Pectra Upgrade: A Game-Changer for Ethereum!

According to IntoTheBlock analyst Gabriel Halm, Pectra will not immediately boost ETH price, but it will strengthen the Ethereum ecosystem by:

• Increasing network capacity,
• Enhancing Layer 2 scalability,
• Reducing consensus overhead,
• Boosting Ethereum’s competitiveness.

Additionally, Ethereum Improvement Proposal (EIP)-7251 will increase the validator staking limit from 32 ETH to 2,048 ETH, making it easier for validators to compound earnings and potentially reducing sell pressure over time.

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Will Ethereum Follow the 2017 Cycle Again?

Crypto trader Merlijn The Trader suggested that ETH price action resembles its 2017 market cycle, which could mean that Ethereum is setting up for a strong recovery.

The Ethereum community has raised concerns over Layer 2 solutions overshadowing the mainnet, leading the Ethereum Foundation to announce a new leadership structure.

On March 17, Hsiao-Wei Wang and Tomasz Stańczak will assume roles as co-directors of the Ethereum Foundation. Meanwhile, Vitalik Buterin has proposed strategies to strengthen Ethereum by increasing transaction capacity and ensuring that Layer 2 solutions contribute fees to the base layer.

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Strengthening Ether as the Ecosystem’s Core Value

Buterin noted the critical importance of positioning Ether as the primary asset of layer 1 and layer 2 Ethereum economies. He argued that layer 2 networks should support transaction fees with ETH and proposed increasing the number of “blobs” to provide more transaction capacity.

Layer-2 Solutions for Scaling

Layer 2 networks have significantly contributed to reducing transaction fees and increasing transaction capacity by operating on Ethereum’s main layer. However, Buterin stressed the need to accelerate the adoption of these solutions and increase interoperability between layer 2 networks.

He stated that Ethereum’s user experience should feel like a single unified ecosystem rather than multiple different blockchains. He also emphasized the need for ETH to continue gaining value in a layer 2-intensive world, highlighting the importance of standardized cross-chain messaging and faster deposit and withdrawal times.

Increasing Transaction Capacity with Blob Scaling

Buterin expressed that the Ethereum network should adopt a blob-focused scaling strategy. (Blobs are a tool that allows the network to process more transactions at lower costs without compromising decentralization or security)

Buterin indicated that forward-looking goals could reach levels like 128 blobs/second, potentially achieving a capacity of 100,000 transactions per second (TPS).

Leadership Change and Ethereum Foundation

Despite adopting an inclusive approach in Ethereum’s development process, Buterin noted that he remains the sole decision-maker in the Ethereum Foundation’s leadership. He stated that this situation would continue until an appropriate board is established with the planned innovations.

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Leadership Disputes and Eric Conner’s Departure

On January 21, Eric Conner, one of Ethereum’s leading developers, announced the end of his 11-year active participation in the Ethereum community. At the core of this decision were criticisms directed at leadership changes implemented by Ethereum founder Vitalik Buterin.

Vitalik Buterin, declaring himself as the sole authority in Ethereum Foundation (EF) management, stated:

“The person deciding the new EF leadership team is me. One of the goals of the ongoing reform is to give the EF a ‘proper board,’ but until that happens, it’s me.”

This statement created discomfort among some community members who felt it contradicted Ethereum’s decentralization ideals. However, another segment supported Buterin’s leadership until the completion of leadership innovations. Conner positioned himself among those opposing this situation.

Breaking Away from Ethereum and A New Journey

Eric Conner explained his reasons for leaving Ethereum as “understanding the importance of community and adaptation to change.”

Announcing his new roadmap, Conner revealed that he has transitioned to the artificial intelligence field and will initially work on developing an AI tool called Freysa.ai. He also expressed his openness to collaborating on other artificial intelligence projects.

Leadership Restructuring at Ethereum Foundation

On January 18, Vitalik Buterin announced a major change in the Ethereum Foundation’s leadership team. The primary purpose of these changes was to emphasize technical expertise and establish better communication between developers in the Ethereum ecosystem and the foundation.

These changes came after the Ethereum Foundation’s expenditures, roadmap, and personnel decisions were criticized by the community throughout 2024.

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Significant Growth in Daily Active Users

Data gathered by crypto ETF issuer Bitwise indicates that, with the lion’s share coming from the Ethereum layer-1 mainnet, Ethereum and its scaling solutions, Arbitrum and Polygon, had an average daily active user base of more than 250,000 in Q1 2020.

