Key Points
– Merge upgrades to improve operational efficiency: Pectra simultaneously updates the execution layer (Prague) and the consensus layer (Electra), making the upgrade process smoother and reducing synchronization issues between developers and validators.
– Key functional updates: Account abstraction (EIP-7702) makes transactions more flexible, increases the staking limit (EIP-7251) optimizes the staking mechanism, and enhances data availability (EIP-7742) to provide better support for Layer-2 expansion.
– Potential challenges: It may bring security risks of validator centralization, account abstraction, and problems in the test network (such as chain splits and empty blocks).
– Ecological impact: Institutional staking may increase significantly. DeFi and NFT platforms can use the fee sponsorship mechanism. Layer-2 networks can use more efficient data processing to reduce costs, increase transaction speeds, and further promote the development of Ethereum.
Ethereum will usher in the Pectra upgrade in mid-March 2025, which will be a key node in its development history. Unlike previous upgrades, Pectra adopts a two-layer upgrade model, synchronously updating the execution layer (Prague) and the consensus layer (Electra), and through multiple Ethereum Improvement Proposals (EIPs), further improving scalability, security and user experience.
Previously, Ethereum usually upgraded the execution layer and consensus layer separately to reduce technical complexity and upgrade risks. This time, Pectra chose to merge the upgrades to allow developers, validators, institutions and ordinary users to adapt to new features more smoothly, while reducing synchronization issues and interference caused by upgrades.
However, although Pectra has been successfully deployed on multiple test networks, it has also exposed some technical challenges, making the community cautious about possible risks while looking forward to it.
This article will take you through the upgrade process of Ethereum, analyze the core functions of Pectra, and explore the impact and potential challenges it may have on the entire ecosystem.
Table of contents
A Review of Ethereum Upgrade History
– Important Milestones: From Frontier to The Merge
– Executive level (Prague)
– Consensus layer (Electra)
– Advantages of Merger Upgrade
– Account abstraction (EIP-7702)
- Increase the validator staking limit (EIP-7251)
– Enhanced data availability (EIP-7742)
– On-chain processing of validator deposits (EIP-6110)
- Smart contract controlled staking withdrawals (EIP-7002)
– Holesky testnet issues
– Sepolia testnet discovery
Impact on the Ethereum ecosystem
– Institutional adoption and staking growth
– DeFi and NFT market impact
– Changes in Layer-2 Scaling Solutions
Potential risks and challenges
– Concerns about validator centralization
– Security and technical complexity of account abstraction
– Potential delays in upgrade deployments
– Challenges for developers to adapt to new changes
Review of Ethereum upgrade process
Since Ethereum was officially launched in 2015, it has undergone several major upgrades, each of which is dedicated to solving system bottlenecks or introducing new features:
– Frontier (2015) – Lays the foundation for Ethereum’s infrastructure and supports smart contracts.
– Homestead (2016) – Improves network stability and optimizes development tools.
– Byzantium (2017) Constantinople (2019) – Enhance scalability and security, and optimize the Ethereum Virtual Machine (EVM).
– Istanbul (2019) – Reduce gas fees and improve network operation efficiency.
– Beacon Chain (2020) – Introduces Proof of Stake (PoS), allowing validators to deposit stake.
– The Merge (2022) – Ethereum officially transitions to the PoS consensus mechanism, replacing PoW.
– Shapella Upgrade (2023) – Allows validators to withdraw staked ETH.
– Dencun Upgrade (2024) – Introducing Proto-Danksharding (EIP-4844) to reduce Layer-2 operating costs.
Each upgrade further enhances scalability, security, and operational efficiency based on the previous one. The upcoming Pectra upgrade (March 2025) will continue this trend, merging the execution layer (Prague) and the consensus layer (Electra), simplifying network operations, and further strengthening Ethereums infrastructure.
Image Credit: Deutsche Bank
Why a double-layer upgrade?
Ethereum s architecture consists of two key layers:
– Execution layer (Prague) – responsible for processing transactions, running smart contracts, and executing state changes.
– Consensus layer (Electra) – manages validators, blocks, and ensures the security of the blockchain through the PoS (Proof of Stake) mechanism.
In the past, these two layers were usually upgraded separately to reduce technical complexity and potential risks. However, Pectra adopts a combined upgrade approach, which brings the following benefits:
– Simplified upgrade process – Through a single hard fork, it is easier for node operators and validators to adapt to new changes.
– Reduce risk – Unify the adjustments on both tiers to avoid synchronization issues and version compatibility issues.
– Overall Optimization – Many EIPs (Ethereum Improvement Proposals) affect the execution and consensus layers, and merged upgrades can allow these improvements to be implemented more efficiently.
Image Credit: Rex Kirshner
Core features of Pectra upgrade
Image Credit: Benjamin Thalman
The Pectra upgrade introduces multiple Ethereum Improvement Proposals (EIPs) aimed at improving user experience, optimizing development tools, improving staking efficiency, and enhancing data availability. Here are the most critical proposals:
1. Account Abstraction (EIP-7702)
EIP-7702 narrows the gap between external accounts (EOA) and smart contracts, giving accounts more flexible functions:
– Fee Sponsorship – Allows third parties to pay transaction fees on your behalf.
– Transaction batching – Users can execute multiple transactions at once, reducing gas costs.
– Multi-factor authentication – supports multiple signatures, biometrics, hardware keys, etc.
– Funds Management and Recovery Mechanism – You can set daily spending limits, time-lock transactions, social recovery and more.
Application scenarios:
– Game dApp can pay gas fees for users, lowering the usage threshold.
– Enterprises can adopt customized authentication methods to improve account security.
– DeFi platforms can execute transactions in batches, reducing gas fees.
Potential risks:
– Increase the complexity of technical implementation, and developers need more time to adapt.
– When account logic is expanded, new security risks may be introduced.
Image Credit: Emmanuel Abedide
2. Increase the validator staking limit (EIP-7251)
EIP-7251 increases the maximum effective stake amount of a single validator from 32 ETH to 2,048 ETH. The main goals are:
– Reduce the number of validators – allowing larger scale stakers to reduce hardware and operational costs.
– Improve operational efficiency – Optimize block proposals and network operations by reducing the number of small nodes.
– Adapting to institutional staking needs – Allowing institutional investors to manage fewer validator nodes while maintaining large staking amounts.
Impact on decentralization: – May lead to the concentration of verification power in the hands of large stakers, weakening decentralization.
– But supporters argue that reducing the number of validators can reduce operating costs and improve network efficiency.
Image Credit: Mike Neuder
3. Enhanced data availability (EIP-7742)
EIP-7742 aims to improve data availability, especially for Layer-2 solutions such as Rollups. The proposal allows for dynamic adjustment of Blob storage capacity to optimize data storage based on network demand:
– Optimizing Rollup scalability
– Ensure that the Layer -2 solution has enough data storage space but does not overly bloat the blockchain.
– Improve resource utilization
– Reduce unnecessary data storage during low traffic periods, reducing operating costs.
This proposal is crucial to Layer-2 solutions such as Arbitrum, Optimism, and zkSync, and can help them improve efficiency and reduce transaction fees.
Image Credit: Ethereum 2077
4. On-chain processing of validator deposits (EIP-6110)
EIP-6110 allows validator deposit transactions to be processed directly at the consensus layer, without relying on the execution layer:
– Reduce security risks
– Eliminate deposit queue delays to reduce potential attack risks.
– Speed up the joining of validators
– Simplify the deposit process and improve the overall efficiency of the PoS mechanism.
This improvement reduces the complexity of the PoS mechanism and allows Ethereum validators to participate in the network more quickly.
Image Credit: SafeStake
5. Smart contract controlled staking withdrawals (EIP-7002)
EIP-7002 allows smart contracts to actively initiate validator withdrawals, bringing the following advantages to staking management:
– Staking Automation – Contracts can automatically reinvest or distribute staking rewards.
