Ethereum’s Pectra upgrade slated for Q4 2024, bringing smart contract features and improved UX for wallets

Ethereum’s upcoming Pectra upgrade, expected to be implemented by late 2024 or early 2025, is set to introduce significant improvements to cryptocurrency wallets, including the addition of smart contract capabilities to standard externally owned accounts (EOAs).

The inclusion of Ethereum Improvement Proposal (EIP) 3074 in the Pectra upgrade will bring a range of new features and enhancements to the user experience.

The Pectra upgrade follows the recent Dencun update, which focused on lowering transaction fees on layer-2 solutions. The name “Pectra” is derived from the combination of two simultaneous upgrades occurring on different layers of the blockchain. The execution layer, responsible for enforcing protocol rules, will undergo the “Prague” upgrade, while the consensus layer, which ensures the validation of blocks, will go through the “Electra” upgrade. This naming convention follows the Ethereum developers’ tradition of combining the names of the upgrades, as seen in previous instances like “Dencun” and “Shapella.”

One of the key benefits of EIP-3074 is the ability for regular wallets, such as those created using MetaMask, to function similarly to smart contracts. This upgrade will enable features like transaction bundling, allowing users to sign multiple transactions at once, and sponsored transactions, where a wallet can delegate funds to be used by another entity. These functionalities are reminiscent of the account abstraction introduced in ERC-4337.

EIP-3074 introduces two new operating instructions: AUTH and AUTHCALL. As explained by anonymous Web3 adviser Cygaar, AUTH verifies signatures and actions, while AUTHCALL calls the target contract(s) with the originator address as the caller instead of the message sender. These instructions work together to enable the smart contract-like behavior of EOAs.

In addition to the features mentioned above, EIP-3074 also includes a social recovery feature that eliminates the need for the traditional 12-to-24-word seed phrase, further simplifying the user experience and potentially reducing the risk of lost or stolen funds.

Another significant change expected to be included in Pectra is an increase in the staking limit for validators, from the current 32 ETH to 2,048 ETH – a substantial 64-fold increase. This proposal, known as EIP 7251, would allow large staking providers, such as Coinbase or Lido, to consolidate their validators operating the Ethereum blockchain. By doing so, these providers can avoid the need to constantly create new validators each time they have an additional 32 ETH to stake, thereby reducing the operational load and resources required for staking and validating.

The need for this change has become apparent as the number of validators on the Ethereum network has surpassed 1 million, raising concerns about excessive latency. EIP 2751 is seen as a potential solution to slow the rate at which new validators enter the system, preventing performance issues and ensuring the blockchain’s smooth operation.

Other EIPs under consideration for Pectra include enabling validator withdrawals from smart contracts, incorporating a code change known as BLS precompile, and removing the deposit window. These relatively minor changes will allow developers to work on smaller improvements while focusing on more significant upgrades in the future.

Looking beyond Pectra, the subsequent upgrade will introduce the highly anticipated “verkle trees” – a novel data system designed to help Ethereum nodes efficiently store large amounts of data. Tim Beiko mentioned that the Pectra upgrade is expected to be released sometime in late 2024 or early 2025, allowing developers to work on two forks in parallel and deliver small wins while preparing for the more complex verkle trees transition.

As Ethereum continues to evolve and improve, the Pectra upgrade represents another step forward in enhancing the network’s performance, user experience, and overall functionality. By addressing key issues such as wallet UX and staking limits, developers aim to ensure that Ethereum remains at the forefront of blockchain technology, providing a solid foundation for the growing ecosystem of decentralized applications and services.