Ethereum Pectra Upgrade: From "Altcoin King" to "Institutional Paradise"?

The Ethereum Pectra upgrade went live on March 5, combining the Prague and Electra updates, optimizing Ethereum's execution layer and consensus layer. This major upgrade aims to enhance the ETH staking experience, improve Layer 2 scalability, and increase network capacity, introducing 11 Ethereum Improvement Proposals. The upgrade is scheduled to be deployed to the mainnet on April 8, 2024, provided that the testnet successfully completes the upgrade.

The Pectra upgrade follows the Dencun upgrade implemented in March 2024 and will integrate several important improvement proposals to address challenges related to 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
• Equitable data availability sampling

The Pectra upgrade includes 11 EIPs, with major improvements including:

1. Account Abstraction: Allows external accounts to execute certain smart contract functions, enhancing wallet functionality.

2. Validator staking increased: the maximum staking balance has been raised from 32 Ether to 2048 Ether, simplifying validator management.

3. Withdrawal Improvements: Simplifying the withdrawal process and enhancing 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 transaction processing capability.

6. Improved MEV Transparency: Provide more MEV-related information.

7. Gas fee adjustment: Optimize the fee mechanism to alleviate the burden during peak times.

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

9. Validator Penalty Mechanism Optimization: Adjust the penalty mechanism to ensure that validator behavior aligns with the interests of the network.

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

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

Pectra adopts the execution layer (Prague) and the consensus layer (Electra) for a merged upgrade to address synchronization issues. This upgrade will bring many changes to Ethereum, including more flexible wallet operations, higher staking limits, faster transaction processing speeds, and more.

However, the upgrade also brings some controversy. The significant increase in staking thresholds may deepen centralization, turning Ethereum into a playground for large investors and institutions. In addition, Ethereum still faces challenges such as the L2 "parasitic" effect and fragmented scaling.

The market has mixed reactions regarding the long-term value of Ethereum. Although the Pectra upgrade has improved network performance and security, Ethereum seems to be searching for a new direction for development. Compared to Bitcoin's "digital gold" and Solana's "on-chain Nasdaq," Ethereum's "North Star" narrative remains unclear.

In the short term, Ethereum may focus on ETF staking, attempting to enhance its strategic position by attracting institutional participation. However, whether this approach can reshape the Ethereum ecosystem remains to be seen.