MW Could Ethereum's Pectra upgrade power an ether comeback?

By Frances Yue

The blockchain completed its most significant upgrade since 2022

The Ethereum blockchain successfully completed its long-awaited Pectra upgrade on Wednesday, its biggest overhaul since 2022 and an event that is expected to allow the blockchain to become faster and cheaper at processing transactions.

The upgrade, however, appeared unlikely to be enough to provide a significant boost to the previously red-hot crypto's price, which continues to lag not only bitcoin but other competitors, industry participants said.

"There are no major specific changes in Pectra that will have an impact on ether's price, but it just shows an ongoing commitment [by the Ethereum community] towards improving the underlying blockchain," Tim Lowe, strategic advisor at Bitwise Onchain Solutions, said in an interview.

While ether (ETHUSD) is the second-largest cryptocurrency by market capitalization, its performance has been lagging behind its peers. Ether has lost 45.5% year to date, while bitcoin (BTCUSD) has risen 3.6% during the same period, according to Dow Jones Market Data. Meanwhile, solana (SOLUSD), often seen as a direct competitor to ether, has declined 24% year to date.

There's more than one reason for ether's lackluster performance, but one potential explanation, according to industry participants, is that Ethereum is too slow and expensive compared with some competitors such as the Solana blockchain.

Ether bulls once touted Ethereum as being superior to the Bitcoin blockchain, with more capacity to power decentralized applications and smart contracts. Smart contracts are computer programs that automatically execute the terms of an agreement when its terms and conditions are met.

However, that confidence has not been reflected in ether's price as of late.

The Pectra upgrade

The Pectra upgrade consisted of 11 Ethereum Improvement Proposals, or documents that proposed changes for the blockchain. Such proposals are written by Ethereum community members, usually application or protocol developers, and have to go through a multistage review and feedback process that includes input from proposal editors and approval from the wider community. Any Ethereum community member can apply to become a proposal editor, while the existing editors would eventually decide whether to approve the application.

The Pectra upgrade on Wednesday incorporated the largest number of proposals ever implemented in Ethereum's history, according to Sam McIngvale, head of product at OP Labs, which supports Optimism, a blockchain built on top of Ethereum.

Moreover, the Pectra upgrade was the most significant overhaul Ethereum has gone through since the Merge in 2022, when the blockchain transitioned to proof-of-stake from proof-of-work, noted Mallesh Pai, senior director of research at blockchain software company Consensys. Proof of work and proof of stake are different mechanisms that blockchains use to verify transactions. For proof-of-work blockchains, miners solve complicated mathematic puzzles to validate transactions, while under the proof-of-stake mechanism, validators lock up their crypto to verify transactions.

While the Pectra upgrade was only one step in Ethereum's effort to become speedier and more affordable while handling a growing amount of transactions, it opens the pathway for future upgrades, said Pai.

Most notably, the Pectra upgrade is supposed to improve the experience of using crypto wallets on Ethereum, as it reduces the number of clicks required to complete certain transactions, McIngvale said.

The Pectra upgrade is also seen enabling more flexible staking strategies. Ether holders could choose to stake their crypto to secure the blockchain and earn a reward. Validators currently earn an annualized staking yield of roughly 3%, according to the CESR Composite Ether Staking Rate, a index developed by CoinDesk.

Through the Pectra upgrade, the staking cap was raised from 32 ether to 2,048 ether per validator, meaning that the maximum amount of ether one validator can stake has increased significantly, according to McIngvale.

Previously, some large validators had to run multiple nodes, or computers, to stake more than 32 ether, resulting in long lines for new nodes to join the network. However, now it is possible to stake any amount between 32 and 2,048 ETH for a single node.

Ether's underperformance

Among the potential explanations for its underperformance, ether hasn't attracted as much institutional interest as bitcoin, Lowe said.

Crypto bulls have argued that bitcoin and ether provide different use cases, as the former has the potential to be eventually seen as a store of value or "digital gold," while the latter is the native cryptocurrency of a programmable blockchain that powers smart contracts and decentralized applications.

However, many institutional investors' first choice was still bitcoin when they started to allocate to the digital-asset space, Lowe added.

Read: 'Too early' to call bitcoin a safe haven as it outperforms stocks and dollar amid tariff turmoil

What's more, some of Ethereum's direct competitors have been gaining more traction in recent years, as they claimed to be faster and cheaper.

While some secondary frameworks built on top of Ethereum, referred to as "layer two" blockchains, allowed transactions to be more efficient and cost-effective, they have not helped lift ether's price due to Ethereum's current economic model, Lowe said.

Still, Lowe argued that Ethereum has significant potential as it is the most decentralized among all its smart-contract-powering peers. For now, over half of smart-contract activities across all blockchains happen on Ethereum, with the total value locked on the blockchain standing at $51.9 trillion, according to data from CoinGecko.

Ether rose 2.7% Wednesday morning to around $1,822, according to Dow Jones Market Data. The crypto was about 56% below its record high at $4,105.9 reached in November 2021.

-Frances Yue

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May 07, 2025 14:28 ET (18:28 GMT)

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