User Exodus Hits Smart Contract Platforms—Can Ethereum’s Pectra Upgrade Turn the Tide?

There has been a sharp decline in daily active addresses across Smart Contract Platforms (SCPs) in recent months, raising concerns among investors and developers.

Meanwhile, Ethereum’s Pectra Upgrade could be the turning point, with crypto analyst Jamie Coutts calling the current state a cleansing of the ecosystem.

SCPs See Sharp Decline in Active Users

Jamie Coutts, who built Bloomberg Intelligence’s crypto research product, says this is the worst decline ever recorded in the history of SCPs.

He also notes that it is far worse than the 2022-2023 bear market, with daily active addresses dropping 40.5% in just five months.

“This is the largest usage collapse in SCP history,” wrote Coutts.

Coutts’ analysis provides a deeper look at the broader crypto ecosystem, which is simultaneously witnessing an uptick in global liquidity and an all-time high in stablecoin market cap.

While the sector seems to be experiencing a shakeout, Coutts says this decline does not indicate the death of smart contract platforms. Rather, it is a necessary cleansing of the ecosystem.

The analyst attributes the drop in daily active addresses to several key factors, including the rise of artificial activity.

“Much of the past cycle’s growth was artificial: Usage inflated by bots and Sybil farms, Incentive programs created temporary traction without stickiness. The unwind reflects a cleansing of fake activity, not the death of the sector,” Coutts explains.

The rise of bots and Sybil attacks, where bad actors create multiple fake identities to manipulate a platform’s usage metrics, has artificially inflated the activity numbers across various smart contract platforms.

Now, as these fake users are being weeded out, the real growth potential of SCPs is becoming clearer.

Moreover, this trend suggests that SCPs with weak application ecosystems or limited use cases will face significant valuation compression. This is especially true without stablecoin integration or real-world asset (RWA) applications.

Coutts notes that many SCP tokens risk valuation compression if their platforms do not offer high throughput, low-cost, and real settlement capabilities.

The market will likely reward mature platforms capable of supporting real economic activity. These include stablecoin transactions, payments, and AI-native applications.

“…going forward, value will concentrate in platforms that enable high-throughput, low-cost, real settlement and agentic automation,” he added.

Ethereum Staking Surge Post-Pectra

Interestingly, these predictions align with the recent Ethereum Pectra upgrade, which went live on May 7, 2025.

The Pectra upgrade introduces key features that could help Ethereum, the largest smart contract platform, stay ahead in this playing field. Specifically, the upgrade improves Ethereum’s staking model and validator operations.

CryptoQuant recently indicated a notable spike in ETH staking around the Pectra Upgrade news. Specifically, before the Pectra upgrade news, ETH staking saw a net outflow of around 1.02 million ETH, reflecting uncertainty.

However, after the news, staking rebounded with a 627,000 ETH inflow, signaling renewed market confidence in the Ethereum staking ecosystem.

“Before Pectra News (Nov 16 – Feb 15): ETH staking dropped from ≈34.88M to 33.86M ETH, a net outflow of ~1.02M ETH. This period reflects market uncertainty and mild unwinding of staking positions ahead of the upgrade. After Pectra News (Feb 16 – May 16): Total ETH staked rose from 33.78M to 34.41M ETH — a net inflow of ~627K ETH. Indicates renewed confidence in the staking process following the upgrade,” wrote CryptoQuant analyst Kripto Mevsimi.

ETH Staking before and after Pectra Upgrade news. Source: CryptoQuant

In the same tone, Bohdan Opryshko, co-founder and COO at Everstake, told BeInCrypto that the Pectra upgrade may be Ethereum’s most institution-friendly update. He says the upgrade is the clearest signal that Ethereum is ready for conservative capital.

“For the first time, institutions can stake at scale with operational clarity and reduced complexity. It’s a green light for conservative capital to get involved in native Ethereum staking,” Opryshko told BeInCrypto.

Further, Pectra’s introduction of smart accounts allows Ethereum wallets to execute smart contract logic. This could drive stablecoin integration.

At the same time, it could enhance scalability. This would make Ethereum better suited to handle real economic activities such as payments and financial transactions.

Nevertheless, Coutts highlighted a divergence between price action and network activity, a common phenomenon in the crypto space. While markets stabilize, activity on many SCPs remains stagnant.

Coutts notes that this divergence will not last. More sophisticated capital will increasingly flow toward platforms that anchor real economic behavior, especially via stablecoin flows and payments.

“Markets may be stabilizing, but activity is not,” More sophisticated capital will increasingly rotate toward chains that anchor real economic behavior, especially via stablecoin flows, payments, and AI-native applications,” Coutts says.

Finally, Coutts predicts that a liquidity-driven rally will return, fueled by the significant liquidity expected to enter the system in the coming months.

However, he cautions that the value will likely accrue to a subset of SCPs that can deliver tangible value through real-world applications and stablecoin integration. This sentiment aligns with the structural upgrades brought by Ethereum’s Pectra fork.