Staking War Officially Begins! Institutions Gobble Up, Retail Investors Retreat
On August 4, Vasiliy Shapovalov, co-founder of the decentralized staking platform Lido, announced a 15% workforce reduction. This news obviously contradicts the expectations of nearly everyone who believes an institution-driven ETH bull market is imminent, especially given the SEC’s indications that it will approve ETH spot ETF staking applications.
As one of the leading projects in the ETH staking space, Lido is likely seen by many as the biggest beneficiary of the SEC’s approval of ETH staking ETFs. But is that really the case?
Lido’s layoffs are not merely a simple organizational adjustment; they reflect a turning point faced by the entire decentralized staking sector. The official explanation is “for long-term sustainability and cost control,” but what it reveals is a deeper industrial change:
As ETH continues to flow from retail investors to institutions, the survival space for decentralized staking platforms is being constantly compressed.
Let’s rewind to 2020, when Lido was just launched, and ETH2.0 staking had only just begun. The 32 ETH staking threshold deterred most retail investors, but Lido’s innovative liquid staking token (stETH) allowed anyone to participate while maintaining liquidity. This simple yet elegant solution enabled Lido to grow into a staking giant with over $32 billion in total value locked (TVL) within just a few years.
However, the changes in the cryptocurrency market over the past two years have shattered Lido’s growth myth. As traditional financial giants like BlackRock began to enter the ETH staking space, institutional investors are reshaping the market using familiar methods. The major players in this institution-driven ETH bull market have each provided their own solutions: BMNR has chosen Anchorage, SBET has opted for Coinbase Custody, and BlackRock’s ETFs have all adopted offline staking.
Without exception, compared to decentralized staking platforms, they prefer centralized staking solutions. Behind this choice are both compliance considerations and risk preferences, but the ultimate result points to one conclusion: the growth engine for decentralized staking platforms is “stalling.”
Institutions to the Left, Decentralized Staking to the Right
To understand the logic behind institutional choices, we need to look at a set of data: starting July 21, 2025, the number of ETH queued for unstaking began to significantly exceed the amount entering staking, with the largest difference reaching 500,000 ETH.
At the same time, ETH strategic reserve companies led by BitMine and SharpLink are continuously purchasing ETH in large quantities; currently, these two companies alone hold more than 1.35 million ETH.
Wall Street institutions like BlackRock are also continuously buying after the SEC approved the ETH spot ETF.
Based on the above data, it is unequivocally clear that ETH is continuously flowing from retail investors to institutions. This drastic change in holding structure is redefining the game rules of the entire staking market.
For institutions managing billions of dollars in assets, compliance is always the top priority. When the SEC reviews BlackRock’s ETH staking ETF application, it explicitly requires applicants to demonstrate the compliance, transparency, and auditability of their staking service providers.
This precisely strikes at the soft spot of decentralized staking platforms. Operators of decentralized staking platforms like Lido are distributed around the globe, and while this decentralized structure enhances the network’s resistance to censorship, it also complicates compliance reviews. Imagine, when regulatory agencies demand KYC information for each validator node, how will decentralized protocols respond?
In contrast, centralized solutions like Coinbase Custody are much simpler. They have clear legal entities, comprehensive compliance processes, traceable fund flows, and even insurance coverage. For institutional investors who need to report to LPs, the choice is obvious.
Risk control departments in institutions focus on a core question when evaluating staking solutions: who is responsible in case of problems?
If losses caused by the errors of node operators are borne by all stETH holders collectively, identifying specific accountable parties may be challenging. However, in centralized staking, service providers assume clear compensation responsibilities and may even offer additional insurance coverage.
Moreover, institutions require not only technical security but also operational stability. When Lido replaces node operators through DAO voting, this “people’s vote” becomes a source of uncertainty in the eyes of institutions. They prefer to choose predictable and controllable partners.
Regulatory Easing, but Not Entirely Positive
On July 30, the SEC announced it had received BlackRock’s ETH staking ETF application. Just on August 5, the SEC released new guidelines stating that specific liquid staking does not fall under the jurisdiction of securities laws.
