As we enter the Web 3 era, Ethereum remains the frontrunner.

Written by: Christine Kim, Galaxy

Translated by: Bai Shui, Jinse Finance

In this report, we will outline the Pectra upgrade and its expected timeline for mainnet activation by October, as well as for validators, ETH holders, and investors. Finally, the report shares insights into the protocol development occurring in parallel with Pectra, such as historical expiration, built-in proposer-builder separation (ePBS), and Verkle tree migration.

How It Started

Prague-Electra, abbreviated as "Pectra," is the name of the next Ethereum upgrade. Aside from the name, all other details regarding the upgrade have been constantly changing since developers began planning as early as November. However, when discussing what Pectra will include, it became clear that developers should reach a consensus on the primary issues of the Ethereum protocol beyond the Verkle transition. Developers unanimously agree that the Verkle transition should be the focus of the upgrade following Pectra, but it remains unclear which code changes should be prioritized before Verkle.

As background, the Verkle transition is a significant reform of Ethereum's state data structure. The state refers to the current balances of all Ethereum accounts, the contract code that controls them, and the stored data. Developers plan to migrate all state data from the Merkle Patricia Tree structure to the Verkle structure. This will enable nodes to generate smaller proofs about the state data and make it easier to pass them to other nodes. In the future, developers envision that nodes run by users will not need to maintain Ethereum's state records, referred to as "stateless clients." These lightweight nodes, which can run on resource-constrained devices, will receive the necessary information to validate blocks and rely on proofs generated by other nodes in the network that store state records (referred to as "stateful clients") to advance the chain. Essentially, the Verkle transition aims to improve Ethereum's decentralization by making it easier for users to run nodes.

Due to the complexity of restructuring Ethereum's state database, developers agreed to reserve the next upgrade after Pectra (called Fulu-Osaka, abbreviated as "Fusaka") specifically for Verkle. They agreed that Verkle would not introduce any other significant changes to the protocol to minimize the technical risks of implementing the upgrade. Developers expect Pectra to be a small upgrade that they can complete easily before focusing all their attention on the more daunting task of implementing the Verkle transition.

Progress So Far

By the end of August 2024, Pectra will become the largest upgrade in Ethereum's history in terms of the number of Ethereum Improvement Proposals (EIPs). Developers agreed to include 20 EIPs in Pectra and considered adding more EIPs to that list in early September. However, the broad scope of Pectra has been a source of controversy and concern among Ethereum developers and other stakeholders. Due to its scale, Pectra requires extensive testing and simulations to ensure that the planned implementation of the 20 EIPs does not contain hidden bugs or vulnerabilities, especially when implemented in tandem.

As early as May 2024, a group of Ethereum Foundation engineers responsible for organizing Ethereum upgrade testing, the EthPandaOps team, shared a blog post suggesting splitting the Pectra upgrade into two parts. At that time, this idea was not seriously considered due to concerns that it might delay the planned Verkle transition after Pectra activation. Ethereum Foundation researcher Alex Stokes brought up this idea again during the All Core Developers Execution call #196 in early September. This time, developers were more agreeable to the idea and insisted that doing so would allow them to deliver the first part of the upgrade within six months.

As a result, all EIPs included in Pectra are planned to be implemented across two hard forks instead of one. The scope of the first hard fork will include 8 of the 20 EIPs from the Pectra list. For the remaining 12 EIPs on the list, developers will continue to develop them in parallel so that they can be implemented on the mainnet after the initial 8 EIPs.

Pectra Overview

As of October 2024, developers have agreed to expand the scope of Pectra to include an additional code change, EIP 7742. Including this code change in Pectra means that developers may also increase blob capacity within Pectra. There are now nine EIPs. The Pectra upgrade is tentatively scheduled for mainnet activation in early 2025 and may include the following 10 code changes:

Overall, Pectra encompasses a series of updates for Ethereum, expected to achieve three outcomes:

• Fix key flaws in the protocol as a proof-of-stake blockchain
• Improve the user experience (UX) when interacting with smart contract applications on Ethereum
• Enhance Ethereum's data availability capabilities

On the surface, the user experience improvements and enhancements to Ethereum as a DA layer aim to encourage end users to interact with smart contracts on rollups in a cheaper manner rather than directly on Ethereum. However, improvements to the Ethereum user experience may create a "trickle-down effect," meaning that due to their implementation on the mainnet, they are likely to be adopted by Rollups, benefiting both Rollup and Ethereum end users.

Notably, Pectra does not include any code changes aimed at reinforcing ETH as a "sound currency" or a store of value narrative. Furthermore, none of the EIPs directly enhance Ethereum's quality as a censorship-resistant blockchain, a concern that has become a priority for developers to address since the Merge upgrade, as the number of known regulated entities participating in the block-building process has increased.

Over 50% of blocks on Ethereum are generated by relays compliant with OFAC standards, meaning that the entities responsible for creating these blocks deliberately exclude transactions interacting with Ethereum addresses listed in the U.S. market.

Developers are working on code changes to reduce ETH issuance and improve censorship resistance in future upgrades. However, these are not the focus of Pectra.

Fusaka Overview

The name of the upgrade following Pectra is Fusaka. Since developers have not finalized the scope of the upgrade, it is difficult to estimate the timeline for Fusaka. Currently, developers are keen to prioritize the other 12 code changes from the original Pectra EIP set, namely EOF code changes and PeerDAS. However, after the Pectra upgrade is completed, developers will reassess the EIPs based on the priorities and readiness for Fusaka.

For reference, below is a list of 12 code changes that were initially included in Pectra but have since been removed from the upgrade.

Note that, aside from the first EIP, the other 11 EIPs are code changes that alter various aspects of the Ethereum Virtual Machine (EVM). These EVM-centric code changes collectively achieve the "EVM Object Format," or EOF for short. EOF significantly changes how the EVM builds and processes code, and it is expected to improve the experience for smart contract developers by making smart contract code execution more predictable, secure, and cost-effective.

In addition to PeerDAS and EOF, here is a list of all potential code changes that could be considered for inclusion in Fusaka as of October 2024:

All initiatives listed above, except for account abstraction and Verkle, have been discussed as potential candidates for the Pectra upgrade but were not included due to a lack of consensus on the code changes. For many of these initiatives, extensive research is still needed before their designs are ready for implementation. The last column of the table ranks the readiness of the aforementioned code changes from 1 to 3, where 3 is ready for immediate implementation and 1 is in the early stages of research and development.

Among the initiatives mentioned above, the inclusion of the list and SSZ transition is the most mature. Among all parallel initiatives, account abstraction is currently the least likely to be ready for Fusaka, as the path to implementing full account abstraction on Ethereum remains unclear, and many parts of that roadmap will be affected by EIP 7702 in Pectra.

Given the uncertainties associated with these parallel initiatives, it is currently unhelpful to assess their readiness for the mainnet or their impact on ETH value. However, by 2025, a series of 10 code changes is likely to affect Ethereum stakeholders.

The next part of this report will explain in more detail the expected impact of the EIPs in Pectra on network stakeholders and ETH value.

Key and Non-Key Fixes

One EIP in Pectra is critical for Ethereum's operation as a proof-of-stake blockchain. EIP 7251 increases the maximum effective balance for validators from 32 ETH to 2048 ETH and allows existing validators with a maximum effective balance of 32 ETH to consolidate their stakes. This is expected to reduce the number of Ethereum validators, which exceeded 1 million as of September 2024.

Simulations conducted by Ethereum Foundation (EF) engineers show that the protocol encounters serious network issues at 1.4 million validators. EIP 7251 is expected to alleviate network pressure by encouraging the consolidation of staked ETH. For more information on the fundamental principles behind large validator set sizes, please read this Galaxy Research report.

The Fundamentals Behind 32 ETH Validators

The Beacon Chain was initially designed for validators with a maximum effective balance of 32 ETH, as protocol developers wanted to encourage a large number of participants to engage in the proof-of-stake consensus protocol. Developers conservatively estimated that with 32 ETH, the Beacon Chain would attract around 312,500 validators, whose aggregated cryptographic signatures would be sufficient to secure the nascent chain.

When the Beacon Chain launched in December 2020, the price of ETH was around $600, meaning that users with less than $20,000 could run their own validators and independently earn staking rewards. At that time, staking rewards did not include transaction fees or MEV rewards, and there was considerable risk in staking since users could not withdraw their funds.

In addition to encouraging participation, the choice of a 32 ETH effective balance was made because the original design of the Beacon Chain required each validator to maintain the same effective balance for "sharding" to scale. If all users were required to maintain a staking balance above 32 ETH, developers were concerned that there would not be enough validators to secure the chain. Conversely, if all users kept their staking balances below 32 ETH, there were concerns about an excessive number of validators placing unnecessary burdens on the Ethereum network layer.

Beyond the maximum effective balance of 32 ETH, developers also set a number of other constants and parameters in the protocol based on rough estimates of future staking demand on Ethereum. If the developers' estimates were significantly inaccurate, they believed they could adjust the chain's economics and staking parameters through subsequent hard forks. Today, the rapid adoption of liquid staking solutions like Lido and Coinbase has sparked discussions among developers about lowering Ethereum's issuance curve.

Finally, there may be erroneous assumptions about the true capacity of the Ethereum network layer. Ethereum founder Vitalik Buterin wrote in a 2021 blog post that the design specifications of the Beacon Chain could realistically support the overhead of 4.1 million validators or stake the entire ETH supply with a maximum effective balance of 32 ETH. In reality, due to various upgrades and changes in client implementations, it is unlikely that Ethereum's network layer can support 1.4 million validators, let alone over 4 million.

Implementation Details of EIP 7251

EIP 7251 is a complex code change that needs to be implemented. It fundamentally alters how the protocol calculates validator rewards, penalties, and withdrawals. The protocol will not base these calculations on the number of active validators but rather on the combined effective balance of validators, which can range from at least 32 ETH to 2048 ETH for each validator.

In particular, during the process of changing the relevant penalty reductions, developers discovered an edge case where validators with smaller effective balances would face disproportionately harsher penalties compared to those with larger effective balances. This edge case has been addressed during the Pectra testing process. As of October 2024, developers are still identifying bugs in the EIP 7251 specification and are committed to resolving these issues.

In addition to updating the calculations, the EIP introduces new operations for validators to consolidate existing validators and to downscale the initial penalty reductions for validators with larger effective balances to encourage consolidation.

Once activated, it remains unclear how quickly large staking entities will be able to consolidate their validators and reduce network pressure. There are concerns that any peaks in the size of the validator set from now until the consolidation of validators takes effect could negatively impact network health and participants running validators on low-end hardware or limited internet bandwidth.

The following chart shows the growth in the number of active validators since the Dencun upgrade. The Dencun upgrade refers to the maximum number of validator entries per epoch on Ethereum being reduced from 15 to a constant value of 8. The chart provides a forecast of the growth of the Ethereum validator set based on the activity of new validator entries since the validator entry cap was reduced to 8. Notably, the following forecast is conservative and does not account for potential future catalysts for staking demand, such as the maturation of restaking protocols like Eigenlayer on Ethereum.

Non-Key Fixes

In addition to EIP 7251, the protocol includes several non-key fixes and improvements that will be activated in the Pectra upgrade. They include:

• EIP 7549, moving the committee index outside of proofs - To make CL client software more efficient, this code change introduces a restructuring of the validator proof messages. It is expected to reduce network load on validator nodes, although to a lesser extent than EIP 7251.
• EIP 6110, providing validator deposits on-chain – This code change shifts the responsibility for validating new staked ETH deposits from CL to EL. By doing so, developers can enhance the security of deposits, reduce the protocol complexity for CL clients, and improve the staking user experience by reducing the latency between depositing 32 ETH on EL and activating new validators on CL.
• EIP 2935, providing historical block hashes from state – Introduces changes to EL so that proofs of historical blocks can be generated from state. It may provide additional functionality for smart contract developers, as they will be able to access information about Ethereum's state from previous blocks. Primarily, this is a necessary code change to prepare for the Verkle transition.
• EIP 7685, general execution layer requests – Creates a general framework for storing requests to CL triggered by smart contracts. As smart contract-based staking pools become increasingly popular, there is a need to enable smart contracts to directly trigger validator withdrawals (EIP 7002) and merges (EIP 7251) on CL. This code change introduces a protocol framework to store these types of requests for easy handling by CL.

Expected Impact

The key and non-key fixes activated in Pectra will primarily affect validator node operators, who will need to update their operations to take advantage of the higher effective balances from EIP 7251, the efficiency improvements from EIP 7549, and the minor user experience enhancements from EIP 6110. The former will benefit node operators in future upgrades when stateless clients become a reality, while the latter improves the implementation of code changes like EIP 7251 but does not otherwise enhance the current state of the network.