– More flexible fund management – Institutional investors and staking pools can use smart contracts to more efficiently adjust fund flows and optimize profit strategies.
Safety considerations:
– If there are vulnerabilities in smart contracts, it may lead to large-scale financial losses and pose a risk to the entire Ethereum ecosystem.
Image Credit: ladislaus.eth
Recent progress and testing
Holesky Testnet (February 24, 2025)
Holesky was one of the first testnets to implement the Pectra upgrade. However, due to a misconfiguration of the validator, a chain split occurred, affecting network performance. Although the developer quickly fixed the problem, the incident exposed the technical challenges that two-layer upgrades may bring.
In a discussion on the Ethereum Magicians forum , some community members expressed concerns that the testnet issues could mean similar problems for the mainnet upgrade, which could affect the stability and security of Ethereum if not adequately addressed.
Sepolia Testnet (March 5, 2025)
On the Sepolia testnet, the Pectra upgrade initially ran smoothly, but then some blocks suddenly had empty blocks, meaning there were no transactions in the blocks.
After analysis, several core developers believe that this may be a bug caused by the new consensus layer logic of EIP-6110 (validator deposit on-chain processing), which may affect transaction processing. Therefore, some developers suggest postponing the Pectra mainnet upgrade to ensure that all problems are completely fixed before official deployment.
This situation is similar to the Constantinople upgrade, when developers discovered critical vulnerabilities before the mainnet upgrade and ultimately chose to postpone the release to ensure network security and stability.
Image Credit: Ethereum Core Dev Tim Beiko X (Twitter)
Impact on the Ethereum ecosystem
Institutional adoption
Large financial institutions and enterprises have been closely watching Ethereum’s shift to Proof of Stake (PoS), mainly because the PoS mechanism consumes less energy and can provide stable and predictable returns through staking.
EIP-7251 increases the maximum staking amount for a single validator to 2,048 ETH, which allows institutional investors to invest larger amounts of funds while simplifying operational management, thereby enhancing the attractiveness of Ethereum as an institutional-grade investment asset.
Some market analysts predict that with the launch of the Pectra upgrade, institutional capital may flow into Ethereums staking market in large quantities, thus affecting ETHs liquidity and price trends.
Image Credit: Julien Riedel
DeFi and NFT fields
DeFi platforms are expected to significantly improve user experience with the help of account abstraction (EIP-7702), which is crucial to attracting mainstream users into the Web3 ecosystem. For example:
– DeFi applications can use the transaction batching feature to simplify user operations and reduce gas fees.
– NFT markets can implement a gas fee sponsorship mechanism so that new users do not need to pay gas fees when purchasing NFTs, thereby increasing user conversion rates.
– Enhanced data availability makes Layer-2 solutions more suitable for large-scale NFT issuance or blockchain game dApps, reducing the problem of gas fee surges caused by transaction congestion in the past.
These improvements will help Ethereum attract more Web2 users into the Web3 ecosystem and increase the popularity of blockchain applications.
Image Credit: Pixelplex
Layer-2 Scaling Solutions
Layer-2 solutions like Arbitrum , Optimism , zkSync, etc. are highly dependent on Ethereum’s data availability, and EIP-7742’s dynamic Blob storage adjustment mechanism brings the following advantages:
– Improve Rollup calculation efficiency
– Rollups can dynamically obtain storage data based on actual needs, avoiding excessive data burden on the Layer-1 chain.
– Reduce Layer-2 transaction fees
– Transaction costs are expected to drop further due to improved data storage efficiency.
– Improve transaction throughput – Applications such as DeFi, NFT trading markets, and blockchain games that rely on Layer-2 can support a larger scale of users and transaction volumes.
The coordinated optimization between Layer-1 (Ethereum mainnet) and Layer-2 is the core of Ethereum’s expansion plan, and the Pectra upgrade is the key node in this development path.
