In recent months, the cryptocurrency market has been notably driven by the 'Trump Effect,' with Bitcoin performing exceptionally well. Meanwhile, other public chain projects such as SOL and SUI have also recorded significant gains, setting new historical highs. In contrast, the overall performance of the Ethereum ecosystem has appeared relatively flat.
Although ETH once soared to around $4000, it has yet to reach its previous historical high of $4800, and other tokens within the Ethereum ecosystem have also performed modestly. However, this does not mean that Ethereum's decline is a foregone conclusion.
It is worth noting that while Bitcoin recently experienced a pullback, the price of ETH has shown relative stability, largely due to the continuous buying of ETH by institutional investors. As Bitcoin prices keep hitting new highs, some institutional investors have begun to turn their attention to Ethereum.
We can take a look at the recent inflow and outflow of funds for spot Ethereum ETFs over the past month.
From the above screenshot, it can be observed that since Trump was elected in November, the spot Ethereum ETF has shown a net inflow of funds on most trading days, which stands in stark contrast to the continuous net outflow of funds when the ETF was initially launched. This phenomenon clearly indicates that more and more institutions are indirectly increasing their risk exposure to ETH through the spot Ethereum ETF.
Additionally, another important positive factor supporting the future price of ETH is the Ethereum Pectra upgrade.
Additionally, another important positive factor supporting the future price of ETH is the Ethereum Pectra upgrade.
The Ethereum Pectra upgrade is expected to begin in the first quarter of 2025. This upgrade combines two independent upgrades: the Prague upgrade and the Electra upgrade, which will respectively impact the network's execution layer and consensus layer. The Pectra upgrade will include several improvements, such as supporting users in paying gas fees with other tokens, accelerating the execution speed of smart contracts, and increasing staking rewards for validators.
Although Ethereum has undergone several upgrades, such as the Merge upgrade in 2022 and the Cancun upgrade in 2024, it still faces many challenges.
Compared to public chains such as SOL, SUI, and BNB, Ethereum is disadvantaged in terms of TPS and transaction gas fees. When the Ethereum network is busy, gas fees soar, leading more projects to choose to build on other public chains, resulting in a significant decline in transaction volume within the Ethereum ecosystem. The Pectra upgrade aims to address these pain points.
The Ethereum Pectra upgrade aims to comprehensively enhance the speed, scalability, and convenience of Ethereum, providing a better user experience for both ordinary users and blockchain developers.
1. Account Abstraction
1. Account Abstraction
Currently, when we conduct transactions within the Ethereum ecosystem, a certain amount of ETH needs to be held in the account to cover gas fees. If there is not enough ETH in the account to pay for gas, the transaction will not succeed, which undoubtedly affects the normal conduct of some transactions.
However, after the completion of the Pectra upgrade, Ethereum will introduce the concept of account abstraction, significantly enhancing the user's transaction experience. Through account abstraction, users will be able to pay gas fees not only with ETH but also with other tokens such as USDC and DAI, making operations more flexible. Additionally, after the Pectra upgrade is completed, third-party DApps will be able to pay gas fees on behalf of users, meaning that in some cases, users will not need to pay gas fees.
2. Smart Contract Efficiency
With the gradual adoption and implementation of Ethereum Improvement Proposals (such as EIP-7692), the efficiency of the Ethereum Virtual Machine (EVM) will see significant improvements, thereby greatly accelerating the execution speed of smart contracts. This optimization not only significantly reduces the deployment costs of smart contracts but also simplifies their complexity, bringing substantial benefits to both developers and users.
3. Optimizations for Validators
As we all know, validators on the Ethereum public chain need to stake at least 32ETH, and in return, they will receive corresponding rewards. However, the portion exceeding 32ETH does not generate income and remains idle, which undoubtedly affects the efficiency of capital utilization.
In the Pectra upgrade, a more flexible staking withdrawal mechanism (EIP-7002) has been introduced, and the staking limit for validators has been increased from 32ETH to 2048ETH (EIP-7251), which will greatly enhance the system's flexibility and operational efficiency, especially for individuals and enterprises that hold and manage large amounts of ETH.
Secondly, the Pectra upgrade will introduce a 'validator consolidation' feature, allowing large operators like Lido, which provide ETH staking services to numerous users, to reduce the number of their validator nodes. This measure can effectively lighten the operational burden on the Ethereum network, further increase network speed, and reduce unnecessary resource consumption.
4. Optimizing Data Management Through Verkle Trees
The Pectra upgrade introduces a crucial technological innovation—the Verkle tree, which allows nodes to store blockchain data more efficiently. Although it sounds quite complex, the Verkle tree essentially optimizes data storage and verification mechanisms, greatly enhancing the speed and scalability of the Ethereum network.
In short, the Verkle tree represents an advanced way of organizing data. It not only significantly reduces storage requirements but also accelerates the transaction processing process, providing users with a smoother and more economical Ethereum experience.
5. Layer 2 Solutions and PeerDAS
Ethereum Layer 2 solutions (such as Arbitrum and Optimism) aim to offload a large number of transactions from the mainnet for processing, thereby alleviating network congestion and reducing transaction costs (Gas fees).
The Pectra upgrade will introduce a peer data availability sampling (PeerDAS) feature, further optimizing L2 solutions. The PeerDAS technology can assist Layer 2 networks in handling data more easily, thereby reducing costs and increasing processing speed, which is a major benefit for both DApps in the Ethereum ecosystem and users.
In summary, the Pectra upgrade is a significant upgrade for the Ethereum ecosystem that will lay a solid foundation for its long-term development. Whether for ordinary users, validators, or developers, the Pectra upgrade will bring new features that will improve the Ethereum user experience.