1. Introduction: Prague Upgrade Outlook
Since its official launch in 2015, Ethereum has been the core position of technological innovation and application exploration in the blockchain industry. As a pioneering platform, Ethereum not only led the wave of smart contracts and decentralized applications (DApp), but also had a profound impact on decentralized finance (DeFi), non-fungible tokens (NFT) and other blockchain application fields. However, Ethereums technological evolution did not stop there. From the initial PoW (Proof of Work) consensus mechanism to the completion of the Merge in September 2022 and the official shift to PoS (Proof of Stake), Ethereum has always been seeking more efficient, environmentally friendly and scalable solutions. Today, the upcoming Prague Upgrade has once again attracted widespread attention from the market.
The Prague upgrade is another important technical iteration of Ethereum. Following the Cancun upgrade in March 2024, it continues to optimize network performance, reduce transaction costs, and enhance the programmability of smart contracts. Compared with previous upgrades, the Prague upgrade not only involves adjustments to the underlying protocol, but also includes a series of far-reaching EIPs (Ethereum Improvement Proposals), including optimizing the Ethereum Virtual Machine (EVM), optimizing Ethereum staking, optimizing Rollup performance, reducing interaction costs, and strengthening storage management. These changes not only improve the overall efficiency of the Ethereum mainnet, but also provide more robust infrastructure support for Layer 2 solutions, DeFi protocols, NFT markets, etc.
Every major upgrade of Ethereum is accompanied by dramatic market fluctuations and in-depth discussions in the community, and the Prague upgrade is no exception. For developers, new features and optimization measures mean more powerful development tools, more efficient smart contract execution methods, and lower computing and storage costs. This will further motivate developers to build more complex and innovative applications on the Ethereum network. For ordinary users, the Prague upgrade may mean faster transactions, lower fees, and a safer on-chain operation experience. More importantly, due to the huge scale of the Ethereum ecosystem, the impact of this upgrade is not limited to Ethereum itself, but will also affect the entire cryptocurrency industry, especially those projects that rely on Ethereum infrastructure to run, such as Layer 2 expansion solutions, cross-chain bridges, decentralized exchanges (DEX), etc.
In addition, from an investment perspective, every Ethereum upgrade may become a key catalyst for changes in market sentiment. Historical experience shows that major upgrades often lead to new market expectations for Ethereums prospects, thereby affecting ETH price fluctuations. As the Prague upgrade is approaching, market participants are generally concerned about its possible price impact: on the one hand, optimizing network performance may increase the usage rate of ETH, thereby enhancing its intrinsic value; on the other hand, whether the technical upgrade can be implemented smoothly, whether there are potential risks, and whether there will be unstable factors in the short term may also affect market sentiment.
2. Overview of Prague Upgrade
2.1 What is the Prague Upgrade?
Prague Upgrade is an important update to the Ethereum protocol. It inherits and expands the core goals of previous upgrades, including optimizing network performance, reducing transaction costs, enhancing smart contract functions, and laying the foundation for further expansion and innovation in the future. This upgrade is part of Ethereums long-term technical roadmap, combining community consensus, developer needs, and feedback from real-world application scenarios to further enhance Ethereums competitiveness as the worlds leading smart contract platform. Ethereums upgrade process is usually carried out in the form of a hard fork, that is, all nodes must update to the new version of the software to maintain compatibility with the network. Prague Upgrade is also a hard fork, which means that it will be activated at a specific block height and implemented simultaneously across the entire network. Once the upgrade is completed, all Ethereum nodes need to run clients that contain the new protocol rules, otherwise they will no longer be able to participate in network consensus. This process requires developers, miners, stakers, and ordinary users to be fully prepared before the upgrade to ensure a smooth transition of the network.
