Ethereum successfully implemented its latest network upgrade, known as 'Pectra,' on May 7, 2025. This significant upgrade aims to enhance user experience by simplifying wallet operations and improving scalability, marking a pivotal moment in the evolution of the Ethereum network.
The Pectra upgrade integrates multiple Ethereum Improvement Proposals (EIPs), including EIP-7702 and EIP-7251, which focus on improving wallet operability and streamlining network operations. This upgrade is a combination of the 'Prague' and 'Electra' branches, designed to enhance both performance and convenience for users.
As of May 8, 2025, at approximately 3:12 PM JST, cryptocurrency deposits and withdrawals using Ethereum, Arbitrum, and Polygon have resumed after being temporarily suspended during the upgrade. Bitbank, a cryptocurrency exchange, announced the suspension around 5:00 PM JST on May 7, which was part of the planned Ethereum update.
Despite the successful implementation of the Pectra upgrade, the market reaction has been notably muted. Ether (ETH) prices and derivative indicators showed little movement following the upgrade. This lack of response has raised questions among traders regarding the potential for ETH to reach the $2,200 mark, as the futures premiums for ETH have remained below the neutral level of 5%. In fact, the premium has not changed from the 3% level observed post-upgrade, indicating a lack of interest from leveraged bulls.
Concerns about macroeconomic factors, such as global trade tensions and recession risks, are believed to contribute to this low market interest. Moreover, Ethereum's performance in the first quarter of 2025 has been disappointing, underperforming the total capitalization of virtual currencies by 28%. This trend highlights a growing dissatisfaction with Ethereum's market position, especially as competing blockchains gain traction.
Ethereum's Layer 1 transaction fees have dropped below $1 since mid-February 2025, suggesting a decrease in network utilization. While Ethereum still maintains the highest total locked value (TVL) in the industry at $53.7 billion, the network fees collected over the past 30 days were only $19 million. In contrast, competitors like Tron and Solana have generated significantly higher fees during the same period, with Tron earning $51.8 million and Solana $39.4 million.
In addition to the fee structures, the user base for Ethereum's Layer 2 solutions remains a concern. The representative Layer 2 network, Base, reported only 10.3 million monthly active users, which pales in comparison to Solana's 82.2 million and BNB Chain's 25.9 million. This disparity raises questions about Ethereum's ability to attract and retain users in an increasingly competitive landscape.
Notably, the Pectra upgrade is seen as a step forward in addressing these challenges. It aims to improve the user experience by allowing for more intuitive transactions and enabling developers to create more flexible applications. For instance, the upgrade facilitates the execution of multiple signatures and approvals without complex operations, enhancing usability.
However, the design of the upgrade does come with risks, as it allows users to delegate wallet operation rights to others, potentially exposing them to malicious smart contracts. Users are advised to exercise caution while navigating these new features.
Moving forward, Ethereum plans to continue implementing EIPs to further enhance its network capabilities. The recent increase in the staking limit for validators from 32 ETH to 2,048 ETH under EIP-7251 is a significant development, allowing larger operators to manage their operations more efficiently.
As Ethereum navigates these upgrades and market challenges, it remains crucial for the network to convey a clear message to investors about its progress and the profitability of its advancements. Improvements in staking yields and the introduction of new incentives to encourage DApp usage could be key to expanding ETH demand.
In summary, while the Pectra upgrade represents a crucial milestone for Ethereum, the network faces significant hurdles in regaining its competitive edge. The muted market response to the upgrade highlights the need for Ethereum to adapt and evolve in a rapidly changing blockchain environment. The coming months will be critical as Ethereum seeks to enhance its user experience and address the challenges posed by rival networks.
