friction and improves dApp usability. (Better to use)
Developer Experience: Improvements in the EVM Object Format (EOF) (EIP-7692) provide more efficient tools for smart contract development, speeding up contract execution and reducing costs. (Easier to develop)
Scalability: Although not directly addressing scalability issues, Pectra paves the way for future upgrades (like Verkle Tree) by optimizing infrastructure and improving transaction efficiency. (Speed will be faster in the future)
Network Security: Improved verification and confirmation processes eliminate potential attack vectors, strengthening Ethereum's ability to withstand threats and vulnerabilities. (More secure)
👉 What impact does the Pectra upgrade have on Ethereum's price?
As shown, historically, Ethereum upgrades have little short-term impact on the price of ETH, so don't be fooled into thinking that Ethereum's price will rise just because of an upgrade. However, these upgrades have a lasting impact on the network. Perhaps the true significance of Pectra is that it optimizes the staking process for Ethereum and prepares for future scalability upgrades.
👉 Which projects and tokens might be affected?
Regarding EIP-7002 and EIP-7251, this could be a positive development for Ethereum's staking and re-staking sector.
Staking-related tokens: $LDO
Re-staking related tokens: $EIGEN $ETHFI $PUFFER $REZ
