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Ethereum's Pectra upgrade (deploying May 2025) marks a major advancement in staking, DeFi, and user experience.

TL;DR

Ethereum's Pectra upgrade (deploying May 2025) marks a major advancement in staking, DeFi, and user experience:

  • EIP-7251: Increase the stake limit for each validator from 32 to 2,048 ETH → Optimize the network, increase performance, and encourage large investors to participate in staking.

  • EIP-7002 & EIP-6110: Flexible ETH withdrawals and faster deposit confirmations → Improve liquidity and security for staking users.

  • EIP-7702: Regular accounts can temporarily execute smart contracts → Pay gas fees with tokens other than ETH, ushering in the era of 'smart wallets'.

Impact:

  • Ethereum LSD Ecosystem: Lido, Rocket Pool, EigenLayer, Ether.fi, Frax ETH, Pendle, Gravita, and Yearn are the Dapps that benefit the most.

  • Increase institutional cash flow attraction, solidifying Ethereum as a DeFi hub.

  • Better user experience, helping to drive Mass Adoption

→ Pectra not only upgrades technology but is a strategy to reshape the entire Ethereum ecosystem.

1/ Positive impact on Ethereum staking

  • Optimizing staking and increasing income: According to stakefish's blog (a staking service provider), after Pectra users can 'earn more rewards by pooling validators or adding ETH' to existing validators. Eliminating the requirement to stake multiple separate 32 ETH validators helps automatically accumulate rewards. For example, a staker can combine five 32 ETH validators into one 160 ETH validator with EIP-7251, saving operational costs and maximizing rewards across all this ETH.

  • Faster ETH withdrawals/deposits: EIP-6110 processes deposits directly on the execution layer, reducing deposit latency to ~13 minutes. Blockdaemon notes that with this upgrade, staking ETH transactions 'are processed as soon as they appear in the EL block', rather than waiting for thousands of blocks as before, thus significantly improving staking speed. The same is true for withdrawing ETH: stakers can request withdrawals through the EL contract without complex operations on the Beacon Chain.

  • Higher network efficiency: The number of validators decreases due to validator pooling (with the total staked ETH remaining unchanged), reducing data traffic and network bandwidth costs. Blockdaemon observes that 'fewer validators improve network efficiency' and even has the effect of 'enhancing small stakers through automatic reward accumulation'. Additionally, Van Loon (a well-known trader) points out that Pectra turns idle ETH into profit-generating capital: early 'stakers or those slightly above 32 ETH' will see their capital no longer wasted but maximized for yield generation. Thanks to these changes, many investors are motivated to accumulate more ETH to participate in staking, expecting stable profits from holding ETH long-term.

  • Flexibility for diverse stakers: EIP-7251 sets the minimum stake at 32 ETH but allows staking up to 2048 ETH. This means that while small investors (minimum 32 ETH) are not directly affected, they can share validators with pools or liquid staking to benefit. For organizations or whales with large ETH reserves, staking at 2048 ETH (or splitting into flexible amounts) becomes feasible, facilitating larger-scale staking.

2/ The ripple effect on the Ethereum Ecosystem

➤ Not only Lido, but protocols like Rocket Pool, Ether.fi, and Frax ETH will benefit from more flexible staking, increased rewards, and easier capital withdrawal. This increases competition in the LST sector and encourages diversification of validator infrastructure.

  • EigenLayer plays a central role in the restaking layer, where users can reuse LLT assets to secure middleware services like oracles, DA, and bridges.

  • Pendle Finance allows trading yield from ETH staking, becoming more liquid and attractive as yield from restaking becomes an additional layer.

➤ DeFi protocols integrating LST and complex yields benefit significantly

  • Gravita, Raft: Allow borrowing stablecoins from LST assets, will grow rapidly due to improved staking liquidity.

  • Yearn, Sommelier, Instadapp, DefiSaver: Can implement optimized 'Restake + Pendle + Leverage' strategies thanks to batch execution features from EIP-7702.

  • JonesDAO, Rage Trade: Capitalize on bribery opportunities and governance through optimized ETH yield strategies.

➤ Smart Wallets and common user UX

  • Safe (Gnosis Safe), Argent, Soul Wallet: Leverage EIP-7702 to implement smart wallets with the ability to pay fees with any token, supporting social recovery and direct keyless experiences.

  • This is the platform that brings DeFi to the mass market, reducing technical barriers to accessing staking and yield applications.

3/ Future prospects

The Pectra upgrade marks a significant milestone in Ethereum's development roadmap, moving towards a more efficient, flexible, and user-friendly network. With improvements in staking, DeFi, and user experience, Ethereum continues to solidify its position as the leading blockchain platform for dApps.

Pectra also creates a new yield loop in Ethereum DeFi:

Stake ETH → Receive LST → Restake on EigenLayer → Yield Tokenization through Pendle → Borrow stablecoins → Recycle into new strategies

This rotation activates real demand for ETH, LST, and stablecoins, helping to increase TVL, liquidity, and creative momentum throughout the Ethereum ecosystem.

4/ Conclusion

LST protocols are at the center of the next growth phase of Ethereum. They not only provide gateways for staking but also act as the vital junction of DeFi, restaking, and yield derivatives.

If Ethereum is an economy, then LST is the central bank.