1. Introduction: Prague upgrade prospects

Since its official launch in 2015, Ethereum has been the core base for 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 (DApps), but also had a profound impact on decentralized finance (DeFi), non-fungible tokens (NFTs), and other blockchain applications. However, Ethereum's technological evolution has not stopped there. From the initial PoW (Proof of Work) consensus mechanism to the completion of the "merge" in September 2022 and the formal shift to PoS (Proof of Stake), Ethereum has always been looking for more efficient, environmentally friendly and scalable solutions. Now, the upcoming Prague Upgrade has once again attracted widespread attention from the market.

The Prague upgrade is another important technical iteration of Ethereum. It follows the Cancun upgrade in March 2024, and 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 EIP (Ethereum Improvement Proposals), including optimization of Ethereum virtual machine (EVM), optimization of Ethereum staking, optimization of Rollup performance, reducing interaction costs, and strengthening storage management. These changes not only improve the overall efficiency of the Ethereum main network, but also provide more robust infrastructure support for Layer 2 solutions, DeFi protocols, NFT markets, etc.

Every major upgrade of Ethereum is accompanied by violent market fluctuations and in-depth discussions from the community, and the Prague upgrade is no exception. For developers, new features and optimization measures mean stronger development tools, more efficient ways to execute smart contracts, and lower compute and storage costs. This will further inspire developers to build more complex and innovative applications on the Ethereum network. For ordinary users, the Prague upgrade may mean an increase in transaction speed, a decrease in handling 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 operate, such as Layer 2 expansion solutions, cross-chain bridges, decentralized exchanges (DEXs), etc.

In addition, from an investment perspective, every upgrade of Ethereum may become a critical factor in market sentiment changesbond catalyst. Historical experience shows that major upgrades often lead to new expectations of the market for Ethereum's outlook, which affects the fluctuations in ETH prices. As the Prague upgrade is approaching, market participants are generally concerned about the possible price impact: on the one hand, optimizing network performance may increase the usage rate of ETH, thereby increasing its intrinsic value; on the other hand, whether the technology 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 Prague Upgrade?

Prague Upgrade is an important update to the Ethereum protocol. It inherits and extends the core goals of several 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 Ethereum's long-term technology roadmap, combining community consensus, developer needs and feedback from real application scenarios, thereby further enhancing Ethereum's competitiveness as the world's leading smart contract platform. The upgrade process of Ethereum is usually carried out in the form of a "hard fork", i.e. all nodes must be updated to a new version of the software to maintain compatibility with the network. The Prague upgrade is also a hard fork, meaning it will be activated at specific block heights and implemented simultaneously across the network. Once the upgrade is completed, all Ethereum nodes need to run clients that contain new protocol rules, otherwise they will not be able to continue to participate in network consensus. This process requires developers, miners, stakers and ordinary users to be fully prepared before upgrading to ensure a smooth transition to the network.

From a technical perspective, Prague upgrade integrates a series of optimization measures that have been reviewed and discussed by the Ethereum Improvement Proposal (EIPs). These optimizations involve multiple key areas such as Ethereum virtual machine (EVM), transaction fee (Gas Fee) structure, storage management, contract execution efficiency, etc. As EVM, the core execution environment of Ethereum, 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 optimization, making smart contracts executed faster and reducing computing costs. In addition, upgrading and optimizing Gas computing logic makes different types of operations more reasonable allocate resources and reduces the cost surge in network congestion.

For ordinary users, the direct impact of Prague upgrade is reflected in the improvement of transaction costs and execution efficiency. Ethereum transaction fee issues have always been one of the most concerned issues for users, especially during busy networks, where Gas prices may soar to extremely high levels, making small transactions expensive and even affectingThe popularity of applications such as DeFi, NFT and chain games. Prague upgrades provide 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 Ethereum's competitiveness, allowing it to maintain its technological advantages when facing other blockchains (such as Solana, Avalanche, BNB Chain).

In addition, the Prague upgrade also enhances the support capabilities of the Layer 2 solution. In recent years, the rapid development of the Ethereum 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, such as data availability, bridging security, and delay in and out of funds, still plague developers and users. The Prague upgrade has optimized these issues, improving the native support capabilities of the Ethereum mainnet for the Layer 2 solution, making the operation of the Layer 2 network more efficient and secure. This not only helps the development of the Rollup solution, but also provides technical support for the future modular blockchain architecture.

