BNY and BlackRock are focusing their investments, amounting to trillions of dollars, on Galaxy's single infrastructure platform

BNY and BlackRock are concentrating institutional cryptocurrency staking infrastructure with a single provider, Galaxy, raising structural concerns about network decentralization. BNY announced on August 4th that it plans to offer institutional staking services through Galaxy's infrastructure, subject to regulatory approval. BNY is a massive institution that manages assets of $62.6 trillion as of the end of June, representing approximately 20% of investable assets worldwide. According to the prospectus for BlackRock's iShares Staking ETH Trust (ETHB), Galaxy is one of three approved validators that can stake ETH for this fund. The fund can stake between 70% and 95% of its held ETH under normal conditions. In the application for the Invesco Galaxy Solana ETF, Coinbase Custody is listed as the SOL staking provider and node operator, while BNY Mellon is listed as the administrator. This structure is forming, where major institutions on Wall Street are processing institutional staking through the same infrastructure provider. The core issue is the separation of economic ownership and operational control. While ETF shareholders or custody clients receive price exposure and staking rewards, the selection and disclosure of validators are determined by the ETF issuer or bank, and the custodian holds the withdrawal authority. When a staking provider like Galaxy determines cloud infrastructure, client software, and compliance policies, those choices translate into risks for the entire network. The ETHB prospectus warns that slashing, inactivity penalties, and correlated penalties can lead to irreversible losses if they occur simultaneously for validators sharing the same staking provider. According to Ethereum documentation, validators controlling more than 33% of staked ETH can prevent block finality if they go offline or provide incorrect proofs. Currently, approximately 33% of the total ETH supply is staked, meaning that concentrating just 11% of the total ETH with a single provider would approach this threshold. Solana has a higher staking ratio of approximately 68%, so only about 22.7% of the total SOL would be needed to reach the one-third threshold. Pigment's second-quarter report reveals that the company manages 6.26% of staked ETH and 6.96% of staked SOL, demonstrating that even mid-sized institutional operators already hold significant proportions. As of August 5th, Solana's Nakamoto coefficient is 10, meaning that only 10 validators are needed to reach approximately 33% of delegated stakes. The Ethereum community is already discussing EIP-8361. This proposal suggests burning a larger portion of validator rewards as the staking ratio increases, aiming to reduce the incentive for staking concentration. However, critics argue that reward reductions could disproportionately affect smaller, independent validators, potentially exacerbating institutional-centric concentration. In an optimistic scenario, products will disclose validator allocations and diversify reliance on single providers, increasing security. In a pessimistic scenario, staking could become a default option in custody accounts, leaving investors unaware of which validators their stakes are held with, and a few approved providers could operate a significant portion of the active validators in the major network.