Disclosure: The opinions expressed herein are solely those of the author and do not reflect the views of crypto.news’ editorial team.
Institutional investments are finally making their way into the crypto space, starting with Bitcoin (BTC) and Ethereum (ETH) ETFs. The next major opportunity lies in staking, where assets generate yield instead of remaining idle. Institutions seek growth, compliance, and security, making staking an essential strategy now that crypto is incorporated into their capital frameworks.
Summary
- Most validators are still hosted on consumer cloud platforms (AWS, Google Cloud), leading to centralization, outages, inconsistent performance, and compliance gaps—none of which are acceptable for institutional capital.
- Dedicated hardware provides operators with total visibility, control, and auditability; enhances performance and isolation; and ultimately offers better cost-efficiency and compliance for large-scale staking operations.
- As staking becomes fundamental to institutional strategies, only projects with transparent, resilient, enterprise-grade infrastructure—rather than cloud-based solutions—will pass due diligence and attract sustained investments.
The challenge is that most staking infrastructure operates on shared cloud services, designed for Web 2.0 and consumer applications, not for institutional finance. While cloud services suffice for mobile games, they are inadequate when a single minute of downtime can result in substantial financial losses.
The risks of cloud-based staking infrastructure
Current staking is established on fundamentally flawed foundations. Most validator nodes (which secure proof-of-stake blockchains and earn rewards) still rely on major consumer cloud providers like AWS and Google Cloud, as they are “easy” to deploy and familiar to developers.
However, as my grandfather used to say, “The easy way is usually not the right way.” There is an evident challenge with these big tech companies: a single policy change, price adjustment, or outage can disrupt entire networks, incapacitating many validators simultaneously.
Moreover, compliance and control pose additional challenges. Adhering to institutional standards—such as jurisdictional choice, SOC2 for data security, and CCSS for crypto operations—becomes extremely difficult when the physical infrastructure is not under your management. Cloud platforms are designed to obscure these details, suitable for weather apps but problematic when auditors arrive.
This abstraction also shields operators from understanding the performance metrics that matter—latency, redundancy configurations, and hardware health—which are often concealed by the provider, reducing uptime guarantees to mere educated estimates. Additionally, shared infrastructure means inheriting problems from other users.
Consider the history of major outages at AWS, including incidents in November 2020, December 2021, June 2023, and a recent 15-hour outage in October 2025, which affected major banks, airlines, and numerous other companies. In crypto, missed rewards or diminished yields can lead to significant penalties.
Why institutions prefer bare metal infrastructure
Institutions rightfully hesitate to trust opaque systems with their capital. They desire visibility and control over these infrastructures, which is why as staking moves to a more institutional focus, bare-metal infrastructure is gaining traction. Operating validators on dedicated machines offers operators complete oversight of performance, enabling real-time visibility without hidden aspects in dashboards or abstraction layers.
On a larger scale, bare metal proves more cost-effective for staking workloads compared to renting portions of general-purpose cloud services. The initial costs can be misleading; what begins as an economical option on AWS can escalate into an expensive production solution. In a dedicated staking ecosystem, the cost per unit of compute and storage decreases, ensuring operational isolation and improved performance.
Furthermore, in terms of compliance, auditors require clear, documented control over every element of the environment. With bare metal, you can demonstrate where your servers are located, who has physical access, how they are secured, and what redundancy measures are in effect. This results in an infrastructure that not only complies with regulations but also builds trust with counterparties.
Deployments of bare metal in high-tier data centers, featuring physical security and dedicated failover systems, provide the enterprise-grade assurances necessary for staking to form a viable treasury strategy. In the upcoming wave of due diligence, projects that rely on shared cloud infrastructure will face difficulties meeting standards, while those combining physical decentralization with operational transparency will attract substantial capital.
Serious capital demands serious infrastructure
As staking transitions into a legitimate strategy for institutions, the infrastructure behind it will influence who garners trust and who falls behind. While cloud-based systems may have supported crypto’s early stages, they fail to meet the rigorous standards required by serious capital. Institutions are not creating games or NFT platforms; they are managing risk, compliance, and capital movements.
This reshapes the definition of “decentralized.” Simply distributing nodes across various wallets and jurisdictions is insufficient; those nodes need to be reliable, transparent, and resilient. The projects that acknowledge this shift now and prioritize institutional-grade infrastructure will be the ones to reap long-term benefits.
