Nearly 70% of institutional investors holding ethereum (eth) participate in staking, and 52.6% of them hold liquid staking tokens (LST), according to Blockworks Research. ethereum-staking-a-survey-of-industry-leaders#introduction”>report.
Almost half of institutional investors betting on eth prefer to use only one integrated platform, such as Coinbase and Binance. Meanwhile, 60.6% of survey participants also use third-party betting platforms.
According to the report, one in five institutional investors surveyed had more than 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 respondents considered when choosing a betting provider were reputation, range of networks supported, price, easy onboarding, competitive costs, and experience and scalability.
Liquidity and security were also considered the most important characteristics for institutional investors when deciding whether staking is a viable option. On a scale of 1 to 10, liquidity scored an average importance of 8.5, reflecting concern about exiting large LST positions if necessary.
Meanwhile, stocks scored even higher, with an average importance rating of 9.4, driven by concerns about withdrawal efficiency in volatile market conditions. Additionally, 61.1% of respondents indicated they would be willing to pay a premium for greater security and fault tolerance.
Geographic location also plays a role: half of institutional investors consider the location of the validator important when choosing a staking platform.
Increase in liquid bets
The report also highlighted that the rise of third-party staking platforms is driven by the growing popularity of LSTs. These tokens address the initial issues with eth staking when users lose liquidity by locking it up to help with network security.
Additionally, due to its popularity, several DeFi applications have started integrating LST into their services. This has significantly improved liquidity and is one of the key reasons why 52.6% of institutional investors own LST, according to the report.
The report noted that liquid staking is dominated by the Lido Protocol and its LST, stETH, and 54.5% of respondents involved in liquid staking own this token.
This concentration creates a dynamic in which large LSTs benefit from economies of scale. Greater market share attracts more operators through higher fee opportunities, which in turn improves security by spreading validation across more operators. However, this also raises concerns about the centralization of validation power in a few protocols, an issue noted by 78.4% of respondents.
Reestablished and distributed validators.
Resumption is another emerging trend, with most investors expressing interest in the technology despite several concerns about additional risks.
Recovery allows validators to use staked eth on multiple protocols simultaneously and receive liquid recovery tokens (LRT) to capture additional yield.
However, it introduces additional risks, such as tapering, a penalty that reduces a validator's staked eth for malicious behavior. The report also noted risks such as protocol-level vulnerabilities and the possibility of greater centralization of validators.
Despite these concerns, 82.9% of respondents were aware of the risks associated with reinvestment, and 55.9% of institutional investors expressed interest in staking eth, indicating a favorable outlook for reinvestment.
Institutional investors view the centralization of validation power as a risky development, with 65.8% saying they are aware of distributed validation (DV) services.