From a technical perspective, the Prague upgrade integrates a series of optimization measures that have been reviewed by the Ethereum Improvement Proposal (EIPs) and discussed by the community. These optimizations involve multiple key areas such as the Ethereum Virtual Machine (EVM), transaction fee (Gas Fee) structure, storage management, and contract execution efficiency. As the core execution environment of Ethereum, EVM is responsible for handling the deployment and execution of smart contracts, so any changes to EVM may have a wide impact on the entire ecosystem. In the Prague upgrade, EVM ushered in new instruction set optimizations, making the execution of smart contracts faster while reducing computing costs. In addition, the upgrade optimizes the Gas calculation logic, so that different types of operations can allocate resources more reasonably and reduce the problem of fee surges during network congestion.
For ordinary users, the direct impact of the Prague upgrade is reflected in the improvement of transaction costs and execution efficiency. Ethereums transaction fee issue has always been one of the most concerned issues for users, especially during busy network periods, when Gas prices may soar to extremely high levels, making small transactions expensive and even affecting the popularity of applications such as DeFi, NFTs, and blockchain games. The Prague upgrade provides users with a more stable and predictable transaction cost structure by optimizing Gas calculation methods, improving transaction bundling strategies, and improving Layer 2 compatibility. This not only improves the user experience, but also enhances Ethereums competitiveness, enabling it to maintain its technological advantage in the face of other blockchains such as Solana, Avalanche, and BNB Chain.
In addition, the Prague upgrade also enhances the support for Layer 2 solutions. In recent years, the rapid development of Ethereums Layer 2 ecosystem has greatly alleviated the congestion problem of the main network, allowing users to conduct faster and cheaper transactions on the second-layer network through Rollup technology. However, the development of Layer 2 is still limited by the main network architecture. Issues such as data availability, bridge security, and delays in capital inflows and outflows still plague developers and users. The Prague upgrade optimizes these issues and improves the native support capabilities of the Ethereum main network for Layer 2 solutions, making the operation of the second-layer network more efficient and secure. This not only helps the development of the Rollup solution, but also provides technical support for future modular blockchain architectures.
In the long run, the Prague upgrade is not only a technical improvement, but also an important step for Ethereum to move towards higher scalability, better user experience and stronger developer ecology. It lays the foundation for subsequent upgrades, further optimization of Ethereum 2.0, data sharding (Danksharding) and other long-term plans, enabling Ethereum to continue to lead the innovation trend in the blockchain industry. As the upgrade approaches, the market, developers, investors and ordinary users are paying close attention to its final effect and the chain reaction it may bring to the Ethereum ecosystem and even the entire crypto industry.
3. Technical and ecological impacts of the Prague upgrade
Ethereum Prague upgrade is a comprehensive hard fork that focuses on improving the scalability, security and user experience of the Ethereum ecosystem. In this version, Ethereum has made a number of technical adjustments to improve on-chain operations, staking mechanisms, and support for the second layer (L2) network, further promoting the development of the Ethereum ecosystem. The following are the key EIPs for the Prague upgrade:
3.1 Account Abstraction (EIP-7702)
EIP-7702 is a key proposal in the Prague upgrade, which introduces an account abstraction mechanism, thus changing the way Ethereum accounts are managed. Users will no longer need to convert account types (EOA -> CA) and can directly perform various operations such as authorization and deduction through EOA accounts. This will significantly reduce the operating costs of users and make on-chain interactions easier and smoother.
Key significance:
Improved user experience: By simplifying the operation process, users no longer need to register or manage complex accounts, which lowers the entry threshold.
Impact on DApps: For DApps like exchanges, the batch aggregation function can reduce their management costs and improve efficiency. However, it should be noted that this also brings security risks, and account abstraction may increase the complexity of permission management.
3.2 Optimization of the pledge mechanism
The Prague upgrade has made a number of optimizations to Ethereum’s staking mechanism, with the goal of improving the security and flexibility of staking operations and ensuring the decentralization and security of the Ethereum network.