End users and ETH holders are not expected to directly benefit from these five code changes. These code changes primarily benefit the health and resilience of Ethereum as a proof-of-stake blockchain. In the long run, they hold a positive outlook on the value of the protocol as they ensure that it can continue to operate securely and smoothly. However, they do not introduce new features that could substantially improve the user experience for end users, smart contract developers, or aggregators. Therefore, they are not expected to have a significant impact on ETH value.

As with any network-wide upgrade on Ethereum, volatility in ETH may increase around the Pectra upgrade, and any unexpected errors or failures related to the upgrade could lead to negative price fluctuations. It is important to clarify that given the extensive battle testing these code changes underwent before activation on the mainnet, the likelihood of the Pectra upgrade failing is low. Thus, unless there are temporary fluctuations in ETH before and shortly after the upgrade, the code changes related to the fixes in Pectra are not expected to have a long-term positive or negative impact on ETH value.

Affected Stakeholders: Validator Node Operators

Expected Impact on ETH: Neutral

User Experience Improvements

There are three EIPs in Pectra that will introduce user experience improvements for Ethereum's end users and smart contract developers. While pursuing a rollup-centric roadmap, developers are also working together to enhance Ethereum's value proposition as a leading general-purpose blockchain.

EIP 2537, precompiled operations for the BLS12-381 curve – Adds new functions to efficiently perform operations on the BLS12-381 curve, an algebraic structure widely used in zero-knowledge cryptography. Zero-knowledge cryptography can provide various benefits for blockchain-based applications, including stronger privacy guarantees, security, and scalability. The ability to perform operations on the BLS curve will benefit applications and rollups built on Ethereum that are already using or seeking to integrate zero-knowledge proof systems into their operations.

EIP 7002, execution layer-triggered withdrawals – EIP 7002 creates stateful precompiles, a mechanism for modifying EVM state for validator withdrawals. Currently, validators on the Beacon Chain can only exit through the intervention of the validator withdrawal key owner (usually the operator of the validator). EIP 7002 introduces a smart contract mechanism that can hold validator withdrawal credentials and use them to trigger validator exits without manual intervention from the validator operator. It will provide more trustless designs for staking applications and allow existing staking applications to eliminate trust assumptions regarding the honesty of their validator node operators and the security of these applications.

EIP 7702, setting EOA account code – Creates a new transaction type for end users to add short-term functionality to their user-controlled Ethereum accounts, such as:

• Transaction batching, authorizing multiple on-chain operations by signing a single transaction
• Sponsorship, paying transaction fees on behalf of another account
• Permission downgrades, authorizing specific spending conditions for account balances

Given that most users execute transactions on Ethereum through wallet providers, wallet developers will need to leverage the new transaction types and incorporate these functionalities into their designs in a way that is easily accessible to users.

Expected Impact

Unlike the key and non-key fixes, these code changes will directly enable the development of more feature-complete applications on Ethereum. EIPs like 7002, 2537, and 7702 will respectively implement more trustless staking pool designs, enhanced privacy for decentralized finance protocols, and secure user-controlled accounts.

Affected Stakeholders: End Users, Smart Contract Developers

Expected Impact on ETH: Positive

DA Improvements

As mentioned earlier in this report, another code change may be included in Pectra. Developers are considering a slight increase in blob gas targets to enhance Ethereum's scalability as a data availability (DA) layer. There are many larger and more complex code changes related to improving DA capabilities through the EIP 7594 (PeerDAS) upgrade. However, since EIP 7549 will no longer be activated in Pectra, there have been suggestions to introduce simpler changes to lower DA costs.

Currently, Ethereum can process a maximum of 6 blobs per block, dynamically adjusting the cost of these blobs to target an average of 3 blobs per block. Francis Li, a developer from Layer-2 rollup Base, proposed increasing the target number of blobs per block to 5 and the maximum number of blobs per block to 8.

In Li's proposal, he noted that even conservatively increasing the target blob count to 4 instead of 3 would help build Rollup teams on Ethereum. Developers largely support the increase in blob targets in Pectra. However, confirmation of this view and the formal inclusion of DA improvements in Pectra still await decisions in future ACD calls. Currently, developers have agreed to include EIP 7742 in Pectra, which will pave the way for changing Ethereum's blob capacity by adjusting CL.

EIP 7742 decouples blob counts between CL and EL - Maximum and target blob limits are hardcoded on both EL and CL. EIP 7742 allows CL to dynamically adjust maximum and target blob limits so that future changes to DA capacity do not require hard forks on both layers but can be adjusted specifically through CL.

