BofA Says Ethereum Needs Scalability Improvements to Hold Its Market Position

The Ethereum blockchain’s transition from a proof of work (PoW) consensus mechanism to proof of stake (PoS) seems imminent, with an Ethereum Foundation member saying recently  that the switch is provisionally expected in mid-September, Bank of America (BAC) said in a research report last week.

The Merge, the first of five planned updates for the blockchain, will combine Ethereum’s existing execution layer with the Beacon Chain, a PoS consensus layer, the report said.

“PoS decreases Ethereum’s energy consumption by over 99%, lowers barriers to entry for investors to generate yield as network validators and alters ETH’s supply/demand dynamics,” the bank said, referring to the system’s ether token.

The transition also acts as a precursor for the “Surge,” the second of the planned upgrades, the note said. That will aim to improve Ethereum’s throughput from around 15 transactions per second (TPS) to about 100,000 TPS while reducing transaction fees, it added.

Without the scalability improvements, Ethereum is unlikely to remain as the dominant blockchain operating system, the bank said.

Bank of America notes that newer blockchains such as Binance Smart Chain (BSC), Tron, Avalanche and Solana have taken market share from Ethereum because of their PoS consensus mechanisms and greater scalability, adding that these features will “likely be key as the Web 3 ecosystem of decentralized applications emerges.”

Web3 represents the next generation of the internet, one that focuses on shifting power from big tech companies to individual users.Read more: Reminder: The Merge Won’t Solve Ethereum’s Scaling Woes by Itself

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