Institutions must stake Ether on decentralized infrastructure

Opinion by: Alon Muroch, founder of SSV Labs

A green light for institutional staking alone will not signal a long-term future for Ethereum. As institutions enter the Web3 ecosystem, they need to recognize that ETH isn’t an asset that can be fit into existing TradFi molds; it’s the World Computer. Unless institutions can embrace Ethereum’s philosophy of decentralization, as well as its token, their core infrastructure and inherent proposition are doomed to fail. 

The dot-com bubble offers a cautionary tale for Ethereum adopters. It burst partly because institutions dove headfirst into the consumer internet’s lucrative market potential without sufficiently understanding the infrastructure beneath it. The gap between capital and comprehension bred dysfunction. 

Institutions should not repeat that mistake. As they move onchain, they should adopt a more balanced approach: accruing economic rewards while actively supporting network health and respecting the blockchain’s underlying ethos. 

Institutions need to stake

ETH staking exemplifies this balance. In August 2025, the SEC that “most staking activities” were not securities, emphasizing that the yield from staked ETH was accrued through administrative acts to maintain the network. SEC guidelines and other important legislation were a landmark decision that opened the floodgates for institutional capital, and now over of ETH is held in ETFs or strategic reserves. 

As institutions pile in, however, they must remember that while staking their ETH reserves is a potentially lucrative exercise, its primary function is to support the underlying infrastructure. 

Through staking, validators lock up ETH as collateral. If they validate transactions correctly, they earn rewards, but if they act maliciously or fail to perform their duties, their stake is penalized. This economic incentive, spread across thousands of independent validators, is what keeps the network secure and running smoothly.

To ensure regulatory compliance and shore up the future value of their assets, institutions must contribute meaningfully to the maintenance of Ethereum’s decentralized network through staking, while mitigating any risk of centralization or downtime. 

DVT offers security in the face of centralization

The total amount of staked ETH is approaching (~29% of the supply), with around 25% held by centralized exchanges. With ETFs likely to encourage institutional interest in staking, ETH is approaching concentration thresholds whereupon the Ethereum Network’s decentralization could be meaningfully questioned, thus risking the security of the network and compromising the inherent purpose of the staking mechanism.

Several paths exist to address centralization risks, including encouraging client diversity, improving the geographic distribution of infrastructure, and supporting staking protocols with decentralized node operators. 

Relying on piecemeal strategies alone may prove insufficient. What is needed are wholesale infrastructural solutions that can securely support global institutions.

Distributed validator technology (DVT) is an obvious solution. By validator duties between multiple machines and spreading their responsibilities across different nodes, it ensures not only that the distribution of infrastructure maintaining validators is decentralized, but their functions too, ensuring the arrangement of validators in a global network of independent nodes.

Through threshold cryptography and multisignature validation, DVT prevents any single operator from controlling or compromising a validator. In contrast, its distributed architecture prevents single-point failures in the network, increasing resistance to censorship, outages, malicious activity and attacks.

DVT works for institutions

If institutions and exchanges adopt this setup, it removes the risk of a lopsided distribution of staked ETH, and improves the security and capital efficiency of their stake. DVT vastly reduces while achieving ~99% uptime through fault-tolerant multiparty operation. 

DVT eliminates single-point failures that could expose institutions to validator penalties and therefore maximizes rewards. Institutions using such infrastructure would have superior risk profiles compared to their alternatives, with greater fault tolerance and guaranteed regulatory compliance due to their maintenance of Ethereum’s network health.

The May 2025 upgrade increased the maximum stake to 2,048 ETH per validator. This is inherently a positive development for institutions with substantial ETH holdings and directly appeals to ETH reserve companies. Validators with such a large delegation of ETH do, however, pose inherent risks of centralization. DVT allows for large staking delegations while maintaining decentralization, without the operational overhead of spreading them over many validators to mitigate these risks.

The wholesale adoption of solutions like DVT would lead to a virtuous cycle, wherein every delegation of staked ETH would provide predictable, secure returns to institutional investors, while shoring up the underlying asset and ensuring decentralized validator distribution. Not only does DVT demonstrate how an ethos of decentralization can be hardwired into institutional adoption, it also shows how global finance and a cypherpunk ethos can coexist in productive ways. 

ETH is more than an asset

The lesson institutions must internalize is this: ETH cannot be treated as just another treasury asset. It represents ownership in a decentralized computational network whose value proposition depends entirely on maintaining that decentralization. Institutions that stake without regard for network health are undermining their own investment thesis: Centralized Ethereum is a contradiction in terms.

This doesn’t mean sacrificing returns; instead, it means recognizing that sustainable yields depend on healthy infrastructure. By embracing DVT and other decentralization-preserving technologies, institutions can simultaneously maximize their economic returns and secure the network they now have significant stakes in. 

The choice is simple: Build Ethereum’s future on solid, distributed infrastructure, or risk regulatory uncertainty and technical risks undermining the inherent value driving the most significant wave of crypto adoption in history. 

Opinion by: Alon Muroch, founder of SSV Labs.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.