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Executive Summary

• Pectra, scheduled for mainnet activation in early 2025, is the next upgrade on the Ethereum (ETH) network, following Dencun in March 2024. This upgrade aims to address Ethereum’s mainnet performance and has three key objectives: fix existing network issues, improve user experience, and prepare for future upgrades.
• At the time of writing, eleven EIPs are included in the scope of the Pectra upgrade and are subject to further changes. The main EIPs include: 
  • EIP-7702: Allows externally owned accounts (EOAs) to temporarily upgrade into contract accounts, allowing users to enjoy benefits (for example, transaction batching or gas fee sponsorship).
  • EIP-7251: Increases the maximum balance that validators can stake from 32 ETH to 2,048 ETH, aiming to consolidate the existing validator number on Ethereum to reduce network pressure.
  • EIP-7742: Enables dynamic adjustments of the max and target blob count, laying the foundation for planned blob changes in the future. 
• Looking forward, the Fusaka upgrade, which comes after Pectra, includes EIP-7594 as a key EIP to address the data availability issues on Ethereum. It aims to reduce the load on each node by allowing nodes to sample portions of the data for verification and together provide a high level of certainty that the full data is available. 
• Ethereum has one of the largest network effects, developer activities, and ecosystems in the cryptocurrency space, hence Ethereum upgrades remain a highly anticipated event. It is worth noting that the scope and timeline of Pectra are not fixed as of this writing. Nevertheless, we look forward to seeing improvements in the Ethereum network’s efficiency and enhanced functionalities (e.g., account abstraction) that would benefit the Ethereum ecosystem as a whole. 

1. Introduction

Pectra is the next upcoming upgrade on the Ethereum (ETH) network, after Dencun in March 2024. It combines two different upgrades — Prague and Electra — which focus on changes to the network’s execution layer (EL) and consensus layer (CL), respectively. 

There have been ongoing changes and discussions around the scope of the Pectra upgrade. The latest target release schedule for mainnet activation is early 2025. 

While the previous Dencun upgrade brought major improvements to Layer-2 (L2) scaling solutions on Ethereum, the Pectra upgrade aims to address Ethereum’s mainnet performance: improving scalability and user experience, as well as preparing the network for future upgrades. 

This report provides an overview of Pectra, including its important EIPs, as well as a glimpse into the upcoming Fusaka upgrade.

2. Pectra Upgrade

2.1 Overview

At the time of writing, 11 EIPs are included in the scope of the Pectra upgrade, subject to further changes. 

The EIPs’ objectives can be broadly categorised into three areas: 

• Fix existing network issues: Aim to address the more critical and urgent bottlenecks currently faced by the Ethereum network.
• Improve user experience: Bring improvements in various aspects, including network efficiency, interoperability, and security, to various stakeholders (users, validators, decentralised apps, etc.).
• Prepare for future upgrades: Set the foundation for future EIPs to be implemented in the next upgrades (e.g., data availability).

We look further into three key EIPs — EIP-7702, EIP-7251, and EIP-7742 — the ones most impactful for user experiences. EIP-7702 allows externally owned accounts (EOAs) to temporarily upgrade into smart accounts, allowing users to enjoy benefits (for example, transaction batching or gas fee sponsorship). EIP-7251 increases the maximum balance validators can stake from 32 ETH to 2,048 ETH, aiming to consolidate the existing validator number on Ethereum to reduce network pressure. EIP-7742 enables dynamic adjustments of the max and target blob count, laying the foundation for planned blob changes in the future.

2.2 EIP-7702 — Set EOA Account Code

Ethereum has two account types: 

• Externally owned account (EOA) — Controlled by private keys; typically used by individuals or entities to hold and manage Ether (ETH) and tokens.
• Contract account — A smart contract deployed to the network, controlled by code.

EIP-7702 allows EOAs to temporarily upgrade into a contract account with the ability to execute code. On Ethereum, the roadmap of account abstraction (AA) is to enable “smart contracts to initiate transactions themselves,” integrating the functions of EOAs and contract accounts. 

Key Features

• Batching: Allows multiple operations in the same transaction (e.g., combine ERC-20 approval and spending in one transaction).
• Sponsorship: Allows account X to pay for gas on behalf of account Y, and gas can be paid in other ERC-20 tokens (e.g., stablecoins).
• Privilege De-escalation: Users can sign sub-keys, which are keys with specific permissions (e.g., can authorise spending of only 5% of total wallet balance per day). 

Implications

EIP-7702 is significant, as users will be able to enjoy the above-mentioned enhanced features in their transactions while keeping the same EOA and address. Imagine being able to execute transactions on chains despite not holding enough funds or gas fees, or being able to execute multiple transactions with one signature, or delegating the wallet to automate certain transactions — this EIP brings convenience and efficiency to users. Wallets (e.g., MetaMask) and dapps will also likely support this function to improve user experience. 

In addition, EIP-7702 will enhance security with its sub-key feature, enabling users to give specific permissions instead of delegating full account control. However, with this EIP, users still need to secure their private keys.

EIP-7702 is seen as a step towards account abstraction on Ethereum to improve upon the previous EIP-3074 by eliminating the need to introduce new opcodes. Yet, more work needs to be done for AA to be fully embedded into Ethereum, in which EOAs are fully converted into contract accounts.

2.3 EIP-7251 — Validator’s Max Effective Balance

EIP-7251 increases the maximum balance validators can stake from 32 ETH to 2,048 ETH, while maintaining the minimum of 32 ETH. This update aims to enhance network efficiency.