Image Credit: Thirdweb
Potential risks and disputes
Concerns about validator centralization
– Raising the staking limit may lead to individuals or institutions with stronger capital strength to further dominate the staking market, forming a centralized trend of large staking pools, and weakening the diverse validator ecosystem that Ethereum should have.
– Currently, the Ethereum PoS mechanism relies on widely distributed validators to maintain network security and fairness, but if a small number of large-scale stakers control too many validation nodes, it may affect the degree of decentralization.
Technical Complexity of Account Abstraction
– EIP-7702 introduces more flexible account management functions, but this also raises the security threshold of smart contracts.
– If the technical implementation of account abstraction is not rigorous enough, it may bring new attack vectors, resulting in contract vulnerabilities being exploited and affecting the security of user assets.
– More rigorous security audits and best practice guidance are needed to ensure developers implement these features correctly and reduce potential risks.
Upgrade delays and deployment risks
– Currently, the testnet has exposed some technical problems, such as the chain split of the Holesky testnet and the empty blocks of the Sepolia testnet.
– Past upgrades (such as the Constantinople upgrade) have been delayed several times due to security issues, so Pectra may also face delays, and developers need to ensure that all issues are fully resolved before the mainnet goes live.
– If the upgrade is too hasty, it may lead to the split of the main network chain or other unstable factors, affecting users’ confidence in Ethereum.
Developers adapt to the challenge
– Many development tools, libraries, and best practice guides need to be updated to support the new features of Pectra upgrades, which may increase the cost of technology adaptation for small development teams.
– Small teams may take longer to adjust to new changes, especially those related to account abstraction and staking management, which may affect the development speed of the DeFi and DApp ecosystem.
Future Outlook
The Pectra upgrade will be an important turning point in the development of Ethereum , which is expected to improve network performance and provide a more efficient and user-friendly experience. However, there are still many unresolved issues, such as whether technical failures in the test network will lead to the postponement of the main network upgrade, and how the community can strike a balance between improving efficiency and maintaining decentralization.
Further development of account abstraction: In the future, there may be new EIP proposals to deepen the concept of account abstraction, so that transaction verification logic can be fully customized at the protocol layer, further improving flexibility and security.
Deeper integration of Layer-2: As Rollups technology matures, the synergy between on-chain data availability (EIP-7742) and off-chain computation execution will continue to be at the core of Ethereum’s scaling plan.
Innovation in staking model: After the implementation of EIP-7251, new staking financial products may appear in the market, such as derivative staking tokens (LST) or algorithmic yield strategies, and automated withdrawals through EIP-7002 will further optimize yield management.
Community forums (such as Ethereum Magicians , EthStaker community ) and the official channels of the Ethereum Foundation will continue to be important platforms for community discussion and collaboration. The future development direction remains extremely flexible and will be jointly promoted and decided by the Ethereum community under the model of open source and iterative development.
in conclusion
The Ethereum Pectra upgrade is a significant step forward in scalability, security, and usability. By integrating improvements from Prague (execution layer) and Electra (consensus layer), this upgrade makes Ethereum ’s evolution more efficient and lays the foundation for future expansion and optimization.
Key EIP Proposals
– Account abstraction (EIP-7702) allows external accounts (EOA) to simulate smart contracts and enhance transaction flexibility.
– Increasing the staking limit (EIP-7251) helps increase the returns of large validators, but it also raises controversy over centralization.
– Enhanced data availability (EIP-7742) and on-chain deposits (EIP-6110) support network expansion and security improvements.
– Smart contract controlled withdrawals (EIP-7002) could revolutionize the way staking is managed.
Pectra brings both opportunities and challenges to validators, developers, and regular users. Testing, strategy adjustments, and familiarity with new features will be key. Before Pectra is officially launched in mid-March 2025, the Ethereum community needs to remain flexible and postpone upgrades when necessary to ensure long-term stability and security.
Pectra embodies Ethereum’s commitment to continuous improvement and bold upgrades, which will be an important step in its future development.
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