It seems that everything is developing positively; superficially, this is the long-awaited good news for decentralized staking platforms. However, a deeper analysis reveals that this may also be the Damocles’ sword hanging over all decentralized staking platforms.
The short-term advantages brought by regulatory easing are evident. Mainstream decentralized staking platform tokens like Lido and ETHFI saw their prices surge over 3% immediately after the announcement. As of August 7, within 24 hours, the liquidity staking target PRL rose by 19.2%, and SWELL increased by 18.5%. The price increase reflects market optimism for the LSD sector, and more importantly, the SEC’s statement has cleared compliance barriers for institutional investors.
For a long time, traditional financial institutions’ primary concern about participating in staking businesses has been potential securities law risks. Now that much of this shadow has been lifted, it seems that SEC approval of the ETH staking ETF is merely a matter of time.
However, behind this thriving scene lies a deeper crisis in the sector. The SEC’s regulatory easing not only opens doors for decentralized platforms but also paves the way for traditional financial giants. When asset management giants like BlackRock begin to launch their own staking ETF products, decentralized platforms will face unprecedented competitive pressure.
This competitive asymmetry stems from differences in resources and distribution channels. Traditional financial institutions possess established sales networks, brand trust, and compliance experience, which decentralized platforms find challenging to match in the short term.
More importantly, the standardization and convenience of ETF products hold an inherent appeal for general investors. When investors can purchase staking ETFs with one click through familiar brokerage accounts, why would they bother learning how to use decentralized protocols?
The core value proposition of decentralized staking platforms—decentralization and resistance to censorship—seems weak in the face of institutional trends. For institutional investors seeking to maximize returns, decentralization represents more of a cost than an advantage. They are more concerned with yield, liquidity, and operational convenience, which are precisely the strengths of centralized solutions.
In the long run, regulatory easing may accelerate the “Matthew Effect” in the staking market. Funds will increasingly concentrate on a few large platforms, while small decentralized projects will face survival crises.
A deeper threat lies in the disruption of business models. Traditional financial institutions can lower fees through cross-selling, economies of scale, and even offer zero-fee staking services. In contrast, decentralized platforms rely on protocol fees to sustain operations, putting them at a natural disadvantage in a price war. When competitors can subsidize staking services through other business lines, how will decentralized platforms with a single business model respond?
Therefore, while the SEC’s regulatory easing brings market expansion opportunities for decentralized staking platforms in the short term, in the long run, it resembles opening Pandora’s box. The entry of traditional financial forces will fundamentally change the game rules, and decentralized platforms must find new paths to survival before being marginalized. This may mean more radical innovations, deeper DeFi integration, or—ironically—a degree of centralized compromise.
At this moment of regulatory spring, decentralized staking platforms may not be facing a time for celebration, but rather a turning point for survival and death.
The Perils and Opportunities of the Ethereum Staking Ecosystem
At this critical juncture in 2025, the Ethereum staking ecosystem is undergoing unprecedented transformation. Vitalik’s concerns, regulatory shifts, and institutional entry—these seemingly contradictory forces are reshaping the entire industry landscape.
Indeed, challenges are real. The shadow of centralization, intensifying competition, and the impact on business models could each become the last straw that breaks the decentralized ideal. But history shows us that true innovation often emerges in crises.
For decentralized staking platforms, the wave of institutionalization is both a threat and a driver of innovation. As traditional financial giants bring standardized products, decentralized platforms can focus on deep integration within the DeFi ecosystem; when price wars become inevitable, differentiated services and community governance will become new moats; when regulation opens doors for everyone, the importance of technological innovation and user experience will become even more pronounced.
More importantly, the expansion of the market means a larger pie. When staking becomes a mainstream investment choice, even niche markets can sufficiently support the flourishing development of multiple platforms. Decentralization and centralization need not be a zero-sum game; they can serve different user groups and meet diverse needs.
The future of Ethereum will not be determined by a single force but will be shaped by all participants collectively.
As tides rise and fall, only the fittest will survive. In the crypto industry, the definition of “fittest” is far more diverse than in traditional markets, which may be the reason we should remain optimistic.
This article is a collaborative reprint from: Shen Chao