Nearly 70% of institutional investors holding Ethereum (ETH) are engaged in staking, with 52.6% of them holding liquid staking tokens (LSTs), according to a Blockworks Research report.
Nearly half of institutional investors staking ETH prefer to use only one integrated platform, such as Coinbase and Binance. Meanwhile, 60.6% of the survey participants also utilize third-party staking platforms.
According to the report, one out of five institutional investors surveyed had over 60% of their portfolio allocated to Ethereum or an ETH-based LST. The survey included exchanges, custodians, investment firms, asset managers, wallet providers, and banks.
The report revealed that the key traits taken into consideration by respondents when choosing a staking provider were reputation, range of networks supported, price, simple onboarding, competitive costs, and expertise and scalability.
Liquidity and security were also deemed the most important features for institutional investors when deciding whether staking is a viable option. On a scale from 1 to 10, liquidity scored an average importance of 8.5, reflecting concerns about exiting large LST positions if necessary.
Meanwhile, security scored even higher, with an average importance rating of 9.4, driven by worries over withdrawal efficiency in volatile market conditions. Additionally, 61.1% of respondents indicated they would be willing to pay a premium for enhanced security and fault tolerance.
Geographic location also plays a role, with half of institutional investors considering a validator’s location important when choosing a staking platform.
Rise of liquid staking
The report also highlighted that the rise of third-party staking platforms is driven by the increasing popularity of LSTs. These tokens address the initial issues with ETH staking when users lose their liquidity by locking it to help with network security.
Furthermore, due to their popularity, various DeFi applications have started integrating LST in their services. This has significantly improved liquidity and is one of the key reasons behind 52.6% of institutional investors holding LSTs, according to the report.
The report noted that liquid staking is dominated by Lido Protocol and its LST, stETH, with 54.5% of respondents involved in liquid staking holding this token.
This concentration creates a dynamic where large LSTs benefit from economies of scale. Greater market participation attracts more operators through higher fee opportunities, which in turn improves security by distributing validation across more operators. However, this also leads to concerns about centralizing validation power in a few protocols — an issue flagged by 78.4% of respondents.
Restaking and distributed validators
Restaking is another emerging trend, with a majority of investors expressing interest in the technology despite several concerns around added risks.
Restaking allows validators to use staked ETH across multiple protocols simultaneously and receive liquid restaking tokens (LRTs) to capture additional yield.
However, it introduces added risks, such as slashing — a penalty that reduces a validator’s staked ETH for malicious behavior. The report also pointed to risks like protocol-level vulnerabilities and the potential for further centralization of validators.
Despite these concerns, 82.9% of respondents were aware of the risks associated with restaking, and 55.9% of institutional investors expressed interest in staking ETH, indicating a favorable outlook for restaking.
Institutional investors view validation power centralization as a risky development, with 65.8% saying they were aware of distributed validator (DV) services.