Institutional Restaking Hesitant Amid Slashing Risks and Operational Complexity

Restaking is gaining traction in the crypto space, particularly in late 2023, with retail investors leading adoption while institutional players remain cautious. The report titled Challenges and opportunities for institutional integration of restaking in 2025 by P2P.org and Cointelegraph Research outlines the key factors affecting institutional adoption, emphasizing the lack of standardized risk assessment methods and the operational complexity associated with validator and protocol management [1].

Restaking involves reusing staked assets across multiple decentralized applications and protocols, often through specialized infrastructure such as liquid restaking tokens (LRTs). While retail investors are already engaging with these tools, institutions require more structured and scalable frameworks to manage risk and operational efficiency [1]. The report argues that institutional integration of restaking is inevitable despite current uncertainties, though it will depend heavily on risk mitigation and the development of robust management tools.

A major concern for institutions is the risk of slashing—penalties applied to validators who violate protocol rules. In restaking, where assets are delegated across multiple networks, the compounding nature of slashing risks becomes more pronounced. Each application-specific validator service (AVS) introduces its own set of technical and economic risks, with slashing conditions and enforcement mechanisms varying across protocols. This lack of consistency and historical data makes it difficult for institutions to quantify and manage these exposures [1].

The report also highlights that most AVSs currently lack sustainable revenue models. For example, EigenLayer, a key player in the restaking ecosystem, does not yet offer actual annual percentage yield (APY) but relies on token incentives to attract participants. Future success in restaking will depend on the ability to select high-demand AVSs that generate meaningful returns, requiring active management and coordination with operators and curators [1].

To facilitate institutional adoption, the report outlines three primary models of restaking: self-controlled restaking, curated vaults, and LRTs. Among these, curated vaults—smart contracts introduced by Symbiotic—are identified as the most effective integration model for institutions. These vaults allow for customizable delegation strategies, slashing governance, and withdrawal timelines, enabling institutions to retain strategic control while outsourcing operational execution [1].

Distributed Validator Technology (DVT) is another promising development, particularly for institutional applications. DVT spreads key management and signing responsibilities across multiple parties, reducing the risk of slashing and eliminating single points of failure. SSV (Secret Shared Validator) Network, a notable implementation of DVT, is already being adopted by major staking and restaking platforms. P2P.org’s SSV White-Label solution, for instance, significantly reduces node operation costs, making the technology more accessible for institutional use [1].

Despite these advancements, the report stresses that institutional allocation into restaking will remain limited until protocols provide reliable mechanisms for risk isolation and loss mitigation. Researchers are working on frameworks such as network-level risk evaluations to address this, but widespread institutional adoption is likely years away [1].

Source:

[1] Challenges and opportunities for institutional integration of restaking in 2025: Report (https://coinmarketcap.com/community/articles/689b49ecec877f6cb3121bfa/)