After repeated delays (in true Ethereum fashion) the long-awaited Pectra upgrade is set to go live on May 7.
This is shaping up to be a key milestone in this blockchain’s history — and it’s been compared to the significance of The Merge back in September 2022.
But what is it all about? How will it affect ETH owners and validators? And will Pectra finally help snap this cryptocurrency’s losing streak? Let’s find out.
What is Pectra?
A portmanteau of “Prague” and “Electra,” Pectra actually consists of 11 different Ethereum Improvement Proposals, otherwise known as EIPs for short.
Headline benefits include a much-needed boost to scalability, which will ensure that the network can process a greater number of transactions per second.
This is regarded as a crucial step to ensure Ethereum’s infrastructure can handle growing demand as tokenization use cases and institutional interest grows.
Co-founder Vitalik Buterin has long warned that high gas fees mean this blockchain is too expensive for consumers in emerging economies — but Pectra is designed to drive down these costs for end users.
This upgrade also marks a key step forward in two key Ethereum concepts: account abstraction and social recovery.
EIP-7702 enables wallets to execute smart contracts — and potential use cases here include settling gas fees using cryptocurrencies other than ETH, as well as bundling multiple transactions together and completing them at once.
The developer platform QuickNode argues that, when fully implemented, “account abstraction aims to make Web3 so seamless that everyday users might not even notice they’re using it, while still reaping all its benefits.”
Buterin has also been a passionate advocate for social recovery — mechanisms that can help crypto stored in a wallet from being lost forever because of access issues or fat-fingered mistakes.
Pectra will deliver safeguards in the event a private key is lost — in essence, features that are taken for granted in the traditional finance world. Enhancing simplicity and usability here could help drive adoption.
Another key improvement proposal, EIP-7251, is designed to benefit validators. Right now, the maximum amount that a single node can stake stands at 32 ETH. That will be expanded to 2,048 ETH.
When Does Pectra Go Live?
According to the Ethereum Foundation, Pectra is scheduled to go live on May 7 at 10.05am UTC — at epoch 364032. There will undoubtedly be a flurry of watch parties as the upgrade is implemented. Famously, pandas began to pop up in code when Proof-of-Stake came into force after The Merge.
Coinbase has confirmed that it will be temporarily pausing ETH deposits and withdrawals for about 55 minutes while the upgrade is taking place — a move that the exchange says is designed “to ensure user fund safety.”
It’s also hoped that the upgrade will help inject a bit of much-needed bullish momentum into Ethereum’s narrative. The world’s second-largest cryptocurrency has plunged by 42% over the past year, while Bitcoin has accelerated 50% over the same period.
This has partly been driven by the rise of Layer 2 networks, with meme coin mania concentrated on the Solana blockchain. That’s a marked departure to previous trends in the crypto space — think ICOs, DeFi, NFTs — that were always based on Ethereum.
P2P.org’s chief revenue officer Alexander Loktev told Cryptonews that while there might be a modest uptick in ETH prices once Pectra is implemented, he expects “nothing revolutionary” overnight.
“The real gains come after implementation when folks actually experience the lower slashing risks and better yields.”
That being said, Loktev argues that Pectra will be “rocket fuel” for ETH in the long term.
“Better staking economics means more ETH locked up, plain and simple. When you drop slashing penalties by 128x and add native auto-compounding, you’re removing the main barriers keeping conservative money on the sidelines. The operational efficiencies from validator consolidation will flow through to higher yields, creating a snowball effect.”
Loktev stressed that P2P.org continues to have faith in the Ethereum Foundation’s leadership. He said the staking infrastructure provider has been “betting on Ethereum since 2018, and every upgrade reinforces that conviction.”
“While competitors make grand promises, Ethereum just keeps delivering meaningful improvements to its economic engine.”
Other green shoots that could help ETH in the long run relate to the approval of exchange-traded funds on Wall Street that offer staking rewards — as institutional investors are currently unable to benefit.
Bloomberg Intelligence analyst Eric Balchunas believes inflows into ETH ETFs — which have proven disappointing since they were approved by the SEC last summer — could accelerate if prices rally.
The jury’s out on whether Pectra will deliver that bounceback.
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