EIP-6110: Optimizes the staking operation so that the consensus layer no longer relies on the voting mechanism, but directly integrates the staking records and validator-related operations into the execution layer.
EIP-7251: Increases the maximum effective staking limit for a single validator to 2048 ETH, further reducing the complexity of validator management and reducing system redundancy.
EIP-7549: Improves the flexibility of staking operations, allowing validators to make partial withdrawals and exits more easily.
The goal of these improvements is to ensure the security of the Ethereum network while reducing the problem of large-scale validator centralization. For users participating in staking, these optimizations provide more flexibility and opportunities for compounding returns, but also bring potential risks to decentralization.
3.3 Layer 2 Network Support (L2 Optimization)
As Ethereums L2 ecosystem continues to develop, the Prague upgrade pays special attention to the support and optimization of L2.
EIP-7623 EIP-7691: These proposals improve the storage and throughput capacity of L2. EIP-7623 reduces the L2 networks reliance on calldata by increasing the gas fee for calldata in transactions; EIP-7691 expands the capacity of L2 Blob and increases storage space.
Blob optimization: Ethereum has increased the capacity and configuration flexibility of the Blob data structure and enhanced support for L2. This will enable more L2 solutions to run on the Ethereum main chain and improve its processing capabilities.
These initiatives reflect Ethereums need to build a more powerful L2 ecosystem to support high-frequency trading and large-scale applications.
3.4 Improvements in Data Availability and Throughput
The Prague upgrade also focuses on data availability and throughput, especially support for stateless clients. For example, EIP-2935 proposes optimization of historical block hash storage, allowing clients to easily access the latest block data without storing the entire chain history. This is of great significance for future optimization solutions such as Verkle trees and applications such as Rollup and Oracles.
3.5. Impact of Prague Upgrade on Ethereum Ecosystem
Although the Prague upgrade itself did not cause market discussion like the merger, it plays a vital role in the long-term development of Ethereum. The Prague upgrade makes Ethereum more adaptable to the L2 era and improves the scalability, security and decentralization of the network. With future upgrades (such as Osaka and Amsterdam hard forks), Ethereum will have more functions, pushing it towards grand visions such as millions of transactions per second (The Surge) and low centralization risk (The Scourge).
The Prague upgrade is an important step in the development of Ethereum. Although it is not as widely discussed in the market as London or Merger, it has laid a higher scalability and decentralized foundation for the Ethereum network through a series of technical improvements. Through account abstraction, pledge mechanism optimization and L2 support, the Prague upgrade makes Ethereum more efficient, friendly and resilient. In the future, Ethereum may continue to achieve higher network performance and lower centralization risks through a series of upgrades, further consolidating its dominant position in the blockchain ecosystem.
IV. Challenges and Controversies of Prague Upgrade
The Prague upgrade is an important evolution of the Ethereum network. Although it brings multiple technical improvements and optimizations, it also faces some challenges and controversies during its implementation. These challenges not only come from the technical level, but also involve the balance of interests of ecological participants and the choice of Ethereums long-term development direction. The following are the main challenges and controversies that the Prague upgrade may face during its implementation:
4.1 Security Risks Brought by Account Abstraction
EIP-7702 in the Prague upgrade introduces an account abstraction mechanism that allows users to implement more flexible transaction methods at the chain level. The core idea of account abstraction is that by eliminating the difference in account types from the chain, users no longer need to convert to a contract account (CA) in advance to operate, but can directly use an externally owned account (EOA) to trade. This optimization significantly reduces the users interaction cost and allows multiple transaction methods (such as authorized deduction and execution deduction) to be executed in parallel in a single account. However, this flexibility brings potential security risks. Although the introduction of account abstraction reduces the interaction cost, it also increases the complexity of user permission management. If the wallet service provider fails to properly adapt to this mechanism, it may cause unexpected security vulnerabilities. In the past, users losses were limited to single-chain assets, but now due to the introduction of account abstraction, once a vulnerability occurs, it may lead to cross-chain losses or even explosive attacks. Hackers may exploit the vulnerabilities of this mechanism to carry out phishing attacks, especially when the wallet service provider does not adapt properly. Therefore, although account abstraction brings about an optimization of user experience, its security is still a major hidden danger in the Prague upgrade.