In the long run, the Prague upgrade is not only a technological improvement, but also an important step for Ethereum to move towards higher scalability, better user experience and stronger developer ecosystem. It laid the foundation for subsequent upgrades, further optimization of Ethereum 2.0, and long-term plans such as data sharding, allowing Ethereum to continue to lead the innovation trend of the blockchain industry. As the upgrade approaches, markets, developers, investors and ordinary users are closely watching its final effect and the possible ripple effect on the Ethereum ecosystem and the crypto industry as a whole.

3. Technical and ecological impact of Prague upgrade

Ethereum Prague upgrade is a comprehensive hard fork focusing on improving the scalability, security and user experience of the Ethereum ecosystem. In this version, Ethereum has made a number of technical adjustments, aiming to improve on-chain operations, staking mechanisms, and support for layer two (L2) networks, and further promote 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. It introduces an account abstraction mechanism, thus changing the way Ethereum accounts are managed. Users will no longer need itConvert account type (EOA -> CA) and perform various operations directly through the EOA account, such as authorization and deduction. This will significantly reduce the user's operating costs and make on-chain interactions easier and smoother.

Key significance:

User experience improvement: By simplifying the operation process, users no longer need to register or manage complex accounts, lowering the entry threshold.

The impact of DApps: For DApps like exchanges, batch collection function can reduce its management costs and improve efficiency. But 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 staking mechanism

Prague upgrade has made many optimizations to the staking mechanism of Ethereum, with the goal of improving the security and flexibility of staking operations and ensuring the decentralization and security of the Ethereum network.

EIP-6110: Optimized staking operations so that the consensus layer no longer relies on the voting mechanism, but directly integrates the staking records with verifier-related operations into the execution layer.

EIP-7251: Increases the maximum effective staking limit for a single verifier to 2048 ETH, further reducing the complexity of verifier management and reducing system redundancy.

EIP-7549: Improves flexibility in staking operations, allowing verifiers 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 centralization of large-scale validators. For users participating in staking, these optimizations provide more flexibility and opportunities for compound interest benefits, but also bring potential risks of decentralization.

3.3 Support for Layer 2 networks (L2 optimization)

With the continuous development of Ethereum's L2 ecosystem, Prague upgrade pays special attention to support and optimization of L2.

EIP-7623 & EIP-7691: These proposals improve L2's storage and throughput capabilities. EIP-7623 reduces L by increasing gas fees for calldata in transactions2. The network depends on calldata; EIP-7691 expands the capacity of L2 blobs and improves storage space.

Blob optimization: Ethereum increases the capacity and configuration flexibility of the Blob data structure, and enhances support for L2. This will enable more L2 solutions to run on the Ethereum main chain and improve their processing power.

These initiatives reflect Ethereum's need to build a stronger L2 ecosystem to support high-frequency trading and large-scale applications.

3.4 Improved 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 history of the entire chain. This is of great significance to future optimization solutions such as Verkle trees and applications such as Rollup and oracles.

3.5. The impact of Prague upgrade on the Ethereum ecosystem

Although Prague upgrade itself has not caused market heated discussions like "merger", it plays a crucial role in the long-term development of Ethereum. The Prague upgrade has made Ethereum more adapted to the L2 era and improved the scalability, security and decentralization of the network. With the future upgrades (such as Osaka, Amsterdam hard fork, etc.), Ethereum will have more features, pushing it toward grand visions such as "Millions of Tradings per Second" and low-centralized risk (The Surge).

The Prague upgrade is an important step in the development of Ethereum. Although it does not cause heated market discussions like "London" or "merger", it has laid a higher foundation for the Ethereum network through a series of technological improvements. Through account abstraction, staking mechanism optimization and L2 support, Prague upgrade makes Ethereum more efficient, friendly and flexible. In the future, Ethereum may continue to achieve higher network performance and lower centralized risks through a series of upgrades, further consolidating its dominance in the blockchain ecosystem.

