Key Insights
The Ethereum network is planning a new upgrade by late 2024 or early 2025.
This upgrade is known as the Pectra upgrade—a combination of the Prague and Electra upgrades.
It is expected to improve the Ethereum network in terms of scalability, security, and usability.
Analysts generally see a $4,000 price target for Ethereum in the short term.
However, analysts from VanEck see Ethereum hitting a price of $7,330 by 2030, down from a $22,000 prediction.
Ethereum, Bitcoin’s sister cryptocurrency and biggest rival is set for another massive upgrade:
The Pectra upgrade.
According to reports, this latest upgrade will combine the previously planned Prague and Electra upgrades.
The resulting Ethereum network will become more scalable, secure, and better in terms of user experience.
But what exactly does Pectra entail? More importantly, how will it affect Ethereum users and investors?
Understanding the Ethereum Pectra Upgrade
A simple way to explain Pectra would be to understand the network itself first.
The Ethereum network is split into the execution layer (which is responsible for smart contracts) and the consensus layer (which manages the PoS mechanism).
The incoming upgrade will merge updates to both layers with a set of EIPs (Ethereum Improvement Proposals).
Incoming Ethereum upgrades with Pectra
Source: Twitter
This upgrade will go live in late 2024 or early 2025, marking the third major Ethereum upgrade since the Merger in September 2022.
Remember the merge? Ethereum’s migration from PoW to PoS.
Pectra will build on some of these major upgrades over the years including the Shanghai-Capella (Shapella) and Dencun upgrades.
It will, therefore, prepare Ethereum for more advanced solutions like Verkle trees and Layer 2 improvements.
Some Big Ways Pectra Will Change Ethereum
One of the first ways Pectra will change Ethereum is via Account Abstraction.
Think of account abstraction as a way to simplify user experience and introduce features like:
Smart contract wallets
Gas fee payments in any token
Enhanced security options
All of the above makes the network more user-friendly, especially for newcomers with little blockchain technology experience.
Pectra will also increase the maximum validator stake limit from 32 ETH to 2048 ETH. This change will allow larger operators to consolidate their stakes, reduce the number of active validators, and make the network more efficient.
The EIP-7002 that Pectra introduces will give Validators greater control over their staked ETH.
Advancements with Pectra
Source: Twitter
They can, therefore, trigger partial withdrawals directly as the network becomes more liquid and staking-efficient.
All of the above is without mentioning the incoming ease of deploying smart contracts that the EIP-7692 brings.
Ethereum’s TVL, user base and adoption will expand before long, as the network strengthens.
As explained, Pectra’s account abstraction will introduce lower transaction fees.
It will also enable developers to create cheaper and more efficient smart contracts.
Before long, Ethereum will become more accessible to everyday users as its Dapps flourish.
It is important to note that Pectra isn't a complete patch to Ethereum’s scaling issues.
However, it does lay the groundwork for more advanced solutions.
How Will This Upgrade Affect Price?
Now, to the big part: How will the Pectra upgrade affect the Ethereum network?
To start with, the announcement of major upgrades often generates excitement and leads to short-term price gains.
Interestingly, Ethereum has been on a bullish spree.
Ethereum’s bullish performance
Source: CoinMarketCap
The cryptocurrency recently broke above the $3,000 mark and is going strong with a near-30% price increase over the last month.
While the long-term effects of the Pectra upgrade might take time to materialize, analysts have a few ideas.
Analyst Crypto Damus, for example, sees the cryptocurrency hitting a $4,000 price tag soon, as early as H1 in 2025.
Can Ethereum hit $4,000?
Source: Twitter
Mario Nawfal believes Ethereum will soon hit the $4,000 mark and might even break above it.
Time to be Cautious?
While Ethereum's short—to medium-term perspectives are promising, analysts like Matthew Sigel of VanEck aren’t very convinced.
Sigel recently noted that the network’s mainnet revenue has been declining due to the rise of Layer 2 solutions.
In essence, the smaller networks like Optimism, Arbitrum, and so on (which piggyback on the mainnet) are taking on most of Ethereum's revenue.
The Pectra upgrade is expected to make these networks even more scalable—and, therefore, capable of becoming a bigger problem.
Sigel maintained that if this trend continues, Ethereum's revenue model could shift significantly, damaging its valuation.
Ethereum’s ongoing problem
Source: Twitter
This problem was serious enough for VanEck to revise its 2030 ETH price target from $22,000 to $7,330—assuming Ethereum continues down this trend and operates at a continued revenue split of 10% for Ethereum mainnet and 90% for Layer 2s.
The Ethereum Pectra upgrade is a major shift towards a stronger network in terms of usability, security, and scalability.
While this comes with its share of opportunities (and problems), its effects on the price of $ETH will depend largely on market reception.
Ethereum is set to become more efficient than ever before.
But how will this affect the network in the long run?
