The Blockworks Research report revealed that nearly 70% of institutional investors holding Ethereum (ETH) are actively engaged in staking, with 52.6% of them holding liquid staking tokens (LSTs). A significant portion of these investors prefer to use only one integrated platform like Coinbase or Binance, while 60.6% utilize third-party staking platforms as well. The report included input from various institutions such as exchanges, custodians, asset managers, and banks.
When choosing a staking provider, institutional investors prioritize factors such as reputation, network support, price, onboarding process, costs, expertise, and scalability. Liquidity and security are also crucial considerations, with liquidity scoring an average importance rating of 8.5 and security scoring even higher with a rating of 9.4. Additionally, over 60% of respondents indicated a willingness to pay a premium for enhanced security and fault tolerance.
Geographic location also plays a role in the decision-making process for institutional investors, with half of respondents considering a validator’s location important when choosing a staking platform. The rise of third-party staking platforms has been driven by the increasing popularity of liquid staking tokens (LSTs). These tokens address the liquidity issues associated with staking ETH and have become increasingly integrated into DeFi applications, thereby enhancing liquidity.
Liquid staking is predominantly dominated by Lido Protocol and its LST, stETH, with 54.5% of respondents holding this token. While this concentration offers economies of scale and attracts more market participants, concerns regarding centralization of validation power in a few protocols have been raised by 78.4% of respondents. Restaking is another emerging trend that many institutional investors are interested in, despite concerns around added risks like slashing penalties, protocol vulnerabilities, and centralization of validators.
Despite these risks, 82.9% of respondents are aware of the risks associated with restaking, and 55.9% of institutional investors express interest in staking ETH, indicating a positive outlook for the adoption of restaking. In conclusion, institutional investors are actively engaging in staking ETH, with a focus on factors such as reputation, liquidity, security, and geographic location when selecting staking providers. The rise of liquid staking tokens and the emerging trend of restaking also show promising developments in the staking space.