4.2 Challenges and Scalability Issues of L2 Ecosystem
The Prague upgrade places special emphasis on optimizing the Ethereum Layer 2 (L2) ecosystem, especially in terms of transaction data storage and computing efficiency. Through EIP-7623 and EIP-7691, the Prague upgrade further increases the storage capacity and computing efficiency of L2, allowing L2 to carry more transactions and data. However, technically, how to manage and optimize the transaction costs and liquidity of these L2s remains a huge challenge. First, although EIP-7623 increases the cost of calldata in order to reduce the L2 systems dependence on the Ethereum main chain, this may also lead to rising costs for some L2 ecosystems. If the L2 system cannot effectively adapt to these changes, it may affect its long-term sustainable development and user experience. In addition, although the expansion of L2 can alleviate the pressure on the Ethereum main chain, the interoperability problem between L2s still plagues the entire Ethereum ecosystem. The biggest problem facing the further expansion and optimization of L2 is how to coordinate communication, transactions, and data sharing between different L2s. With the increase in different L2 solutions on the Ethereum network, the complexity of cross-chain is also increasing, and the dispersion of liquidity and security may affect the stability and benefits of the entire ecosystem. Therefore, although the Prague upgrade has made great efforts to optimize the L2 ecosystem, its actual effect remains to be seen, especially how the collaboration between L2 and L1 can be achieved, and how to ensure the transparency and verifiability of L2 transactions.
4.3 Community and Developer Adaptability Issues
The implementation of the Prague upgrade involves multiple EIP proposals, many of which are technical changes that have a profound impact on the Ethereum ecosystem. Although these changes can theoretically significantly improve the performance and user experience of the Ethereum network, they may encounter resistance from developers and users during actual application and adaptation. In particular, the introduction of new technologies such as account abstraction and BLS signatures may require developers to refactor and optimize existing DApps, which may lead to a certain degree of development and adaptation pressure in the short term.
More importantly, the core proposals of the Prague upgrade, such as EIP-7702 and EIP-2537, may require developers to invest a lot of time and energy to adapt to the new development framework and standards. If the developer community fails to keep up with these changes in a timely manner, some DApps may not be able to adapt to the new system in a timely manner, thus affecting the healthy development of the entire Ethereum ecosystem. In addition, the acceptance of these technical improvements in the community varies. The Ethereum community has experienced many disputes and disagreements, and some technical solutions in the Prague upgrade, especially in the staking mechanism and L2 optimization, may cause further controversy. How to achieve technological innovation while ensuring decentralization and network security is still a problem that Ethereum developers and the community need to continue to explore and solve.
4.4 Market Response and Pressure from the Competition Chain
Although the goal of the Prague upgrade is to improve Ethereums scalability, user experience, and security, competition is also increasingly fierce in the multi-chain ecosystem. Ethereum faces tremendous pressure from other public chains (such as Solana, Aptos, Polkadot, etc.) and Layer 2 solutions (such as Arbitrum, Optimism, etc.). These competing chains and protocols usually have higher transaction speeds and lower transaction fees. Although Ethereums L2 optimization can alleviate this problem to a certain extent, if the L2 ecosystem cannot operate effectively, Ethereum will still face the loss of market share. In addition, although the Prague upgrade has made many technical optimizations, the actual market response to these upgrades is still unknown. If Ethereum cannot attract more developers and users through these upgrades in the short term, its market position may be challenged by other competing chains. Moreover, although the Prague upgrade can improve Ethereums throughput and efficiency, how to maintain its original decentralized characteristics and avoid the risk of over-centralization is still the focus of the market and the community.
