ETH Pectra Upgrade: The largest major upgrade with the most EIPs in history, an overview of EIP details

Original Title: Pectra: Ethereum’s Next Major Upgrade

Original source: substack

Compiled by: Mars Finance, Daisy

Key points:

Pectra is the next major upgrade of Ethereum, involving changes to the execution layer (Prague) and the consensus layer (Electra). It is expected to go live on the testnet from February to March and is planned to activate the mainnet in April.

This upgrade brings optimization of the staking mechanism, improvement of Layer-2 scalability, and enhancement of user experience (UX), laying the foundation for future upgrades.

The main changes include increasing the validator’s stake limit, more flexible staking and withdrawal, enhanced account abstraction, and higher blob throughput, which helps improve network efficiency and security.

Introduction

After nearly 29 months of ‘The Merge’, 22 months of ‘Shapella’, and 11 months of ‘Dencun’, Ethereum is about to undergo its next major upgrade - the Pectra hard fork. As the world’s largest proof-of-stake (PoS) blockchain, Ethereum currently has around $90 billion worth of ETH staked, stablecoin market cap exceeding $135 billion, and approximately $4 billion worth of tokenized assets. With ongoing iterative upgrades, Ethereum is continuously evolving.

Pectra is expected to be the largest hard fork in Ethereum’s history involving the most EIPs. Following last year’s Dencun upgrade, Pectra has further introduced a series of new features to optimize user experience (UX), improve validator operations, and support further Layer-2 scaling, indicating that this upgrade will have a wide-ranging impact on the entire Ethereum ecosystem.

In this issue of Coin Metrics’ State of the Network, we will delve into the key changes of Pectra and discuss its impact on users, stakeholders, and investors, helping you prepare for the mainnet upgrade in April.

What is Pectra? Why is it important?

Similar to previous Ethereum upgrades, Pectra has made changes to the Execution Layer (EL) and Consensus Layer (CL). Its name reflects this dual upgrade: ‘Prague’ represents the Execution Layer, in honor of the city hosting Devcon 4; ‘Electra’ is derived from a star in the constellation Lyra, symbolizing the upgrade of the Consensus Layer.

Pectra was initially envisioned as a large-scale upgrade, with plans for as many as 20 EIPs. However, as the development progressed, in order to better optimize and manage its complexity, Pectra was split into two phases. Currently, the upgrade has entered its final stage, expected to go live on the testnet from February to March, and is scheduled to be officially activated on the mainnet in early April.

Before delving into specific EIPs, we need to understand the core areas of focus for Pectra. This upgrade focuses on optimizing staking and validator mechanisms, user experience (UX), and Layer-2 scalability, laying the foundation for the future development of Ethereum.

Staking and Validator Optimization

This upgrade contains three important EIPs, aiming to optimize the experience of validators operating under the Ethereum Proof of Stake (PoS) mechanism:

EIP-7251: Increase maximum effective balance

The current Ethereum staking design limits the effective balance of validators to 32 ETH, which means independent stakers must stake in fixed increments of 32 ETH, which is also the maximum stake for a single validator. Rewards exceeding this limit will not be counted towards active staking. EIP-7251 raises this maximum effective balance (MaxEB) to 2048 ETH, meaning a single validator can now stake any amount between 32 ETH and 2048 ETH. It is expected that this change will bring several benefits:

Increase the flexibility of staking: Stakers can now compound on the entire balance, not just multiples of 32 ETH. For example, when a validator stakes 33 ETH, all 33 ETH will count towards rewards, enhancing capital efficiency and staking flexibility.

Reducing the number of validators: Currently, Ethereum has a total of 1.05 million active validators. This EIP allows large operators to consolidate their validators, expecting to reduce the number of validators and alleviate the network burden caused by a large number of validators.

Reduce network load: While a large number of validators help enhance decentralization, it also increases bandwidth and computational requirements. Increasing MaxEB can form a more efficient set of validators, thereby reducing the overhead of peer-to-peer communication.

EIP-7002: Withdrawals Triggerable by Execution Layer

EIP-7002 extends the functionality of validators and complements the EIP mentioned earlier. This EIP enables validators to withdraw credentials through their execution layer (0x01), directly triggering exit operations and partial withdrawals. Validators have two keys: one is an activation key for performing validator duties, and the other is a withdrawal key for accessing and managing staked funds. Previously, only the activation key could trigger exit operations, but now, the withdrawal credential address can also trigger exits, allowing validators to make larger withdrawals and reducing reliance on node operators.

