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Ethereum's upcoming The Merge to Proof-of-Stake could lead to wider institutional adoption of cryptocurrency, according to a Bank of America research report.
Proof-of-Work (PoW) systems often face backlash for their environmental aspects. The fact is that cryptocurrencies are mined in this system, and the amount of energy required to maintain the operation of thousands of nodes is very large. Many institutions and individuals do not invest their money in environmentally harmful assets, which creates some barriers to the wider adoption of cryptocurrencies mined through the PoW system. However, Ethereum (ETH) has long planned a move to a Proof-of-Stake (PoS) consensus system that will drastically reduce energy consumption.
According to Bank of America (BAC), investors who are prohibited from buying PoW-based cryptocurrencies can purchase ETH after switching Ethereum to PoS, watcher.guru reports. This is strong positive news for the cryptocurrency and could significantly affect the trajectory of its development. The environmental aspects of cryptocurrencies are a major hurdle for many institutions. Thus, Ethereum eliminating its mining needs opens the door to entering into the asset for many organizations.
According to BAC analysts, institutional adoption may also be influenced by the capacity to stake ETH and provide a higher-quality yield as a validator, or through a staking service.
The bank stated that in order for a decentralized insurance protocol like Nexus Mutual to be a viable substitute for conventional insurance companies, it needs to make a return on its reserves. Insurance firms often invest their reserves in corporate and government debt. However, it can be challenging to locate instruments in the digital asset ecosystem with similar risk and reward characteristics. The nearest option might be to stake on Ethereum, BofA adds.
It is highly likely that The Merge will help ETH become more acceptable. Being greener leads to a big shift in perception. In addition, it may be easier for corporations to invest in an asset that causes less damage to the environment.
© 2022, Eva Fox | Tesmanian. All rights reserved.
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About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.