What Should We Expect From The Ethereum Pectra Upgrade?

Ethereum, a decentralised blockchain, has grown enormously since its advent in 2015, supporting a large sector of decentralised financial services. In March 2024, Ethereum launched its Dencun upgrade, aimed at reducing Layer 2 transaction costs. 

However, the blockchain always pushes forward, and the next major upgrade, Pectra, is scheduled for Q1 2025. It combines Prague for the execution layer and Electra for the consensus layer, aiming to bring ambitious improvements to ETH.

However, some studies highlight risks associated with this Upgrade. This article aims to explore the upcoming ETH Pectra upgrade, the benefits and hazards it might bring to the network, and discover what the future of ETH will be after the big event.

Defining Ethereum Roadmap

Ethereum, a global coordination platform, faces challenges in mainstream adoption due to slow transaction speeds and high fees during high congestion. The blockchain trilemma, forged by co-founder Vitalik Buterin, outlines decentralisation, scalability, and security. To balance these, ETH has created a roadmap for upgrades, including specific modifications, to remain cost-effective, accessible, secure, and sustainable.

The Ethereum roadmap provides a comprehensive development plan and goals for the ETH blockchain network, offering insights into upcoming features, upgrades, and improvements for developers, investors, and users.

Over the past nine years, Ethereum has undergone numerous network improvements:

The Merge

On September 15th, 2022, ETH transitioned from the energy-intensive PoW consensus mechanism to the more efficient PoS consensus mechanism. The Beacon Chain, a basic PoS-based version, was presented in December 2020 for safe testing. In September 2022, ETH officially adopted the PoS consensus mechanism, integrating both the Beacon Chain and mainnet.

The Shanghai Upgrade

This upgrade, also known as the Shapella upgrade, marked the transition from PoW to PoS on ETH. This hard fork allowed for new protocol advancements and the retrieval of staked ETH from the Beacon Chain. Users who staked ETH on the Beacon Chain could now access their locked-up ETH and earn rewards.

The Dencun Upgrade

The Upgrade, launched on March 13th, aimed to reduce costs for layer-2 transactions and improve data accountability on the network. It introduces “proto-danksharding,” the first phase of scaling the network through danksharding. This involves using data “blobs” (Binary Large Objects) to decrease data stored perpetually on the ETH blockchain. Blobs automatically delete data after a fixed period, reducing storage costs and lowering user transaction fees. This upgrade is part of Dencun’s efforts to improve ETH’s data availability and reduce costs associated with layer-2 transactions.

What Is ETH Pectra Upgrade

The Pectra upgrade follows the Dencun upgrade and is set to go live in the first quarter of 2025. It will merge Prague and Electra upgrades, focusing on network execution and consensus layers. It will allow staking providers to consolidate stakes into fewer validators, reducing the number of validators needed and easing pressure on Ethereum’s communication layer.

The upgrade is expected to bring several ambitious improvements, including enhanced account abstraction, validator operations, and overall network performance. The Ethereum Pectra includes nine standard Ethereum Improvement Proposals (EIPs).

The upgrade may also include Peer Data Availability Sampling (PeerDAS) and EVM Object Format (EOF) to enhance smart contract security and developer experience. ETH developers are considering replacing EIP-3074 with EIP-7702, a new transaction type proposed by developers to enhance account abstraction compatibility. Additionally, they are considering implementing a patch for EIP-2935, which addresses the handling of historical block hashes.

Key Features of the Pectra Upgrade

Petra upgrades aim to enhance consensus and execution layers, extend PeerDAS/rollup to optimise transaction data storage in ETH layer-2 networks and improve UX, developer experience, and performance on layers 1 and 2. The new cryptographic system includes wallet functionality enhancements, increased validator stake limits, and improved roll-up scalability.

Among the key features of the upcoming upgrade are the following:

Improved UX and Wallet Functionality

Pectra aims to improve smart contract functionality for digital coin wallets. This includes transaction bundling, which allows users to sign multiple transactions at once and reduce costs, and sponsored transactions, which enable users to delegate funds to another entity and thus interact with dApps, leveraging the ETH ecosystem. Pectra also includes asset recovery through social recovery, delegated security, and ERC-20 gas payments.

Validator Withdrawals from Smart Contracts

Pectra is set to enable validator withdrawals directly from smart contracts, allowing for more advanced use cases such as automated reward distribution, fund distribution to multiple parties, decentralised staking services, and advanced security models. This move aims to unlock new possibilities for building innovative staking applications and services on ETH, allowing validators to withdraw their staked coins and rewards directly from smart contracts.

Improved Developer Experience

Pectra enhances the developer experience by streamlining the development lifecycle, reducing deployment costs, and improving smart contract management capabilities.

Gas Efficiency Improvements

The upgrade to ETH Virtual Machine (EVM) aims to improve gas efficiency by updating pricing for SLOAD, SSTORE, and CODECOPY opcodes, introducing a “warm” storage category, and making precompiled contracts cheaper to call from smart contracts. The Pectra upgrade focuses on optimising gas usage and improving network throughput through refined gas consumption algorithms.

Increased Staking Limit for Validators

Pectra plans to increase the staking limit for validators by 64-fold from 32 ETH to 2,048 ETH to simplify operations and reduce operational load. This will consolidate existing validators, reduce the need to constantly create new ones, improve operational efficiency, and reduce computational resources spent on processing consensus messages from the same entities.

