Upgrade is imminent, can Pectra boost ETH prices?

Author: Mark Dewolf

Compilation: Vernacular Blockchain

Ethereum (ETH) may be preparing for a revival after prices fell 45% in the first quarter. On May 7, the highly anticipated Pectra upgrade is expected to pass the final test, paving the way for the main network to go online.

This network upgrade is composed of two improvement packages - Prague and Electra - merged, collectively known as Pectra, and contains 9 Ethereum Improvement Proposals (EIPs). These changes are designed to simplify the entry process for new retail traders while making the world's second largest blockchain more attractive to institutions.

Pectra increases the validator staking cap from 32 ETH to 2048 ETH, reducing the need to run multiple validator nodes. By simplifying the staking process, Ethereum managers hope to achieve stronger liquidity lock-in and even promote the flow of funds of large investors.

If the user experience (UX) is improved and large investors can participate more easily, on-chain activity should increase significantly - that's what they expect. Pectra's upgraded Ethereum price trend will be a key indicator of the crypto market in the second quarter. Let's take a look at what's behind it.

What is Ethereum Pectra upgrade?

Pectra is an upgrade of the Ethereum blockchain, aiming to improve staking efficiency, improve user experience, and continue to promote the Rollup-centered expansion roadmap, while enhancing the decentralized features of Ethereum.

Prior to the merger, Prague focused on improvements to the Ethereum execution layer, while Electra focused on upgrading the consensus layer.

The Pectra upgrade has been highly anticipated for months and now has an official launch date: May 7, 2025. If everything goes as planned, this will be the biggest update ever made on Ethereum.

Pectra's main proposals

As of March 2025, the Pectra upgrade includes the following nine EIPs:

• EIP-2537: New precompilation is added, providing 120+ bit security operations, which is higher than the 80-bit security of the existing BN254 precompilation.
• EIP-2935: Save historical block hash to support stateless clients.
• EIP-6110: Provide verifier deposits on the chain.
• EIP-7002: New mechanism that allows verifiers to trigger withdrawals and exits through execution layer withdrawal vouchers.
• EIP-7251: Increases the maximum staking limit for Ethereum validators from 32 ETH to 2048 ETH.
• EIP-7549: Provides additional data availability for Ethereum Layer 2 (L2).
• EIP-7685: Framework that allows verifiers to perform specific actions in smart contracts.
• EIP-7702: Experience improvements for external account (EOA) users.
• EIP-7742: Decouples the Blob counts of the consensus layer and the execution layer.

Among them, EIP-6110, EIP-7002, EIP-7251, EIP-7549 and EIP-7742 will be applied to the consensus layer of Ethereum; while EIP-2537, EIP-2935, EIP-6110, EIP-7685, EIP-7002, EIP-7702 and EIP-7742 will change the execution layer of Ethereum.

The main functions of Pectra

More efficient pledge

Currently Ethereum limits the single validator staking scale to 32 ETH. For larger transactions, this restriction requires the transaction entity to run a large number of validator nodes.

By introducing EIP-7251, the maximum stake limit for each validator node will be increased from 32 ETH to 2048 ETH. However, the minimum validator pledge threshold remains at 32 ETH to not hinder personal pledge.

The increase in the maximum stake limit will allow large validators to consolidate fewer nodes running, reducing the number of peer-to-peer messages and digital signatures.

Small validators can still increase staking instead of accumulating in multiples of 32 ETH to run multiples of multiples of validator nodes.

As of December 2, 2024, Ethereum has more than 1.07 million daily active validators. A large number of validators can lead to higher computing and bandwidth loads on the network.

User experience improvement

The Pectra upgrade includes multiple EIPs designed to improve the user experience for Ethereum users and developers.

EIP-7702 will introduce a new transaction type, allowing multiple operations of the same user to be completed in one transaction. The upgrade will also allow the account to sponsor gas fees for another account. We have discussed this "gas abstraction" before.

"Permission Degradation" is a new feature introduced by EIP-7702 that allows users to authorize spending that meets the criteria. For example, authorize spending a specific type of ERC-20Token, or 2% of the total daily balance.

EIP-2537 will also introduce new features used in zero-knowledge cryptography, while EIP-7002 will make the Ethereum staking pool experience more trustless by introducing a mechanism to trigger validator exit for smart contracts.

Improved Rollup extension

The Pectra upgrade further developed based on the data blobs introduced by the original Danksharding, which greatly reduced the gas costs of Ethereum Layer 2 (L2).

EIP-7594 will introduce a new protocol called PeerDAS that allows nodes to download only part of the data to verify the availability of L2 Blob data.

How may Pectra affect the value of ETH?

In a research report released last October, Galaxy Vice President of Research Christine Kim wrote that as Ethereum advances its Rollup-centric expansion roadmap, the impact of the mainnet (L1) protocol upgrade on ETH value will gradually decrease.

She added that upgrades on Tier 2 (L2) may have the greatest impact on ETH value, as Ethereum revenue may be driven primarily by user activity on L2 in the future.

From $3 to $4,000, downward: Ethereum’s price history as of April 6, 2025. Source: CoinMarketCap

Christine Kim pointed out: "To promote the upgrade of user experience, interoperability, decentralization and security on L2 is more important to Ethereum's value than optimization and improvement at the base layer."

summary

Ethereum’s Rollup-centric expansion plan has sparked disagreement among analysts around its uncertainty that could have affected market valuations over the past year.

However, network upgrades like the original Danksharding and Pectra show a high degree of planning and effort. Ethereum—decentralized applications (dApps), decentralized finance (DeFi), and the pillars that drive many parts of the modern crypto market—will undoubtedly benefit from greater efficiency and flexibility.