Pectra Upgrade Propels Ethereum Forward, But Phishing Risks Loom Large

Ethereum's recent Pectra upgrade has significantly boosted EIP-7702 transactions, enabling external accounts to function as temporary smart contract wallets. While this enhances user experience and functionality, security experts are flagging a rise in sophisticated phishing attacks that exploit the new transaction bundling capabilities, urging increased user awareness and improved wallet transparency.

Ethereum's Pectra Upgrade: A Leap Forward

The Ethereum Pectra hard fork, launched on May 7, marks a significant stride in the network's evolution. This upgrade introduces 11 Ethereum Improvement Proposals (EIPs), aiming to enhance validator operations, improve user experience through smart accounts, and expand Layer-2 capacity. Key changes include:

• EIP-7251: Increases the maximum effective balance for validators from 32 ETH to 2048 ETH, allowing for more efficient staking and consolidation of multiple validators.

• EIP-7691: Doubles the throughput of blobs, a low-cost data availability solution crucial for Layer-2 scalability, by raising the target number of blobs per block from 3 to 6.

These improvements are designed to make Ethereum a more robust and scalable global settlement layer, paving the way for broader adoption and institutional participation.

EIP-7702: Transforming User Experience

One of the most impactful EIPs in the Pectra upgrade is EIP-7702. This proposal allows regular external accounts (EOAs) to temporarily function as smart contract wallets without requiring users to change their addresses. This innovation brings several benefits:

• Batching multiple actions into a single transaction.

• Enabling sponsored gas fees.

• Integrating passkey authentication.

• Implementing spending limits and wallet recovery options.

Since the upgrade, EIP-7702 transactions have surged from a handful to nearly 1,000 daily interactions, indicating rapid adoption. This functionality significantly bridges the gap between standard and smart contract wallets, making decentralized applications (dApps) more accessible and improving the overall user experience in DeFi and Web3.

Rising Phishing Risks and Security Concerns

Despite the advancements, the flexibility offered by EIP-7702 has introduced new security challenges. Security experts are warning of an increase in sophisticated phishing attacks that leverage the transaction bundling feature. Malicious actors are now able to:

• Bundle multiple approval permissions (e.g., for NFTs and ERC-20 tokens) into a single click.

• Exploit generic prompts in wallet interfaces, making it difficult for users to discern the full scope of a transaction.

For instance, the notorious Inferno Drainer group has been observed using MetaMask's EIP-7702 delegator contract to perform batch authorization phishing. This allows attackers to execute pre-programmed instructions to drain assets without raising immediate red flags. The streamlined user experience, while beneficial for usability, inadvertently reduces friction for attackers, making these new phishing attempts harder to detect and faster to execute. The Ethereum community faces the critical task of balancing enhanced functionality with robust user protection through improved wallet interfaces and comprehensive user education.

Sources

• What impact will the Ethereum Pectra upgrade have on the ecosystem?, | PANews.

• EIP-7702 Transactions Surge After Ethereum’s Pectra Upgrade, BeInCrypto.