Now including the since-launched layer-2 networks Optimism, Base, and zkSync, this daily user count as of the first quarter of 2024 surpassed around 2.25 million, approximately nine times bigger.

Pushing transactions to L2s has caused Ethereum to have a considerably lower fraction of daily active users.

The Ethereum mainnet had 378,000 active users on June 4; Polygon had 1.3 million; and the other four L2s recorded overall about 1.5 million active users.

Ethereum’s Scaling and Future Potential

Late 2021 brought optimism; the zkSync mainnet and Base began to be accessible to the public in 2023.

Although Ethereum’s user count doesn’t seem very good, co-founder Vitalik Buterin is focused on scaling the main blockchain via L2s, so this is part of the plan even though the user count doesn’t seem very good.

He recently claimed that L2s resemble the sharding idea of the previous Eth 2 design and that the layer may potentially support expansion in several “subcultures” inside the Ethereum network.

Price Predictions and Market Dynamics

Concurrently, VanEck, the maker of the crypto ETF, has set a price goal for Ethereum based on projections of the coin reaching $22,000 by 2030.

Matthew Sigel and two colleagues, the analysts, raised their 2030 expectations for Ether—up from just $11,800 last year—noting that its revenue per user exceeds most Web2 companies and is set to grow in popularity among traditional financial market participants as well as with Big Tech in a June 5 blog published by VanEck’s head of digital assets research.

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“We believe spot ether ETFs will soon be approved for trading on US stock exchanges. This breakthrough would enable institutional investors and financial advisers to own this special asset […] and gain from the price and liquidity benefits typical of ETFs,” the experts noted.

“We estimate ETH’s 2030 valuation depending on a projection of $66B in free cashflows generated by Ethereum and accruing to the ETH token,” the experts said.

Ethereum’s Revenue and Fee Dynamics

Referring to it as a “modern miracle,” bankless co-founder Ryan Sean Adams pointed out that the Ethereum blockchain earns three times more fees than top-layer 2 networks and Solana combined, despite reduced user counts.

By paying Ethereum fees to resolve transactions on the main chain, the L2s gain from its security.

Though others caution that inflows into the new crypto ETFs will be substantially less than the Bitcoin ETFs, many hope the introduction of spot Ether ETFs will ultimately drive the price of Ether to a new all-time high.

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Boiron, in an April 7th social media post, highlighted the risk of “cannibalization” within the Ethereum ecosystem due to the competition between layer-2 networks. He argues that instead of attracting new users and developers from outside the Ethereum space, layer-2s are currently fighting over existing users and resources within Ethereum.

“Ethereum’s biggest problem is cannibalizing itself continuously via all L2s competing over devs, users and liquidity rather than competing outside of the Ethereum ecosystem. Microeconomics 101 would tell you this is a bad strategy. I don’t have the answer but it needs to be addressed,” stated Boiron.

This sentiment appears to be shared by some crypto community members. Karthik Senthil, a venture partner at crypto hedge fund Lattice, emphasized the need for layer-2s to focus on expanding the overall user base, including those outside the Ethereum ecosystem.

“L2s only become successful if they meaningfully grow the pie and attract the 99% of stuff (web2 included) that’s outside Ethereum today. If we fight over the same people that are already here, no one is winning anything,” said Senthil.

Boiron further re-posted a social media message advocating for collaboration among layer-2 networks. The message argues that a successful application on any layer-2 network would ultimately benefit the entire ecosystem, and “stealing applications” hinders this collective growth.

However, not everyone agrees that competition between layer-2s is detrimental. Some community members believe it can ultimately strengthen the Ethereum ecosystem by fostering innovation and driving efficiency.

The Rise of Layer-2 Solutions

Layer-2 networks are designed to address Ethereum’s scalability limitations by processing transactions off-chain before settling them on the main Ethereum blockchain. This approach significantly increases transaction throughput compared to the Ethereum mainnet.

The popularity of layer-2 solutions has surged in recent years. According to L2Beat, layer-2 networks collectively process over 123 transactions per second, exceeding Ethereum’s mainnet by more than tenfold. Leading layer-2 networks like Arbitrum and Coinbase’s Base have even surpassed Ethereum’s mainnet in daily transaction volume.

Furthermore, the number of active wallets interacting with layer-2 solutions surpassed five million earlier this month. The total value locked (TVL) on these platforms has also climbed above $42 billion, indicating significant user adoption and potentially further growth in the future.

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