The Prague upgrade is undoubtedly an important evolution in the history of Ethereum, and it has made significant efforts to improve network performance, scalability, and user experience. However, this process is not without challenges. Centralization risks, security risks, L2 ecosystem management issues, and community adaptability issues have all brought considerable challenges to the smooth implementation and long-term development of the Prague upgrade. Nevertheless, the implementation of the Prague upgrade has laid the foundation for the future development of Ethereum. As these problems are gradually resolved, Ethereum is expected to achieve a more efficient, secure, and decentralized network structure in the future.
V. Future Outlook
As a key upgrade of the Ethereum network, the Prague upgrade has laid an important foundation for its future development. With the continuous advancement of technology, the Prague upgrade will have a profound impact on the Ethereum ecosystem, especially in terms of scalability, decentralization, security, user experience, etc. The following two parts will explore in depth the impact of the Prague upgrade on the Ethereum ecosystem and its future prospects.
5.1 The beneficial effects of the Prague upgrade
The Prague upgrade has brought significant improvements to the Ethereum network through a series of technical optimizations and protocol improvements. The Prague upgrade optimizes transaction data storage, computing efficiency and interaction methods. Ethereum can process more transactions and smart contracts more efficiently, significantly improving the networks throughput. In particular, through the support of L2 (Layer 2) solutions, the Prague upgrade greatly reduces the burden on the Ethereum main chain and enhances the overall scalability of the network. L2 solutions not only provide higher speeds and lower costs for transactions, but also increase Ethereums transaction throughput, thereby supporting more DApps and user needs. At the same time, the Prague upgrade improves the implementation of the second-layer solution on Ethereum through the support of proposals such as EIP-7623 and EIP-7691, making the collaboration between L2 and L1 smoother. By transferring computing and data processing from the main chain to L2, the Prague upgrade effectively alleviates the congestion problem of the Ethereum main chain and provides technical support for the emergence of more applications in the future.
Several optimization measures in the Prague upgrade, such as the introduction of the account abstraction mechanism (EIP-7702) and the modification of the transaction fee model, have greatly improved transaction efficiency and reduced transaction costs. Account abstraction allows users to execute transactions more flexibly and simplifies complex transaction logic. In addition, by optimizing transaction fees and reducing execution costs, users can interact more frequently without sacrificing experience, thereby improving the efficiency of the Ethereum network. These improvements are especially convenient for users and developers in the decentralized finance (DeFi) and non-fungible token (NFT) markets. Lower transaction fees and higher transaction throughput mean that users can more easily participate in various DeFi protocols, and the activity of the NFT market will be further improved.
At the same time, the Prague upgrade strengthens the security of the Ethereum network, especially in the optimization of the Proof of Stake (PoS) mechanism and the staking system. Through the improvement of the staking mechanism, the Prague upgrade not only enhances the networks ability to resist attacks, but also increases the diversity of validators by raising the staking threshold and expanding the staking pool, thereby reducing the risk of 51% attacks. The new staking mechanism makes the networks verification nodes more decentralized, reduces the risk of single point failures, and strengthens the Ethereum networks resistance to malicious behavior.
In addition, another important improvement of the Prague upgrade is the introduction of a stronger consensus algorithm, especially support for BLS signatures, which makes data verification and storage safer. By enhancing the security of the network, the Prague upgrade improves the stability of Ethereum in high-risk environments, especially in supporting financial applications, ensuring a more secure and reliable trading environment.
Although the centralization of the staking mechanism is one of the controversies of the Prague upgrade, the Prague upgrade has generally strengthened the decentralization of Ethereum. By increasing the diversity of validators, lowering the threshold for verification, and strengthening support for small validators, the Prague upgrade has promoted the decentralization of the Ethereum network to a certain extent.