This change enhances the validators’ control over the funds and provides support for achieving a fully trustless staking pool, thereby enhancing security and decentralization.

EIP-6110: On-chain Validator Deposit

EIP-6110 simplifies the process for validators to join by improving the way deposits between the Ethereum Execution Layer (EL) and Consensus Layer (CL) are handled. Currently, when a new validator makes a deposit in the Execution Layer (EL), they must wait for the Consensus Layer (CL) to recognize and process it before activation, resulting in some delay. EIP-6110 enables the Execution Layer to directly pass validator deposits to the Consensus Layer, eliminating the additional verification process and reducing activation delay from about 9 hours to 13 minutes.

This optimization improves the efficiency of validator participation and accelerates the response speed of the entire network.

Expand Blob and Layer-2

EIP-7691: Increase Blob Throughput

In addition to the improvements of validators, Pectra has also made key adjustments to the data availability and scalability of Ethereum. The Dencun upgrade last year introduced Blob as an efficient data storage method, mainly used to store data from Layer-2 rollups. Currently, Blob has been widely adopted on Ethereum’s Layer-2, with approximately 21,000 Blobs being released daily. However, the usage of Blob has consistently reached capacity limits, leading to increased transaction fees and limiting throughput.

The throughput improvement proposed by EIP-7691 will address this bottleneck, enhance Ethereum’s ability to store and transmit large-scale data, support more Layer-2 transactions, and improve the overall performance of the network.

EIP-7691: Improving Blob Throughput (Continued)

Currently, the goal of the Ethereum network is to process an average of 3 Blobs per block, with a maximum of 6. EIP-7691 increases this target to 6 Blobs, with a maximum of 9, thereby increasing data storage capacity, throughput, and scalability. This change will reduce data storage costs, thereby reducing Blob fees for Ethereum L2s, and also lower transaction fees for end users.

EIP-7623: Increase Calldata Cost

EIP-7623 is another supplement to the EIP adopted by Blob. Before Blob was introduced, Layer-2 stored data through calldata, and they still occasionally use calldata because it is more cost-effective in some cases. However, by increasing the cost of calldata, this change aims to encourage Layer-2 to fully adopt Blob space, making Rollup transactions more efficient.

The combined effect of these two EIPs will promote the more widespread adoption of Blob in Ethereum and optimize the performance of Layer-2, thereby enhancing the overall scalability and cost-effectiveness of the network.

Improved User Experience (UX)

EIP-7702: Set External Owned Account (EOA) Code

EIP-7702 is a highly anticipated change due to its bringing Ethereum closer to account abstraction. This proposal is expected to significantly improve user experience (UX) and wallet functionality by allowing external owned accounts (EOA) or user wallets to temporarily act as smart contract wallets. This enables them to execute logic similar to smart contracts, providing users with greater flexibility, while offering wallets and applications greater programmability.

After the upgrade of Pectra, users and developers can use EIP-7702 to:

Batch trading: bundling multiple trades or user operations into a single transaction. (For example, approving and exchanging tokens in a single transaction).

Gas-free transactions: Allow account X to pay transaction fees on behalf of account Y, or pay gas fees for users through ‘paying main contract’.

Conditional or sponsored transactions: Implement expenditure control, automated operations, or sponsored transactions based on set conditions.

Although we have covered the most influential changes in Pectra, there are some other EIPs that have also optimized the network. These include EIP-2513, EIP-2935, EIP-7549, EIP-7865, and EIP-7840, all of which are dedicated to improving efficiency and reducing network resource consumption.

Conclusion

Ethereum is gearing up for another major upgrade - this time with a record number of EIPs involved. The goal of the Pectra upgrade is to enhance Ethereum’s capabilities in several key areas, including transitioning to account abstraction, improving validator operations, enhancing network efficiency, and gradually expanding the use of Layer-2 Blob. Meanwhile, as Vitalik Buterin emphasized in a recent blog post, while Ethereum’s roadmap is centered around Rollup, it is still expanding Layer-1. With the gas limit increasing to 36 million, further expansion is expected to enhance the network’s censorship resistance, throughput, and scalability.

While Pectra’s changes are primarily technical, many may wonder how these changes will affect the valuation of ETH. Historically, the price fluctuations of ETH during past upgrades have been traceable, but market sentiment - whether in the crypto market or the broader financial market - often has more influence than direct changes to the Ethereum economic model. Nevertheless, the Pectra upgrade will undoubtedly drive the adoption of Ethereum, and as we move through this upgrade, we will reassess its impact on key network metrics, ecosystem stakeholders, and ETH as an asset in the future.