After the successful Dencun upgrade, Ethereum developers are already gearing up for the next big improvement, codenamed "Pectra." While the specifics of Pectra are still in flux, the overarching goal remains clear: to enhance the efficiency and functionality of the Ethereum blockchain.

Following the Dencun success, the focus shifts to Pectra's development, with a dual emphasis on efficiency and continuous improvement. By streamlining processes and refining functionalities, Pectra aims to further optimize transaction costs and overall performance.

Why the name Pectra?

It's like a mix of two upgrades happening at the same time on different parts of the blockchain. One part, the execution layer upgrade, called "Prague," will make sure the rules are followed. The other part, the consensus layer upgrade, called "Electra," will check that blocks are valid. Just like the last upgrade, "Dencun," combined two names, this one does too to make things easier to talk about.

What is included in the Pectra update?

Now there are two things majorly happening here EIP3074 and EIP7251.

EIP-3074

One of EIP-3074’s functions gives standard externally owned accounts (EOAs), normal wallets such as a MetaMask wallet, smart contract capabilities.

This allows functions such as transaction bundling, so users only have to sign once, and sponsored transactions where a wallet can delegate funds for use by another, similar to account abstraction that was introduced in ERC-4337.

So, what is a sponsored transaction? Sponsored transactions let someone else pay the gas fees for your Ethereum transaction. 
Here's how it works: instead of setting the gas price or limit yourself, you sign the transaction without those details. Then, a third party pays the gas fees and sends the transaction for you. It's like having a friend cover your bill at a restaurant.

EIP-7251 (also known as maxeb)

Since Ethereum shifted from Proof of Work (PoW) to Proof of Stake (PoS), many have been attracted to become validators due to the potential 4% returns by staking 32 ETH. However, concerns arise as the validator set grows too large.

This growth could affect decentralization, especially if it's driven by large entities like Lido. A larger validator set might also reduce network activity if too many people stake ETH instead of using it.

Another issue is network latency and sprawl, where too many validators sharing information leads to block reorganizations and missed blocks, hurting transaction throughput and chain stability.

Moreover, with more validators, each one earns less since rewards are shared among them. Proposed solutions include EIP-7251, suggesting increasing the maximum stake per validator from 32 ETH to 2048 ETH to consolidate validators.

Other EIPS in this update

🔹 EIP 7610: Ensuring compatibility with future upgrades by refining smart contract creation.
🔹 EIP 7523: Streamlining network efficiency by tidying up Ethereum’s state.
🔹 Account Abstraction EIPs (EIP 3074, 5806, 7377): Simplifying transaction authorization and asset migration for enhanced usability.
🔹 EIP 2537: Elevating security and scalability through cryptographic improvements.
🔹 EIP 5920: Streamlining transactions by enabling ETH transfers sans recipient function activation.
🔹 EIP 7609: Reducing transient storage costs for common smart contract use cases.

What's next?

The upgrade following Pectra will include long-awaited "verkle trees" – a new type of data system designed to help Ethereum nodes store large amounts of data.