Institutional Restaking Adoption Grows Amid Risk Management Advances

Restaking, a derivative of Ethereum-based staking, gained momentum in late 2023 and has since drawn the attention of both retail and institutional investors. While retail participants have embraced the model, institutional adoption remains in early stages, primarily due to operational complexities and the absence of standardized risk assessment frameworks [1]. A recent report by P2P.org and Cointelegraph Research delves into the developmental trajectory of restaking and highlights the potential for institutional integration in the coming years, despite existing uncertainties [1].

The report outlines restaking’s core fundamentals, key risks, and evolving risk-management frameworks. It emphasizes how distributed validator technology is reshaping the landscape of native restaking, enabling more secure and scalable operations. At the same time, it underscores the challenges institutions face in yield generation, particularly the lack of historical data and quantifiable risk models that are essential for large-scale capital allocation [1].

One of the most pressing issues for institutional participants is the risk of slashing—penalties imposed on validators who violate network rules. Restaking introduces a unique variant of this risk, as assets are often delegated across multiple networks simultaneously. Each application-specific validator service (AVS) comes with its own risk profile, and the compounding effect of minor risks can result in significant losses for institutional portfolios [1]. The absence of a standardized slashing recovery mechanism further complicates risk management [1].

Additionally, the selection of AVSs is a critical factor in determining returns, yet most restaking infrastructure currently lacks sustainable revenue models. At present, EigenLayer, a prominent restaking platform, does not distribute actual annual percentage yield (APY) but relies on token incentives [1]. Analysts predict that, in the future, strategic AVS selection and active portfolio management will play a central role in optimizing returns for restaked assets [1].

To address these challenges, the report identifies a path for institutional integration that mirrors the evolution of traditional staking. Initially driven by DeFi-native projects and liquid restaking protocols, the next phase is expected to involve broader adoption by crypto-native institutions, including custodians and exchanges. This transition requires a balance between control and operational efficiency [1].

Curated vaults, introduced by Symbiotic, are positioned as a key enabler of institutional adoption. These smart contracts allow institutions to delegate operational responsibilities while retaining strategic control over critical parameters such as delegation strategies, withdrawal timelines, and slashing governance. This modular architecture separates asset custody, yield generation, and execution, offering greater precision in capital management [1].

Another emerging development is the use of Distributed Validator Technology (DVT), which enhances validator security by distributing key management across multiple parties. This reduces the risk of slashing and eliminates single points of failure. The SSV (Secret Shared Validator) Network, an implementation of DVT, has become a key enabler for liquid staking and restaking applications on Ethereum. Major platforms, including P2P.org, have adopted SSV-based solutions to significantly reduce node operation costs [1].

Despite these advancements, institutional adoption of restaking will remain cautious until robust risk frameworks and insurance mechanisms are widely implemented. Researchers are actively developing such models, including network-level risk evaluations, to facilitate greater institutional participation [1].

Source: [1] Challenges and opportunities for institutional integration of restaking in 2025: Report (https://cointelegraph.com/news/challenges-and-opportunities-for-institutional-integration-of-restaking-in-2025-report?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound)