Ethereum's next big update, called Pectra, is on the way. It will bring significant changes to gas fees, validator staking, and more. This week, Ethereum's core developers decided to split the Pectra upgrade into at least two parts. The first part is set to launch around February 2025.

Recent updates like Dencun, which launched in March, and Shapella, which went live in 2023, have already made important changes for both developers and everyday users of Ethereum.

Pectra: Part One

During a recent meeting, developers realized that the list of features for Pectra was too long to tackle all at once. To avoid complications, they chose to break it down into multiple updates. The first part will arrive early next year.

Several proposals are already approved for this initial update, and they promise to make a noticeable impact on users.

One key change will remove the need to hold small amounts of ETH to pay for gas fees on the Ethereum mainnet and many layer-2 networks. Right now, gas fees on Ethereum, Base, Arbitrum, Optimism, and others must be paid in ETH, no matter which token you’re transferring.

The proposal, known as EIP-7702, will allow users to pay gas fees in other cryptocurrencies. This introduces "account abstraction," enabling Ethereum wallets to act more like smart contracts. This means third parties can help cover your gas fees.

So, soon you’ll be able to use a service to pay your gas fees in USDC, for example. This change will make it unnecessary to hold ETH just to carry out basic functions on Ethereum.

“It's a great improvement for user experience,” said developer Marius van der Wijden.

Another update in the first part of Pectra, EIP-7251, will let Ethereum stakers earn rewards on amounts greater than 32 ETH. Until now, validators could only earn yield if they deposited exactly 32 ETH (which is slightly over $81,000 right now). Any ETH above that didn’t generate more yield unless another full 32 ETH was deposited from a different validator.

For instance, if you’re staking 40 ETH, you currently can’t earn yield or voting power from that extra 8 ETH.

“It was just dead stake, basically,” van der Wijden explained. “But now it won't be.”

Once the first part of Pectra launches, stakers will earn proportional yield on any amount above 32 ETH. This will be possible because of new functionality that allows for the consolidation of validators. If you’re running several different validators of 32 ETH each to maximize rewards, you can combine them into a single validator with greater voting power and rewards.

On a larger scale, this consolidation means big stakers like Lido, Rocket Pool, and Coinbase can significantly reduce the number of nodes they need to run for staking on the Ethereum mainnet.

“This will greatly reduce the overall bandwidth requirements of the Ethereum network,” van der Wijden noted.

Part Two and Beyond

While the features mentioned above are set to go live early next year, there are still many questions about the second part of the Pectra upgrade. What EIPs will it include? When will it launch? Will there be other updates before it?

Currently, van der Wijden estimates that the rest of Pectra might not arrive until 2026.

However, when the second part does come, expect significant changes. Two major proposals are likely to be included: an EVM Object Format (EOF) that will improve efficiency and safety in smart contract coding, and a new feature called PeerDAS. This could lower layer-2 gas fees even more over the next two to three years.

Back in March, the Dencun upgrade introduced blobs, which dramatically cut layer-2 fees. This was done by allowing layer-2 data to be stored temporarily on-chain for about a month instead of permanently. Right now, six blobs exist on every Ethereum transaction block, providing space for cheap layer-2 transactions.

Once PeerDAS is launched, it will enable developers to significantly increase the number of blobs in every block. Van der Wijden is confident that after PeerDAS, his team will be able to fit 32 blobs on each Ethereum block. That’s an efficiency jump of over 400%!