The economics align incentives across stakers, operators, and the protocol to support sustainable, long-term value creation in the Ethereum staking ecosystem.
Reward Generation
Rewards derive from staking rewards. Validators earn staking rewards by proposing and attesting to blocks on the Ethereum network.
There are two categories of rewards:
- Consensus layer rewards are deterministic. They are governed by network rules, proportional to validator performance and uptime.
- Execution layer rewards are variable: transaction tips, MEV, and other block-building rewards.
The vault's total value grows as validators accumulate rewards. Fees are deducted, and the remainder accrues to the staker.
Fee Flows
Stakers deposit ETH and earn rewards net of fees. There is also a liquidity fee for those who mint stETH.
Node operators run validators and collect a fee on the staking rewards those validators generate.
The DAO provides shared infrastructure including oracles, infrastructure, stETH minting mechanics and charges a fee on staking rewards.
Fee Structure
There are two categories of fees, configured per vault and collected automatically by the protocol:
Node Operator Fee
Node Operator Fees are an optional fee charged on actual staking rewards generated by the vault's validators. The rate is agreed upon by the owner and operator, and can be set to zero.
Fee accounting uses a high-water mark approach calculated on growth, meaning any ETH that wasn’t deposited to the vault is considered the growth amount (MEV, tips, CL rewards). This ensures operators are compensated for value they generate, and negative performance periods do not accrue fees until the vault recovers past its previous high.
This fee mechanism is only available for vaults using Dashboard. Advanced stakers can implement their own operator accounting arrangements outside the Lido protocol.
DAO Fees
Infrastructure fees are charged on "deemed" rather than actual rewards. The protocol calculates what the vault would have earned at the Core Pool's APR. The infrastructure fee is a percentage of this deemed amount.
Liquidity fees are charged on minted stETH and accumulates over time while the stETH remains outstanding. Stakers who never mint never pay this fee.
Reservation fees secure the right to mint stETH at a specific reserve ratio. The reservation fees are currently set at 0%.
Default Parameters: Infrastructure fee: 1%. Liquidity fee: 6.5%. Reservation fee: 0%. These are tier-level defaults; the DAO can adjust them globally or per vault.
Relationship to stETH APR
The DAO's infrastructure fee uses Core Pool APR as a reference rate, effectively treating it as an oracle for normal staking returns. The DAO thus receives a consistent share of expected returns regardless of individual vault performance.
The staker's economics depend on how their chosen operator performs relative to the network average. Outperformance accrues to the staker after fees. Underperformance is borne by the staker. This separation creates clear incentives: operators are motivated to maximize performance, stakers are motivated to select capable operators.
Fee Settlement
Protocol fees settle permissionlessly through VaultHub. Any party can trigger settlement. Until fees are settled, the vault faces restrictions including limited withdrawals and reduced minting capacity. The protocol does not allow vaults to accumulate fee obligations indefinitely.
Node Operator fees (for vaults using Dashboard) also settle permissionlessly. Settlement computes the fee using the high-water mark, and pays the fee to the configured recipient from the vault's available balance.