🔎Ethereum's big plans
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In today’s newsletter:
🔎What’s next for Ethereum?
📊 On-chain alpha
😂 Crypto meme of the week
🗞️ The latest DeFi news
🔎What’s next for Ethereum?
The past few years have been very rough for ETH.
Last cycle, people were talking about how ETH could potentially flip BTC. Now, the sentiment around it is terrible.
Some of the ETH FUD that led to this is justified, while some of it isn’t.
Fortunately, after all those years, the Ethereum Foundation is finally showing signs of listening to the community's criticism and feedback.
And recently, Vitalik and a few other team members talked about the most important items on Ethereum’s roadmap. I thought it would be interesting to cover them.
Here’s an overview of the biggest upgrades coming to Ethereum👇
1. The Pectra Upgrade
I’ll not focus much on this one as I covered Pectra many times in the past.
In short, Pectra is the most ambitious Ethereum upgrade yet, with more EIPs than any previous upgrade. Its main goal is to improve the on-chain UX.
The biggest changes it will bring are:
Account Abstraction (enabling wallets to execute batch transactions and dApps to pay the gas fees on behalf of their users)
Increase the maximum ETH validator stake from 32 to 2,048 ETH
Increase blob throughput by raising the target no. of blobs per block (this will lead to reduced congestion and higher transaction speeds on L2s)
Pectra is expected to go live on the mainnet on May 7.
The most exciting part is that Pectra will eliminate the need for token approvals. For instance, when swapping tokens on Ethereum, you need to sign two transactions: One for approving your tokens to be spent, and another one for the actual swap.
After Pectra, you will have the option to sign just one transaction for every swap.
2. Scale the L1
It’s clear to everyone that Ethereum’s long-term goal is to scale primarily through L2s.
The issue? L2s don’t generate much value for ETH, and many of the most innovative dApps in the Ethereum ecosystem are still built only on the L1.
On top of this, most L2s are today far less decentralized and way less secure than the L1, which is why many whales and institutions prefer using the L1.
Hence, many people (including me) argue that Ethereum should also scale the L1.
And based on the recent statements made by Vitalik Buterin and other developers, it looks like L1 scaling has finally become a top priority.
In the short-term, this will be done primarily by increasing the gas limits.
Vitalik wants to increase the L1 gas limit by 10x, as he mentioned in a recent comment, which would significantly increase Ethereum’s scalability.
According to the “Ethereum roadmap czar”, we should see some major improvements in L1 scaling over the next 12 months.
Before I cover a few other important items from Ethereum’s roadmap, here’s an overview of Onchain, the Web3 research hub:
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The next important item on Ethereum’s roadmap is the following one:
3. Solve the L2 fragmentation problem
Transactions on Ethereum L2s are now very fast and cheap.
But the user experience for the bridging process between L2s is far from perfect.
The launch of hundreds of different L2s also led to fragmented liquidity.
For Ethereum to successfully scale through L2s, the cross-L2 user experience needs to radically improve, and the bridging process must be abstracted away.
Happily, there are many Ethereum Improvement Proposals (EIPS) under discussion that aim to address this:
ERC-7786 - which aims to provide a single universal interface that dApps can use to securely send & receive messages across multiple blockchains
ERC-7811 - which aims to allow wallets to aggregate user balances across all L2s and automatically handle bridge/cross-chain swap transactions
ERC-7281 - which aims to enable seamless token bridging across all L2s, allowing tokens to be minted and burned across multiple L2s
Unfortunately, the bad news is this:
Many of the EIPs that aim to solve liquidity fragmentation are still in the draft stage or in another very early stage of development.
So it will probably take a long time until Ethereum L2s will be able to offer a unified user experience.
4. Enable on-chain privacy
Recently, Vitalik Buterin released a simplified L1 privacy roadmap.
He believes privacy should be a top priority, and it’s true that many ppl aren’t comfortable with their transactions being monitored on-chain.
The main changes the roadmap mentions are:
Incorporate privacy tools into existing web3 wallets
Move the ecosystem toward “one address per application” in order to remove public links between your activity across different dApps
Develop a new token standard for private fungible token transfers
Closing thoughts
If you want to learn more about Ethereum’s roadmap, I suggest you follow @rudolf6_.
He’s basically the “Ethereum roadmap czar” these days.
For now, I’m still not eager to get high exposure to ETH.
But Ethereum remains my favorite DeFi ecosystem by far, and I genuinely hope it regains its momentum by addressing its current challenges.
The current Ethereum roadmap is looking promising.
Yet what’s crucial is how quickly the items on the roadmap will get delivered. The Ethereum Foundation has been slow to ship upgrades in recent years.
But if this time they manage to scale the L1 and improve the UX for cross-L2 transactions in a timely manner, Ethereum will benefit tremendously.
On-chain Alpha🔎
The search traffic for “tokenization” is at all-time high
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The latest developments in DeFi
Ethereum Foundation announced they’re working on scaling the L1
Cosmos launched IBC Eureka - a major upgrade that enables native interoperability with Ethereum
Pendle partnered with Amber Group, a digital asset leader that will start using Pendle as part of its on-chain treasury strategy
Donald Trump blocked the IRS rule requiring DeFi apps to report customer data from all users
Jupiter released Jupiter Pro, a platform for advanced Solana traders. It comes with real-time analytics and 10x lower fees than competitors
Resolv Labs, an innovative stablecoin protocol, raised $10M in funding. Coinbase Ventures is among its early backers
Mode introduced Mode Trade - an AI-powered perpetual trading terminal
KernelDAO launched its token and the airdrop claiming portal. Kernel is one of the largest restaking protocols
AAVE DAO is discussing a proposal to deploy AAVE V3 on Aptos
MANTRA’s OM token crashed 90% in just a few minutes. The team said this happened due to “reckless liquidations“
GMX announced plans to launch a Bitcoin-native version of its exchange
Loopscale, a modular lending platform that enables leveraged yield farming, was launched on Solana
Cork Protocol, a new DeFi primitive that tokenizes the risk of depeg events, went live on Ethereum
Raydium introduced LaunchLab, an all-in-one token launchpad
Monad announced that native USDC will launch on its mainnet
That’s all for this week!
Until next time,
The DeFi Investor
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