Enhanced Network Security

ETH’s Pectra upgrade prioritises security, enhancing defences against potential exploits and safeguarding network integrity and user assets, impacting dApp development.

Which EIPs Have Been Proposed?

Ethereum is a decentralised and open-source network that allows developers and investigators to propose improvements to its protocol through an Ethereum Improvement Proposal (EIP). The roadmap is subject to change as new information and technologies emerge. The Ethereum Pectra upgrade aims to improve network performance and scalability through several EIPs. These EIPs aim to make the Ethereum network more scalable and simplify validator management. Let’s explore the most notable ones.

EIP-7251 (Maxeb)

EIP-7251 boosts the staking limits from 32 ETH to 2,048 ETH, preventing staked ETH from outgrowing the new fork before blockchain adjustments can be made. This allows staking providers to consolidate stakes into fewer validators, reducing message transmission and potentially improving network efficiency and performance.

EIP-7002

Validators can trigger exits and partial withdrawals using their execution layer withdrawal credentials, providing more flexible options for restaking and staking pools.

EIP-7702

The Ethereum blockchain has seen a significant change with the introduction of EIP-7702, a new transaction type designed to improve Externally Owned Accounts (EOAs). This proposal offers an alternative to the previously discussed EIP-3074, which was praised by some members of the community. Key features include temporary smart contract conversion, transaction batching, fee sponsorship, and a mechanism for managing wallet privileges. 

EOAs can be converted into smart contract wallets during transaction execution, increasing efficiency and potentially reducing gas fees. The proposal also outlines mechanisms for managing wallet privileges and enhancing security by allowing users to control access to different assets or functions within their wallets.

EIP-7523

EIP-7523 is a retroactive EIP that prevents empty accounts on the network, saving space and memory. It improves the network efficiency by reducing state size and accelerating network scaling. This proposal type limits smart contract creation, and different EIPs may be included in the final Pectra upgrade to ensure compatibility and efficient EVM operation.

EIP-5920 (Pay opcode)

This EIP enhances ETH network scalability by allowing users to share ETH directly without activating the receiver’s contract code.

EIP-7610

The EIP 7610 is a unique EIP designed to prevent account overwriting during a hard fork. In simpler terms, the system will deny attempts to create a new account when one already exists. This is a more comprehensive protection against account overwriting and can only be activated during a hard fork, potentially marking a last chance for a few months.

EIP-2537

EIP-2537 improves BLS12-381 curve operation by introducing pre-built functions, enhancing efficiency and ensuring better network security verification through increased cryptography.

EIP-3074, 5806, and 7377

EIP-3074 introduces new commands AUTH and AUTHCALL, enhancing network transaction speed by enabling autonomous verification and execution of transaction contracts with specific permissions.

Key Risks of The Upcoming Upgrade

The upcoming Pectra fork, aimed to improve the network execution layer and consensus layer, has known vulnerabilities, but they are considered worst-case scenarios and unlikely to occur. The issue of overwriting an existing account is slightly more severe, but there are already small fail-safes in place. Developers are confident that these issues will be solved before anything catastrophic happens. The associated EIP will solidify blockchain rules post-fork, but the average user is not worried.

However, a Liquid Collective and Obol research report highlights risks associated with ETH’s Pectra upgrade, including concerns about client, operator, and cloud diversity, as well as limited adoption of distributed validator technology.

Thus, the report warns that potential errors in a dominant client in ETH’s consensus mechanism could trigger severe slashing penalties and network instability. It also highlights the importance of operator diversity in maintaining network health and avoiding single points of failure.

Also, the report emphasises the necessity for a global presence of validators and cloud providers, citing recent outages and suggests DVT can enhance this strategy by reducing risks.

ETH Future After The Upgrade

ETH developers have announced streamlined upgrades for the ETH blockchain after the Pectra upgrade. The ETH community eagerly anticipates the release of Verkle trees, a new data system that will improve the efficiency of ETH nodes in storing large amounts of data. This upgrade is expected to enhance Ethereum nodes to validate blocks without storing large amounts of state data.

There are several reasons to believe that ETH’s price will rise in the coming days.

Thus, the upcoming Pectra upgrade, along with the launch of the first Ethereum ETF, has increased investor confidence, boosting Ethereum’s price. Petra Upgrade, which bundles several significant updates into one package, will make ETH more efficient and enhance its usability as a layer-one platform. This might lead to the coin breaking its record high of $4,800 by the end of the year.

Ethereum is set to expand its user base post-Pectra, offering programmable accounts, affordable L2s, efficient smart contracts, and flexible validators. The Ethereum community is also implementing Verkle trees in the Osaka upgrade, improving the solo staking user experience and enabling stateless validator clients. These improvements will enable Ethereum to handle increased adoption, integrate with other networks, and introduce new features.

Final Takeaways

Crypto money, like ETH, has revolutionised the financial world by offering a decentralised, permissionless, and secure alternative to traditional banking systems. With advanced technology, a growing ecosystem, and constant evolution, the future of this smart contract chain is promising.

ETH Pectra upgrade is a significant step towards a more efficient, user-friendly, and scalable blockchain. This upgrade is more than just a bunch of technical jargon. Whether you’re a casual user, an investor, or a developer, these changes are set to make your ETH experience smoother and more efficient.