Bank of America said in a research note that the Ethereum ETH -2.70% blockchain’s transition from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) appears imminent, as it needs scalability improvements to maintain its market position.
Without scalability improvements, Ethereum is unlikely to continue as the dominant blockchain operating system, the bank said, stating: “PoS reduces Ethereum’s energy consumption by more than 99%, lowering investors as a network Barriers to entry for validators to generate revenue and change the supply and demand dynamics of ETH.”
Analysts also noted that newer blockchains such as Binance Smart Chain (BSC), Tron, Avalanche AVAX -1.76% and Solana SOL -3.24% have taken market share from Ethereum due to their PoS consensus mechanism, greater scalability and lower transaction fees .
The bank added that these functional advantages “may be key with the emergence of decentralized applications in the Web3 ecosystem.”