4. Challenges and controversies about Prague upgrade

The Prague upgrade is an important evolution of the Ethereum network. Although it has brought many technological 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 Ethereum's long-term development direction. Here is the Prague upgrade during implementationThe main challenges and controversies that may be faced:

4.1 Security risks brought by account abstraction

EIP-7702 in the Prague upgrade introduced an account abstraction mechanism, which allows users to implement more flexible transaction methods at the chain level. The core concept of account abstraction is to eliminate the differences in account types from the chain, and users no longer need to convert to contract accounts (CAs) in advance to operate, but can directly use externally owned accounts (EOAs) to trade. This optimization significantly reduces the interaction cost of users 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 safety risks. Although the introduction of account abstraction reduces interaction costs, it also increases the complexity of user permission management. If the wallet service provider fails to adapt this mechanism correctly, unexpected security vulnerabilities may be triggered. In the past, users' losses were limited to single-chain assets, but now due to the introduction of account abstraction, once a vulnerability occurs, cross-chain losses and even explosive attacks may occur. Hackers may use vulnerabilities in this mechanism to conduct phishing attacks, especially when wallet service providers are inappropriate. Therefore, although account abstraction brings optimization of user experience, its security is still a major hidden danger in Prague's upgrade.

4.2 Challenges and scalability issues of the L2 ecosystem

Prague upgrade particularly emphasizes the optimization of 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. But technically, how to manage and optimize the transaction costs and liquidity of these L2s remains a huge challenge. First, although EIP-7623 increases calldata's expenses with the goal of reducing the L2 system's dependence on the Ethereum main chain, this may also lead to an increase in the cost of some L2 ecosystems. If the L2 system cannot adapt effectively to these changes, it may affect its long-term sustainability and user experience. In addition, although the expansion of L2 can alleviate the pressure on the Ethereum main chain, the interoperability problem between L2 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. As the number of different L2 solutions on the Ethereum network increases, the complexity of cross-chain continues to increase, and the dispersion of liquidity and security may affect the stability and benefits of the entire ecosystem. Therefore, although Prague upgrade has made great efforts to optimize the L2 ecosystem, its actual effect remains to be seen, especially how the collaborative work between L2 and L1 is achieved, and how to ensure the transparency and verifiability of L2 transactions.

4.3 Adaptation issues between the community and developers4.4 Market response and pressure on competitive chains

Although the goal of Prague's upgrade is to improve the scalability, user experience and security of Ethereum, competition is becoming increasingly fierce in the multi-chain ecosystem. Ethereum is under tremendous pressure from other public chains (such as Solana, Aptos, Polkadot, etc.) and Layer 2 solutions (such as Arbitrum, Optimism, etc.). These competitive chains and protocols usually have higher transaction speeds and lower transaction fees. Although Ethereum's L2 optimization can alleviate this problem to a certain extent, if the L2 ecosystem cannot operate effectively, Ethereum will still face market share loss. In addition, although Prague upgrades have made many technical optimizations, the actual response of the market 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 competitive chains. Moreover, although the Prague upgrade can improve Ethereum's throughput and efficiency, how to maintain its original decentralized characteristics and avoid the risk of excessive concentration remains the focus of market and community attention.

The Prague upgrade is undoubtedly an important evolution in Ethereum's history, and it has made significant efforts to improve network performance, scalability and user experience. However, this process is not without its challenges. Centralized risks, safety hazards, L2 ecologyThe management issues and community adaptability issues have brought considerable challenges to the smooth implementation and long-term development of Prague's upgrade. Nevertheless, the implementation of Prague upgrades 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.

5. Future Outlook

The Prague upgrade, as a key upgrade of the Ethereum network, 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 is a detailed discussion of the impact and future prospects of Prague's upgraded ecosystem after the Ethereum ecosystem and its future prospects from two parts.

5.1 The positive impact of the Prague upgrade

The Prague upgrade has brought significant improvements to the Ethereum network through a series of technical optimizations and protocol improvements. Prague upgrades optimize transaction data storage, computing efficiency and interaction methods, and Ethereum can handle more transactions and smart contracts more efficiently, significantly improving the network throughput. Especially through support for L2 (Layer 2) solutions, the Prague upgrade greatly reduces the burden on the Ethereum main chain and enhances the overall scalability of the network. The L2 solution not only provides higher speeds and lower costs for transactions, but also improves Ethereum's transaction throughput, thus supporting more DApps and user needs. At the same time, Prague upgraded the implementation effect of layer two solutions 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 has effectively alleviated the congestion problem of Ethereum's main chain and provided technical support for the emergence of more applications in the future.

