HTX Research has released a comprehensive analysis of the forthcoming Pectra upgrade, anticipated to be one of the most significant enhancements in Ethereum's history since the Dencun upgrade in March 2024. The Pectra upgrade, a combination of the Prague and Electra upgrades, is scheduled for Q1 2025 and aims to address key issues such as scalability, security, and user experience.
The Pectra upgrade will incorporate several Ethereum Improvement Proposals (EIPs) designed to benefit various sectors within the Ethereum ecosystem. Key proposals include EIP-7702, EIP-3074, and EIP-7623, which will directly impact projects in the modular, chain abstraction, and account abstraction (AA) wallet sectors. Additionally, EIP-7594, known as PeerDAS, will introduce Data Availability Sampling (DAS), expected to be advantageous for Zero-Knowledge (ZK) Prover networks and the broader ZK field.
EIP-7702, a groundbreaking proposal for AA wallets, will enable externally owned accounts (EOAs) to execute smart contract code, leading to the development of feature-rich and user-friendly wallets. This could result in the creation of complex applications that attract Web2 users and present new opportunities in the DeFi space. EIP-3074 will allow EOAs to function like smart contract wallets without deploying a contract, enabling more complex transaction schemes such as gas sponsorship and batch transactions.
One of the significant changes introduced by EIP-7623 is the increase in calldata costs, which will reduce the maximum block size and improve overall Layer 2 performance. This proposal aims to enhance Ethereum's efficiency by optimizing transaction processing speeds and resource usage, ultimately lowering transaction costs and improving network performance.
The PeerDAS proposal, EIP-7594, will significantly enhance Ethereum's scalability and resilience by distributing data availability responsibilities across the network. This approach will improve the network's capacity to support rollups and their data availability needs, making Ethereum more robust and efficient.
In addition to these major proposals, other EIPs included in the Pectra upgrade aim to lower Layer 2 data layer costs, enhance transaction speeds, and reduce data storage costs. These enhancements will collectively improve Ethereum's overall performance and user experience, making it more competitive in the blockchain space.
The Pectra upgrade is also expected to have a favorable impact on the valuation of venture capital (VC) projects. Amid the current anti-VC sentiment, Q3 might offer a favorable window for institutional investors to enter the primary market, particularly in DeFi and innovative DeFi projects. The price-to-sales ratios for DeFi projects have reached a historic low, making this an opportune time for investment.
Overall, the Pectra upgrade represents a significant milestone in Ethereum's strategic development. By addressing key issues related to scalability, security, and user experience, Pectra will enhance the Ethereum ecosystem's overall functionality and competitiveness. As the upgrade approaches, it will be crucial for developers, investors, and users to stay informed about these changes and their potential impacts on the blockchain landscape.