In addition to EIP 7742 and the increase in blob capacity, developers are weighing two additional code changes related to optimizing Ethereum's DA capabilities in Pectra or Fusaka:

EIP 7762 increases MINBASEFEEPERBLOB_GAS - When the demand for blobs exceeds the target rate (currently 3 blobs per block), the protocol automatically adjusts the mandatory base cost of blobs upward. EIP 7762 raises the minimum base cost of blobs so that the blob fee market can be more sensitive to fluctuations in blob demand and achieve price discovery for blobs more quickly.

EIP 7623 increases the cost of call data - In addition to blobs, rollups can also publish arbitrary data to Ethereum using the call data field of transactions. However, utilizing the call data field of transactions is generally more costly for rollups. EIP 7623 aims to further increase the cost of call data to reduce the maximum size of Ethereum blocks. As Ethereum developers increase block size by adding blob capacity, they hope to prevent edge cases where validators propagate abnormally large blocks containing a large amount of call data and the maximum number of blobs.

Increasing blob throughput in Pectra is a contentious topic among developers, as it may reduce the number of independent stakers operating on the network, negatively impacting Ethereum's decentralization. Independent stakers refer to users who stake their own ETH and run their staking operations at home or through cloud providers, rather than relying on staking pools or other intermediary services. Compared to other types of stakers, independent stakers operate validators on the most resource-constrained devices.

An increase in blob throughput may raise the computational requirements for operating validators, potentially leading some independent stakers to shut down their machines. During ACDE #197, developers shared anecdotal evidence that some independent stakers have been struggling to operate their post-Dencun validators. Developers have agreed to conduct data-driven research on the health of independent staking operations before deciding to increase blob capacity in Pectra.

Expected Impact

In the short term, Ethereum's DA improvements are expected to reduce protocol revenue from Layer-2 rollups (L2), increase the profit margins of L2 sequencers, and lower transaction fees for L2 end users. These impacts are expected to be similar to those observed after the activation of EIP 4844 in the Dencun upgrade.

Affected Stakeholders: Layer-2 Rollups, L2 End Users, ETH Holders

Expected Impact on ETH: Negative

Pectra Timeline Analysis

Developers have discussed two alternative code changes to include in Pectra in case changes to the blob fee market are ultimately not included in the upgrade. Given that blob capacity may increase in Pectra, these two code changes are less likely to be included. They are EIP 7782 and

EIP 7782, proposed by Nethermind developer Ben Adams, reduces Ethereum's slot time from 12 seconds to 8 seconds. This change in slot time would effectively increase Ethereum's transaction throughput by 50% and reduce transaction confirmation times by 33%. Concerns raised by developers during ACDE #198 and ACDC #144 regarding this proposal include that it may accelerate the rate of state growth, making the Verkle transition more challenging. Additionally, Ethereum Foundation researcher Francesco D'Amato indicated that changes in slot time could negatively impact positive research initiatives such as the built-in proposal builder separation (ePBS) and inclusion lists (IL).

EIP 7783, proposed by Erigon developer Giulio Rebuffo, is a relatively easier code change for developers to implement as it does not require a hard fork. EIP 7783 creates a mechanism for client teams to gradually increase gas targets over time. Increasing gas targets will raise the maximum number of transactions that can be included in a block. Rebuffo's proposal does not specify a concrete gas target but suggests a mechanism for developers to choose targets and gradually increase them safely to this threshold. In a recent call in October 2024, developers discussed the potential for implementing EIP 7783 shortly after the Pectra upgrade.

Adding any new EIPs in Pectra could delay the activation of the upgrade on the mainnet. Furthermore, the longer developers delay deciding the final scope of Pectra, the longer it will take to upgrade the public Ethereum testnet. As of October 2024, developers do not seem to be close to finalizing the scope of Pectra. Therefore, the public testnet upgrade for Pectra is unlikely to go live before the end of this year.

Assuming the scope of Pectra is finalized in January or early February next year, developers will need to test any new content of Pectra on a private test network (also known as a development network) before proceeding to upgrade the public Ethereum testnet. Reserving at least a month for testing additional code changes in Pectra, it is suggested that developers could start the public testnet upgrade in March, aiming for a temporary activation of the mainnet upgrade sometime in April or May.

These timelines are estimates and may change based on when developers finalize the scope of Pectra in the coming months and the complexity of the code changes they decide to ultimately add to the upgrade.

