Prague Upgrade: An Important Milestone for the Ethereum Network

Since its launch in 2015, Ethereum has been at the forefront of blockchain technology innovation. The upcoming Prague upgrade is another important technological iteration following the Cancun upgrade in March 2024, aimed at further optimizing network performance, reducing transaction costs, and enhancing smart contract functionality.

The Prague upgrade involves multiple Ethereum Improvement Proposals (EIP), including optimizations to the Ethereum Virtual Machine (EVM), staking mechanisms, Rollup performance, and more. These changes not only enhance the efficiency of the mainnet but also provide a more robust infrastructure support for Layer 2 solutions, DeFi protocols, NFT markets, and more.

For developers, new features and optimizations mean more powerful development tools, more efficient smart contract execution methods, and lower computational and storage costs. For ordinary users, this may bring improved transaction speeds, reduced fees, and a more secure on-chain operation experience.

From an investment perspective, the Prague upgrade may become a catalyst for changes in market sentiment. Optimizing network performance is expected to increase ETH usage and enhance its intrinsic value. However, whether the technical upgrade can be successfully implemented and whether there are potential risks may also affect short-term market sentiment.

Major Technical Improvements of the Prague Upgrade

Account Abstraction ( EIP-7702)

Introducing an account abstraction mechanism that allows users to perform various operations directly through the externally owned account (EOA) without converting to a contract account. This simplifies the user operation process and reduces interaction costs. However, it also brings potential security risks, requiring wallet service providers to adapt correctly.

Staking Mechanism Optimization

• EIP-6110: Integrate staking records and validator-related operations directly into the execution layer
• EIP-7251: Increase the maximum effective staking limit for a single validator to 2048 Ether
• EIP-7549: Increase the flexibility of staking operations, supporting partial withdrawals and exits.

These improvements aim to enhance staking security and flexibility while reducing the centralization issues of validators.

Layer 2 support optimization

• EIP-7623: Increase calldata fees and reduce L2 dependence on the main chain
• EIP-7691: Expand L2 Blob capacity, increase storage space
• Blob Optimization: Increased capacity and configuration flexibility

These measures will enhance Ethereum's support for L2 solutions and improve its processing capacity.

Data availability and throughput enhancement

EIP-2935 optimizes the storage of historical block hashes, making it easier for clients to access the latest block data. This is of significant importance for future applications such as Verkle trees, Rollups, and oracles.

Challenges and Controversies of the Prague Upgrade

security risks of account abstraction

Account abstraction simplifies operations, but it may increase the complexity of permission management. If wallet service providers do not adapt properly, it could lead to security vulnerabilities and even result in cross-chain asset losses.

Challenges of L2 Ecosystem

Despite the optimized L2 support, interoperability issues between L2s remain to be resolved. How to coordinate communication, transactions, and data sharing between different L2s, as well as how to ensure the transparency and verifiability of L2 transactions, are pressing issues that need to be addressed.

Community and Developer Adaptability

The introduction of new technologies may require developers to restructure existing DApps, which could cause adaptation pressure in the short term. How to achieve technological innovation while ensuring decentralization and network security still needs further exploration.

Market competitive pressure

Ethereum faces competition from other public chains and Layer 2 solutions. If it cannot attract more developers and users through upgrades, its market position may be challenged.

Future Outlook

The Prague upgrade has laid the foundation for the future development of Ethereum. It is expected to bring the following impacts:

1. Ethereum will become a more efficient multi-chain ecosystem center, achieving better cross-chain collaboration with other public chains.

2. The DeFi ecosystem will further expand, with more innovative financial products and services emerging.

3. The NFT and digital art market is expected to further thrive, supporting a more diversified range of application scenarios.

4. The decentralized governance of Ethereum will be strengthened, and community participation will increase.

Despite the challenges, the upgraded Ethereum ecosystem in Prague still holds great potential and deserves ongoing attention.