In May 2025 Ethereum’s latest upgrade Pectra went live which saw into action the eight Ethereum Improvement Proposals that as per JPMorgan Chase Co which had the aim of improving staking efficiency, validator operations and compliance. This Ethereum upgrade resulted in transaction volumes that did not see growth, also retail participation went down.
This paradox also presents the growth of Ethereum’s institution play which sees the CME futures positions rise and we see the launch of new security token standards. At the same time daily active addresses have stabilised at 387,000 and transactions are at 1.1 million per day which we haven’t seen since the 2023 bear market.
Ethereum Upgrade Details: Technical Advances And Adoption
Ethereum’s latest update brought in three primary innovations:
- Staking Reform (EIP-7251) saw the max validator stake increased from 32 ETH to 2,048 ETH. This in turn allowed large scale custodians to consolidate their power which in turn reduced network congestion but at the same time raised issues of centralization.
- Regulatory Framework Tokens (ERC-3643/1400) introduced what is in essence a programmatic layer for regulation which in turn enabled automatic KYC/AML processes. Since their implementation, amidst the Ethereum upgrade, 23 platforms have adopted these standards which in turn has seen $780 million of real world assets locked onto Ethereum.
- Dynamic pricing for Blobs in EIP-7263 which varies Layer-2 rollup fees based on demand, we see a 22% drop in user costs but a 41% increase in mainnet revenue.
Despite what we have seen in terms of technology improvements, the Ethereum upgrade did not see greater retail or developer participation which in turn saw daily transactions and active addresses report no growth.
Ethereum Upgrade And Network Economics: Rising Prices And Costs
In the past Dencun update we saw a 90% drop in Layer-2 fees which at the same time caused an increase in ETH issuance which we see a daily net inflation of 1600 ETH. This goes against what we had seen previously from Ethereum’s “ultrasound money” status. Further changes introduced by the upgrade, JPMorgan reports, show that fee cuts which were put in place to encourage adoption are in fact negative for Ethereum’s token economy.
Ethereum Update In A Competitive And Risky Environment
While Ethereum is growing in its institutional appeal, competitors at Layer-1 like Solana and Avalanche are seeing growth in retail users. Ethereum is at just 12% of the action in meme coins, and in premium NFT sales we saw a drop to 31%. Also developer interest fell off. We saw only 23% of new smart contract deployments on Ethereum which was down from 41% previously.
JPMorgan reports that the Ethereum upgrade which puts more focus on the enterprise is in fact causing the innovation story to be taken over by more retail-oriented chains. Also the upgrade brought forward issues of decentralisation and scale. We see that the top five stakers have taken control 34% of network security and mainnet blocks are nearly at capacity.