Other Catalysts for ETH Value

So far, Pectra is a mixed bag of code changes, some of which are expected to enhance the experience for users and smart contract developers. Due to the streamlined scope of Pectra, this upgrade is not expected to have a significant impact on ETH value. Beyond Pectra, Ethereum has more follow-up updates that may more directly affect ETH value, such as reducing issuance and implementing PeerDAS initiatives. However, as mentioned earlier in this report, it is difficult to predict when these changes can be activated on the mainnet.

It is worth noting that as Ethereum further pursues DA scalability improvements according to its "rollup-centric roadmap," the impact of protocol upgrades on ETH value should diminish over time. In the long run, as applications and users migrate to L2, Ethereum's revenue may primarily be driven by user activity on L2. Upgrades occurring on L2 can enhance user experience, interoperability, decentralization, and security on these networks, which are more important for Ethereum's value than optimizations and improvements on the base layer. While upgrades like Pectra will further enhance the protocol's decentralization and usability, they are less likely to attract a new wave of users and drive the adoption of decentralized applications, as rollups can scale to meet this demand while Ethereum cannot. Therefore, when assessing factors driving ETH value, applications built on rollups and rollup-based protocol upgrades (which further enhance the functionality of applications built on rollups) are key to the analysis.

A common resistance to the rollup-centric roadmap is the concern that Ethereum may become too cheap due to the DA layer or that revenue from rollups may be too low to sustain ETH's value. These arguments underestimate the overall potential market for decentralized applications. Currently, cryptocurrency use cases are disrupting every industry in the world, as public blockchains have the potential to fundamentally change human coordination activities, just as artificial intelligence (AI) has the potential to disrupt all industries by fundamentally changing the way digital content is generated across all sectors.

While scalability improvements like EIP 4844 or PeerDAS may reduce protocol revenue in the short term, they are laying the groundwork for Ethereum to support more on-chain activity than what is possible on Ethereum L1. Gaming, fundraising, decentralized finance, and social media are just a few examples of application types that have historically led to spikes in Ethereum transaction volume and fees. These applications leverage Ethereum's network effects, decentralization, censorship resistance, and composability. Theoretically, applications on rollups will be able to utilize all these advantages of Ethereum, in addition to significantly reduced fees and enhanced functionalities (such as different types of virtual machines, programming languages, and account management).

However, in practice, rollups do not meaningfully inherit attributes such as Ethereum's decentralization, censorship resistance, or composability. While they can effectively lower transaction costs, they do so at the expense of decentralization and security. In other words, rollups do not meaningfully scale Ethereum beyond just lowering transaction costs. Users face too many trade-offs when migrating their activities and applications from L1 to L2. Other scaling solutions developed on alternative Layer 1 blockchains, as well as infrastructure projects like restaking solutions and ZKVM, are underway. Pure DA improvements may not drive a new wave of adoption for Ethereum or rollups built on it until rollups as a technology mature and benefit from Ethereum's decentralized characteristics.

Conclusion

Despite the uncertainties surrounding the scope and timeline of Pectra, Ethereum remains a leader as we enter the Web 3 era, where human coordination primarily occurs through decentralized blockchain technology rather than centralized internet protocols. To achieve this, Ethereum must continue to scale as a decentralized technology while combating centralized forces such as Maximal Extractable Value (MEV) and transaction censorship. While Ethereum certainly faces competitors in realizing this vision, dominating the Web 3 blockchain space remains a game that Ethereum cannot afford to lose.

Ethereum continues to maintain the highest network effects among all general-purpose blockchains. For smart contract developers, it remains the most battle-tested blockchain and the most researched blockchain among researchers and developers for addressing challenges related to scalability, MEV, censorship, user experience, and more. However, as Ethereum developers pursue a rollup-centric roadmap, the importance of Ethereum as a technology and the significance of Ethereum upgrades should diminish, as the solutions to the biggest challenges facing Web 3 will be inherited by rollups.

Pectra will introduce user experience-focused code changes, which are expected to attract new users and smart contract developers into the Web 3 space. However, this may be one of the last few upgrades where code changes on the protocol directly impact users and ETH holders. As users migrate to rollups, protocol revenue will increasingly be driven by rollup activity, and the most important code changes for Ethereum stakeholders will be those made on rollups. Therefore, it is crucial to analyze the maturity of rollups as a technology and their ability to meaningfully inherit Ethereum's security and scale it to millions of new users.

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