Many 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. Through account abstraction, users can execute transactions more flexibly, simplifying complex transaction logic. In addition, by optimizing transaction fees and reducing execution costs, users can interact at higher frequency without sacrificing their experience, thereby improving the efficiency of the Ethereum network. These improvements have especially brought greater convenience to users and developers in the decentralized finance (DeFi) and non-fungible tokens (NFT) markets. Lower transaction fees and higher transaction throughput means that users can more easily participate in various protocols of DeFi, while the activity of the NFT market will be further improved.

At the same time, Prague upgrades are strengthenedThe security of the Ethereum network is especially optimized in the Proof of Stake (PoS) mechanism and staking system. Through the improvement of the staking mechanism, Prague upgrade not only enhances the network's attack resistance, but also improves the diversity of validators by increasing the staking threshold and expanding the staking pool, thereby reducing the risk of attacks by 51%. The new staking mechanism makes the network's verification nodes more dispersed, reduces the risk of single point of failure, and strengthens the Ethereum network's resistance to malicious behavior.

In addition, another important improvement in the Prague upgrade is the introduction of stronger consensus algorithms, especially support for BLS signatures, making data verification and storage more secure. By enhancing the security of the network, the Prague upgrade has improved the stability of Ethereum in high-risk environments, especially in supporting financial applications, ensuring a safer and more reliable transaction environment.

Although the issue of centralization of the staking mechanism is one of the controversies in the Prague upgrade, the Prague upgrade generally strengthens the decentralized characteristics of Ethereum. By improving the diversity of validators, lowering the verification threshold, and strengthening support for small validators, the Prague upgrade has promoted the decentralization process of the Ethereum network to a certain extent.

Prague's upgraded account abstraction and smart contract optimization also provide developers with more tools to implement decentralized applications (DApps). At the same time, it further promotes 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: Prague's upgraded Ethereum ecosystem

With the successful implementation of Prague's upgrade, Ethereum's future ecosystem will show many new possibilities. The following are several important outlooks for the Ethereum ecosystem after Prague’s upgrade: 5.2.1. Ethereum will become a more efficient multi-chain ecosystem center

Prague upgrade provides strong technical support for Ethereum’s potential to expand the multi-chain ecosystem by strengthening the support of L2 solutions. In the future, Ethereum will not only exist as a blockchain platform, but will serve as a multi-chain center to realize 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 theseApplications can run more efficiently and at low 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 ecological development. The Prague upgrade further promotes Ethereum’s strategy as a cross-chain hub, making it more competitive in multi-chain interoperability.

5.2.2 Further development of decentralized finance (DeFi)

With the reduction of transaction fees and the increase in network throughput, Prague has created conditions for the expansion of the decentralized finance (DeFi) ecosystem. The DeFi protocol no longer faces the bottleneck of main chain congestion and high fees, and more users and developers can participate in the construction of DeFi. The new trading model, more efficient lending market, liquidity pool and decentralized derivatives market will gradually mature against the backdrop of Prague's upgrade, creating a richer financial product. Especially in terms of automated market makers (AMMs) and decentralized exchanges (DEXs), Prague upgrades will further promote the scale development of decentralized finance by providing more efficient network support and improved trading models. DeFi will not be limited to simple borrowing and transactions, but may include more financial derivatives, insurance, stablecoins issuance, etc. in the future.

5.2.3 The further prosperity of the NFT and digital art market

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 NFT creation, trading and transfer more economical and efficient. Artists, creators and brands will have more opportunities to publish and trade digital works on Ethereum, while NFT's diversity and innovation will continue to drive the entire digital art market. NFT's smart contracts can not only support art transactions, but will also expand to more areas such as games, music, entertainment, etc. Prague's upgrade has brought a more efficient trading experience to the NFT market and has also made the NFT-based business model more sustainable.

5.2.4 Further enhance 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 the decentralized governance of Ethereum. By improving the transparency of the staking mechanism, enhancing the diversity of validators, and further removing dependence on centralized institutions, Ethereum's governance structure will be more open and decentralized. In the future, with the Ethereum DAO (Decentralized Autonomous Organization) modelImprove, more governance decisions will be made through community consensus to truly achieve decentralized autonomy. This improvement in decentralized governance also provides a demonstration for other blockchain projects, allowing blockchain technology to be more widely used in governance innovation.

In short, the Prague upgrade is a milestone in the development of Ethereum and has brought unprecedented technological progress to the Internet. In the future, Ethereum will continue to usher in 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 upgraded Ethereum ecosystem in Prague is still full of huge potential, which deserves our continued attention and expectations.