Use the sauté function on your instant pot to melt the butter (2 tablespoons). Add the diced onion and stir to coat. Sauté for about 2 minutes, stirring occasionally, until onions are softened.
Add the chicken broth (4 cups), diced potatoes (2.5 lbs.), kosher salt (1.5 teaspoons), and black pepper (½ teaspoon). Stir together.
Turn sauté function off and place cover on instant pot, making sure the valve is set to "sealing." Set pressure cooker to manual, high pressure for 10 minutes.
When the 10 minutes is up, quick release the pressure by using a wooden spoon to turn the valve from "sealing" to "venting." Wait until the float valve depresses completely until you open the pressure cooker (this can take about 5 minutes).
Use an immersion blender to puree the soup directly in the pot. (Alternatively, use a potato masher for a more rustic texture.)
Add the sour cream (8 oz.) and the shredded cheddar cheese (1 cup) to the pot and stir together until melted. Taste and adjust seasoning if necessary.
Serve garnished with sliced green onions, chopped cooked bacon, more sour cream, and more cheese, if desired.