There are currently more than 1 million validators on Ethereum. One of the reasons for this large validator set is the maximum (and also minimum) staking limit of 32 ETH. The original rationale for setting this limit was to ensure a sufficient number of validators in the Proof of Stake (PoS) consensus mechanism and to reduce the risk of having concentrated large validators. However, this resulted in a large number of ‘redundant’ validators controlled by a single entity; for example, Lido has ~305,000 validators, with a 28% share. In addition, according to Galaxy, simulations conducted by Ethereum Foundation engineers revealed that Ethereum would run into networking issues at 1.4 million validators. This includes requiring a longer time in attestation aggregation (to create and finalise blocks), which may cause delays in transaction finalisation, potential network disruptions due to higher bandwidth requirements, and challenges to achieving single slot finality (blocks are proposed and finalised in the same slot) in the future. Therefore, there’s a need to change the staking limit to enhance efficiency.

Implications

Under this EIP, the ETH network would be able to consolidate the number of validators, reduce pressure on the network, and improve efficiency. Large validators and node operators can consolidate to run fewer validators, hence reducing overhead costs. Block proposer selection probability will be weighted by the ratio of effective balance/maximum effective balance, hence ensuring large validators have similar probabilities of being chosen after consolidation. Smaller validators can enjoy compounding rewards and be able to stake in more flexible increments (e.g., 40 ETH instead of needing 64 ETH to run two validators). 

In addition, by having both a minimum and maximum balance, stakers can benefit from compounding rewards and flexibility for partial withdrawals. Currently, an automatic sweep takes place for balances above 32 ETH, which sends staking rewards to the staker’s wallet. With this EIP, stakers can continue to compound their rewards above 32 ETH, increasing potential earnings. Stakers can also partially withdraw ETH at their discretion after the EIP is implemented (versus currently, where there’s no flexibility to withdraw, as 32 ETH is the minimum and the maximum balance). This provides more control for exits. 

Ultimately, validators are the ones to decide whether they prefer to consolidate or not. Hence, for this EIP to achieve its desired effects to reduce network pressure, the EIP needs to address implementation details around how rewards, penalties, and withdrawals are processed post-consolidation. For example, there are ongoing discussions around the mechanics of slashing penalties after validator consolidation (currently, penalties are proportional to the ETH effective balance).

2.4 EIP-7742 — Optimise Blob Count 

Blobs, introduced in EIP-4844 through the Dencun upgrade, are designed to temporarily store large amounts of data and make L2 transactions cheaper by reducing data storage costs. Blob count is the number of blobs that can be included in each ETH block — currently, there is a maximum of six, and the target is a fixed value of three. As mentioned by Vitalik Buterin, the current blob capacity is uncomfortably close to a ceiling, which can impact scalability.

Currently, both the blob maximum and target are hardcoded in the EL, and the blob maximum is separately hardcoded in the CL. EIP-7742, which was newly included in Pectra in October 2024, aims to uncouple these values between EL and CL to make deployment of blob count changes easier. The CL will now verify the blob maximum and can dynamically set the blob target (no longer a fixed value in relation to the maximum). 

EIP-7742 also lays a foundation for blob changes planned in the future. On 5 December, Ethereum developers included EIP-7691 in Pectra to increase the blob target/maximum to 6/9 from 3/6. This aims to enhance L2 transaction throughput and reduce transaction fees. One of the concerns of raising blob throughput is the potentially rising bandwidth requirements for solo stakers to propose blocks with more blobs. A reduction of solo stakers would, in turn, impact the network’s decentralisation. However, the Ethereum Foundation conducted a recent study, which showed that the performance of these solo stakers is not negatively impacted if the blob target and maximum increase to six and nine, respectively.

3. After: Fusaka Upgrade

One of the key EIPs in Fusaka is EIP-7594 (PeerDAS), which aims to address the data availability issues on Ethereum. 

EIP-7594 Peer Data Availability Sampling (DAS)

EIP-7594 reduces the load on each node by allowing nodes to sample portions of the data for verification and together provide a high level of certainty that the full data is available. We have previously discussed the problem of insufficient blob capacity after EIP-4844. Instead of purely increasing the blob numbers to include more transactions, which would increase the burden on the hardware, PeerDAS approaches the issue by verifying the accuracy and availability of a data blob without downloading the entire blob. Hypothetically, if each node stores only ⅛ of the blob data, blob counts can theoretically increase four to eight times (4–8x), while maintaining similar bandwidth usage. The nodes can maintain connections with other peers in the network to sample other pieces of data if needed.

The implications of this EIP include the expectation to improve Ethereum network scalability to cater to the anticipated increase in the number of rollups and transactions on L2s and further reduce the L2 transaction fee. In addition, it improves efficiency as the data availability (DA) function is spread amongst multiple nodes, potentially reducing bandwidth usage for each node. Moreover, enhancing DA and blob count can reduce spikes in gas fees currently experienced when purchasing additional blobs.

4. Conclusion

Due to the split in the scope of the Pectra upgrade, the current number of EIPs included has been reduced and focuses more on improvements in the ETH network, particularly in user experience and fixing existing network issues. It is worth noting that the scope and timeline of Pectra are not fixed as of this writing, and we would have to continue following the latest updates from the developer teams. 

Given ETH has a rollup-centric scaling roadmap with the target to reach 100,000 tps, and with user activities gradually migrating to L2s, the market may tend to look forward to improvements in L2 and rollups (e.g., PeerDAS, which was delayed from Pectra to Fusaka). 

Nevertheless, improvements in ETH’s efficiency and enhanced functionalities (e.g., account abstraction) would benefit the ecosystem, including the applications on rollups. In addition, Ethereum has one of the largest network effects, developer activities, and ecosystems in the cryptocurrency space; hence, Ethereum upgrades remain a highly anticipated event. 

Read the full report: Ethereum Pectra Upgrade

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Authors

Crypto.com Research and Insights team

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