Can the Pectra upgrade reshape the Ethereum ecosystem?

The Ethereum Pectra upgrade will go live on March 5, combining the Prague and Electra updates, optimizing the execution layer and consensus layer. This upgrade aims to enhance the ETH staking experience, improve L2 scalability, and increase network capacity by introducing 11 improvement proposals. The upgrade is scheduled to be deployed to the mainnet on April 8, provided that the testnet successfully completes the upgrade.

Pectra follows the Dencun upgrade implemented in March 2024, which is expected to integrate several important improvement proposals to address challenges in scalability, security, and user experience. The upgrade will be implemented in two phases:

Phase One ( mid-March 2025 ):

• 2-layer Blob capacity doubled
• Account Abstraction
• Increase validator staking limit

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

• Verkle Tree Implementation
• Equivalence Data Availability Sampling

Pectra includes 11 key improvement proposals:

1. Account abstraction: allows external accounts to perform certain smart contract functions, enhancing wallet functionality.

2. Validator staking increase: the maximum staking balance is raised from 32 Ether to 2048 Ether, simplifying validator management.

3. Withdrawal Improvements: Simplify the withdrawal process and enhance network flexibility.

4. Validator activation delay optimization: reduced from 9 hours to 13 minutes, improving participation efficiency.

5. Block Expansion: Increase capacity by 50%, enhance scalability and transaction throughput.

6. Improve MEV transparency: Help better understand and monitor MEV activities.

7. Gas fee adjustment: Optimize the fee mechanism to make transaction fees more reasonable.

8. Governance Mechanism Optimization: Enhance decentralized governance, improve transparency and efficiency.

9. Optimizing the Validator Penalty Mechanism: Ensuring that validator behavior aligns with the interests of the network.

10. Smart Contract Performance Optimization: Improve execution efficiency and reduce Gas consumption.

11. Cross-chain compatibility improvements: Enhance interoperability with other blockchains.

Pectra adopts a dual-layer upgrade that merges the execution layer (Prague) and the consensus layer (Electra) to solve synchronization issues. The execution layer handles transactions and smart contracts, while the consensus layer manages validators and network security.

The impact of Pectra upgrade on Ethereum and the cryptocurrency market:

1. DApps: Simplify the development process and expand the application scope. However, the L2 "parasitic" effect is obvious, raising doubts about the value of the mainnet.

2. Ethereum's long-term value: improving staking and L2 scalability, but fragmentation issues still exist. DeFi remains the biggest value.

3. Decentralized Compromise: Enhancing security and scalability, but deepening centralization, which may become the playground for large investors and institutions.

4. New Narrative: Ethereum seems to have lost its direction, facing the "new impossible triangle" problem. In the near future, it may use ETF staking as a guiding star to enhance price expectations.

The upgrade of Pectra to Ethereum brings many changes, but also faces new challenges. Balancing decentralization with institutional participation, as well as maintaining an advantage in competition, will be key issues for the future development of Ethereum.