Timeless Titans

Close to a decade ago, Ethereum broke ground as the first blockchain supercomputer and enabled a myriad of smart contract use-cases. For the longest time, it has given direction to countless crypto projects – both as a home to many Ethereum-based dApps, as well as an industry leader for the L1 space.??

Not long after, one of the co-founders of Ethereum – Gavin Wood - co-founded Polkadot. It was founded with the vision of providing a network that was more scalable and interoperable than other L1s which existed at the time.??

Today, both projects stand as pioneers of the modular blockchain infrastructure stack. Even amidst some serious competition from L1s including Solana, the two networks continue to innovate. With major upgrades on the horizon, Ethereum and Polkadot reaffirm their roles as resilient and forward-thinking blockchain ecosystems in this ever-evolving industry.?

In this edition of the Crypto Market Monitor, we will explore the two upcoming upgrades for Ethereum – Pectra, and Fusaka. We also dive into Polkadot’s 2.0 vision to understand how it aims to reinvent the Polkadot network.?

Ethereum gears up for Pectra?

Prague-Electra (dubbed Pectra) is the next big upgrade for Ethereum. It aims to tackle critical shortcomings in its Proof-of-Stake architecture while also enhancing its data availability and usability.??

Among the key Ethereum Improvement Proposals (EIPs) in Pectra, EIP-7702 introduces a significant enhancement to user experience by enabling Ethereum accounts to seamlessly upgrade to smart accounts. This simplifies transaction flows, removing the long-standing need to sign multiple transactions – one each for approvals and swaps. This changes the UX game for end users on the chain. However, users benefitting from this will largely depend on wallet providers integrating this functionality effectively since most users transact on the chain through wallet provider services.?

EIP-7251 is another major inclusion in Pectra, raising the validator staking limit from 32 ETH to 2048 ETH on which validators can earn their yield. This change is designed to mitigate Ethereum’s ever-growing validator set that puts a strain on the network. At the time of writing, the number of Ethereum validators has exceeded 1.7 million, surpassing the threshold at which networking inefficiencies emerge. By encouraging stake consolidation through a rise in staking limit, the EIP enhances network performance and reduces operational overhead for validators.?

Pectra introduces several technical refinements and its impact would predominantly be felt by validator node operators rather than end-users. The upgrade is expected to go live on Mainnet in mid-March this year.?

Fusaka Up Next?

Following Pectra, the Fusaka upgrade is up next on the Ethereum developer community’s docket. Although its complete scope is yet to be finalised, two key components have already been earmarked: EOF (EVM Object Format) and PeerDAS (Peer Data Availability Sampling).?

EOF introduces structural improvements to Ethereum’s Virtual Machine (EVM), which is the smart contract execution environment on the blockchain. The update makes smart contract execution more predictable, secure and efficient. These refinements will improve the developer experience on Ethereum.?

PeerDAS, on the other hand, is a transformative leap for Ethereum’s data availability model. In 2024, Ethereum saw the proto-danksharding upgrade (EIP-4844) which introduced the concept of blob-carrying transactions. Blobs refer to a new type of data storage where large chunks of data can be temporarily stored on the blockchain, primarily used by Layer-2 rollups to significantly reduce transaction fees by offloading large data packets without burdening the main chain with permanent storage.

With Fusaka, expanding upon EIP-4844’s proto-danksharding mechanism, PeerDAS distributes blob data storage and verification across multiple nodes, similar to how peer-to-peer torrenting operates. According to Ethereum co-founder Vitalik Buterin, this approach could immediately double or even quadruple the number of blobs, with further scalability improvements in the long term. By decentralising data responsibilities, PeerDAS enhances Ethereum’s ability to accommodate Layer 2 scaling solutions efficiently.

Polkadot 2.0

While Ethereum refines its core architecture, Polkadot is undertaking an ambitious transformation with Polkadot 2.0, which reimagines how blockchain resources are allocated and scaled. The upgrade introduces three foundational enhancements: Async Backing, Agile Coretime and Elastic Scaling.?

Async Backing is a pivotal improvement that reduces block time from 12 seconds to 6 seconds, significantly increasing transaction throughput. By enabling parallel transaction validation and expanding data storage capacity within each block, Polkadot effectively doubles its network efficiency. This optimisation draws parallels with traditional processor pipelining, where multiple instructions execute concurrently, maximising computational efficiency.?

Agile Coretime represents a radical shift in how projects access and utilise Polkadot’s computational resources. Moving away from the static parachain slot auction model, Agile Coretime allows projects to purchase coretime (computational resources) in flexible increments. This dynamic resource allocation model enhances economic flexibility, optimising the network’s utilisation by permitting parachains to acquire computing power as needed. Furthermore, the ability to subdivide and trade these resources in secondary markets builds a more efficient and fluid ecosystem.?

Complementing these enhancements, Elastic Scaling ensures that parachains can dynamically adjust their computational needs in response to network demand. By leveraging parallel computation, parachains can allocate multiple cores within a single relay chain block, effectively increasing their capacity.?

