Ethereum (ETH) is poised to implement two significant upgrades this year, named Pectra and Fusaka

However, these enhancements do not fully address persistent concerns regarding its tokenomics, according to a research report from Binance released on 16th April.

Two significant Ethereum (ETH) upgrades, Pectra and Fusaka, are set to be rolled out this year, but they do not fully address the persistent concerns regarding the blockchain's tokenomics, according to a research report from Binance.

The upcoming upgrades promise improvements in data availability, expanded support for layer-2 chains, and enhancements to wallet functionalities. However, as the blockchain faces increasing pressure to attract and retain user interest, investors are becoming more apprehensive about the potential for value accrual, especially with some features appearing to prioritize layer-2 networks over Ethereum's own revenue generation.

The Pectra upgrade, which is expected in May, will introduce additional "blobs" that enable layer-2 networks to submit more data to Ethereum, ultimately leading to lower transaction fees for users of these networks. However, this change could result in a decrease in Ethereum's income per transaction.

"While this optimizes the efficiency of layer-2 networks, it could decrease throughput on Ethereum and lower the trading fee income generated by ETH," Binance researchers noted.

The upcoming upgrade will also see an increase in the validator caps from 32 ETH to 2,048 ETH and modifications to wallet capabilities to improve the user experience. Although these changes are technically significant, they do not appear to benefit ETH holders directly in terms of value capture.

"The Pectra upgrade signals a technical step forward for Ethereum, but it does not address the pressing concerns of ETH holders seeking value and returns in the face of declining network activity and rising inflation," the researchers stated.

Later this year, the Fusaka upgrade will bring further enhancements with an emphasis on dark sharding and the developer experience. The introduction of the Ethereum Object Format aims to simplify the creation of smart contracts, potentially leading to fewer errors and increased security.

"The Fusaka upgrade showcases Ethereum's commitment to becoming the foundational infrastructure for the future of Web3, aiming to place itself at the heart of a broader ecosystem," the researchers explained.

"But as Ethereum faces growing competition and seeks to maintain its dominance, it is crucial to address the concerns of its own token holders and ensure that the value proposition of ETH continues to be attractive."

Currently trading at $1,567, Ethereum has seen a decline of over 60% from its December peak of $4,106. A drop in network activity, largely attributed to the rise of layer-2 solutions, has led to decreased trading fee generation. Consequently, ETH is becoming increasingly inflationary, a factor that is striking fear among investors.