The account abstraction and smart contract optimization of the Prague upgrade also provide developers with more tools to implement decentralized applications (DApps), while further promoting the development of the decentralized ecosystem by reducing transaction costs and improving execution efficiency. In this way, the Prague upgrade not only enhances the flexibility of the network, but also provides technical support for the innovation and development of ecological applications such as decentralized autonomous organizations (DAOs) and decentralized finance (DeFi).
5.2 Future Outlook: Ethereum Ecosystem after Prague Upgrade
With the successful implementation of the Prague upgrade, the future ecology of Ethereum will present many new possibilities. The following are several important prospects for the Ethereum ecology after the Prague upgrade:
5.2.1. Ethereum will become a more efficient multi-chain ecological center
The Prague upgrade provides strong technical support for Ethereums potential to expand its multi-chain ecosystem by strengthening support for L2 solutions. In the future, Ethereum will not only exist as a blockchain platform, but also as a multi-chain center to achieve cross-chain collaboration and data exchange with other public chains (such as Polkadot, Cosmos, etc.). Through the maturity and optimization of Layer 2 technology, the Ethereum network will be able to accommodate more DApps and smart contracts, and these applications can run more efficiently and at a lower cost. Further optimization of cross-chain will also make Ethereum a core hub for decentralized finance (DeFi) and asset management, and the flow of various cross-chain protocols and assets will become part of the development of the ecosystem. The Prague upgrade further promotes Ethereums strategy as a cross-chain hub, making it more competitive in multi-chain interoperability.
5.2.2 Further development of decentralized finance (DeFi)
With lower transaction fees and higher network throughput, the Prague upgrade creates conditions for the expansion of the decentralized finance (DeFi) ecosystem. DeFi protocols no longer face the bottleneck of main chain congestion and high fees, and more users and developers can participate in the construction of DeFi. New trading models, more efficient lending markets, liquidity pools, and decentralized derivatives markets will gradually mature against the backdrop of the Prague upgrade, creating a richer range of financial products. Especially in terms of automated market makers (AMMs) and decentralized exchanges (DEXs), the Prague upgrade will further promote the scale of decentralized finance by providing more efficient network support and improved trading models. DeFi will not be limited to simple lending and trading, and may include more financial derivatives, insurance, the issuance of stablecoins, etc. in the future.
5.2.3 Further prosperity of NFT and digital art markets
The Prague upgrade also provides a more solid foundation for the development of the NFT market. Low transaction fees and efficient smart contract execution make the creation, trading, and transfer of NFTs more economical and efficient. Artists, creators, and brands will have more opportunities to publish and trade digital works on Ethereum. At the same time, the diversity and innovation of NFTs will continue to drive the development of the entire digital art market. NFTs smart contracts will not only support art transactions, but will also expand to more areas such as games, music, entertainment, etc. The Prague upgrade brings a more efficient trading experience to the NFT market and makes the NFT-based business model more sustainable.
5.2.4 Further improving the decentralized governance of the Ethereum ecosystem
The Prague upgrade is not only an optimization of the technical architecture, but also provides better support for Ethereums decentralized governance. By improving the transparency of the staking mechanism, enhancing the diversity of validators, and further removing the reliance on centralized institutions, Ethereums governance structure will be more open and decentralized. In the future, as the Ethereum DAO (decentralized autonomous organization) model improves, more governance decisions will be made through community consensus, truly realizing decentralized autonomy. This improvement in decentralized governance also provides a model for other blockchain projects, making blockchain technology innovations in governance more widely used.
In short, the Prague upgrade is a milestone in the development of Ethereum, bringing unprecedented technological progress to the network. In the future, Ethereum will continue to make new breakthroughs in performance, ecological diversity, and decentralized governance, and provide global users with a more efficient, secure, and decentralized blockchain platform. Despite some technical and governance challenges, the Ethereum ecosystem after the Prague upgrade is still full of great potential and deserves our continued attention and expectations.