Conclusion

The forthcoming upgrades to Ethereum and Polkadot put their distinct approaches to scalability and efficiency on display. Ethereum is addressing critical protocol limitations including its expanding validator set and the need for a simpler UX. Meanwhile, Polkadot is pioneering a flexible and dynamic resource allocation model, ensuring its ecosystem remains agile in a rapidly evolving industry. Both the networks are making strides toward greater decentralisation, improved performance and enhanced developer experiences. We see the roll out of these upgrades solidifying Ethereum and Polkadot as strong infrastructure players, laying the foundation for more developers to build on these networks that have stood the test of time.

Disclaimer

This document has been prepared by AMINA Bank AG (“AMINA”) in Switzerland. AMINA is a Swiss bank and securities dealer with its head office and legal domicile in Switzerland. It is authorized and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

This document is published solely for educational purposes; it is not an advertisement nor is it a solicitation or an offer to buy or sell any financial investment or to participate in any particular investment strategy. This document is for distribution only under such circumstances as may be permitted by applicable law. It is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or would subject AMINA to any registration or licensing requirement within such jurisdiction.

No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained in this document, except with respect to information concerning AMINA. The information is not intended to be a complete statement or summary of the financial investments, markets or developments referred to in the document. AMINA does not undertake to update or keep current the information. Any statements contained in this document attributed to a third party represent AMINA's interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party.?

Any prices stated in this document are for information purposes only and do not represent valuations for individual investments. There is no representation that any transaction can or could have been effected at those prices, and any price(s) do not necessarily reflect AMINA’s internal books and records or theoretical model-based valuations and may be based on certain assumptions. Different assumptions by AMINA or any other source may yield substantially different results.?

Nothing in this document constitutes a representation that any investment strategy or investment is suitable or appropriate to an investor’s individual circumstances or otherwise constitutes a personal recommendation. Investments involve risks, and investors should exercise prudence and their own judgment in making their investment decisions. Financial investments described in the document may not be eligible for sale in all jurisdictions or to certain categories of investors. Certain services and products are subject to legal restrictions and cannot be offered on an unrestricted basis to certain investors. Recipients are therefore asked to consult the restrictions relating to investments, products or services for further information. Furthermore, recipients may consult their legal/tax advisors should they require any clarifications.

At any time, investment decisions (including whether to buy, sell or hold investments) made by AMINA and its employees may differ from or be contrary to the opinions expressed in AMINA research publications.

This document may not be reproduced, or copies circulated without prior authority of AMINA. Unless otherwise agreed in writing AMINA expressly prohibits the distribution and transfer of this document to third parties for any reason. AMINA accepts no liability whatsoever for any claims or lawsuits from any third parties arising from the use or distribution of this document.

Research will initiate, update and cease coverage solely at the discretion of AMINA. The information contained in this document is based on numerous assumptions. Different assumptions could result in materially different results. AMINA may use research input provided by analysts employed by its affiliate B&B Analytics Private Limited, Mumbai. The analyst(s) responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering, applying and interpreting market information.? The compensation of the analyst who prepared this document is determined exclusively by AMINA.

Disclaimer – Research

This document has been prepared by AMINA Bank AG (“AMINA”) in Switzerland. AMINA is a Swiss bank and securities dealer with its head office and legal domicile in Switzerland. It is authorized and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

This document is published solely for educational purposes; it is not an advertisement nor is it a solicitation or an offer to buy or sell any financial investment or to participate in any particular investment strategy. This document is for distribution only under such circumstances as may be permitted by applicable law. It is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or would subject AMINA to any registration or licensing requirement within such jurisdiction.

No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained in this document, except with respect to information concerning AMINA. The information is not intended to be a complete statement or summary of the financial investments, markets or developments referred to in the document. AMINA does not undertake to update or keep current the information. Any statements contained in this document attributed to a third party represent AMINA's interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party.?

Any prices stated in this document are for information purposes only and do not represent valuations for individual investments. There is no representation that any transaction can or could have been affected at those prices, and any price(s) do not necessarily reflect AMINA’s internal books and records or theoretical model-based valuations and may be based on certain assumptions. Different assumptions by AMINA or any other source may yield substantially different results.?

Nothing in this document constitutes a representation that any investment strategy or investment is suitable or appropriate to an investor’s individual circumstances or otherwise constitutes a personal recommendation. Investments involve risks, and investors should exercise prudence and their own judgment in making their investment decisions. Financial investments described in the document may not be eligible for sale in all jurisdictions or to certain categories of investors. Certain services and products are subject to legal restrictions and cannot be offered on an unrestricted basis to certain investors. Recipients are therefore asked to consult the restrictions relating to investments, products or services for further information. Furthermore, recipients may consult their legal/tax advisors should they require any clarifications.

At any time, investment decisions (including whether to buy, sell or hold investments) made by AMINA and its employees may differ from or be contrary to the opinions expressed in AMINA research publications.

This document may not be reproduced, or copies circulated without prior authority of AMINA. Unless otherwise agreed in writing AMINA expressly prohibits the distribution and transfer of this document to third parties for any reason. AMINA accepts no liability whatsoever for any claims or lawsuits from any third parties arising from the use or distribution of this document.

Research will initiate, update and cease coverage solely at the discretion of AMINA. The information contained in this document is based on numerous assumptions. Different assumptions could result in materially different results. AMINA may use research input provided by analysts employed by its affiliate B&B Analytics Private Limited, Mumbai. The analyst(s) responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering, applying and interpreting market information. ?The compensation of the analyst who prepared this document is determined exclusively by AMINA.