Lido captured only 5.7% of Ethereum’s net staking additions in the first half of 2026, even though its own staked ETH balance still increased during the period. For LDO holders, the core problem is not simply growth versus decline. It is whether Lido can convert activity in a larger staking market into DAO revenue that can support automated buybacks.
That tension is visible in NEST, short for Network Economic Support Tokenomics, Lido DAO’s on-chain automated LDO buyback system. Under fixed rules that cannot be manually overridden, the mechanism uses surplus revenue from the protocol’s staking business to repurchase LDO. On Sept. 9, the contract responsible for releasing buyback funds hit a checkpoint, but no distribution took place. The reason was a negative NEST budget, meaning the buyback allowance was still in deficit. The funds were present, but under the rules, more surplus must accumulate before buybacks can begin again.
Lido kept growing, but its share of the market still fell
Lido’s first-half report said total Ethereum staking reached 43.1 million ETH as of June 30, up from 36.3 million ETH at the start of the year. Over the same period, Lido added 386,000 ETH, taking its total from about 8.74 million ETH to 9.13 million ETH.
Across the network, Ethereum staking grew by 6.8 million ETH in the first half. Lido accounted for only 5.7% of that increase. Its measured market share fell from 23.93% to 21.18%. The figures are historical statistics that include ETH waiting in the activation queue and exclude ETH in the exit queue, all as of June 30. The numbers show that even with positive net growth for the half, and despite some months seeing outflows in the middle of the period, Lido still lost ground in share terms.
Lido said a large part of that dilution came from institutional capital choosing other staking providers. In the protocol’s market breakdown, institutional capital’s share of the Ethereum staking market rose from 25.9% to 35.3% in the first half.
The same report showed that as of June 30, Bitmine accounted for 11.5%, Coinbase for 10.9%, and Binance for 7.9%. These labels refer to different entities in the staking chain. The report also listed Grayscale separately at 3.1%, marked as operating “through Coinbase.” Adding those figures together directly would create double-counting errors.
The economics behind this are simpler than the ranking table. Institutions can earn Ethereum staking rewards through other providers without producing protocol fees for Lido. So even if staking as a whole expands, growth in other parts of the market can dilute Lido’s total share at the same time.
Institutional adoption does not automatically mean more DAO revenue
Some institutions are using Lido. On Aug. 13, Sharplink selected Lido for a $200 million ETH staking allocation, with the corresponding wstETH to be custodied by Anchorage Digital. The transaction showed one model in which institutional custody and Lido-based staking can work together.
Still, the specific product an institution chooses determines what fee income the DAO can collect. Lido has also introduced stVault staking vaults, which come with their own fee rules. In a Lido announcement, node operators running stVault and holding more than 250 ETH in total value locked can qualify for a waiver of Lido infrastructure fees through Oct. 31.
The waiver applies only to infrastructure fees for eligible vaults. Other fees, and Lido’s other products, remain under existing terms. For the protocol, growth in these qualified vault balances may help product adoption, but the waived portion does not translate into revenue.
Lido’s first-half report said the DAO’s effective share of staking rewards rose to 6.15%, up from 4.96% in December last year, while the protocol’s headline fee rate remained unchanged at 10%. In other words, the split between the DAO and node operators matters just as much as the top-line fee rate. The report’s effective-share figure reflects profitability at the end of the first half, while different products still carry separate fee schedules.
The article offered a simple sensitivity example. If another 100,000 ETH enters staking, annualized rewards are 2.59%, and the DAO receives 6.15% of those rewards, then at an ETH price of $2,500, that staking balance would generate about 159 ETH a year for the DAO, or roughly $398,000 in staking revenue.
That estimate holds conditions constant. Actual revenue depends on active staked balances, reward rates, ETH’s dollar price, and fee terms that determine how much of the economics stays with the DAO. Winning deposits and earning revenue from those deposits are two separate parts of the business.
Queue costs shape choices for new deposits, liquid positions and validator migration
The activation queue is another factor affecting product choice. Node queue data on Sept. 9 showed 1,931,206 ETH waiting for activation, with an estimated wait time of 33 days and 13 hours. Total ETH already staked stood at 43 million, and the annualized staking reward rate was 2.59%.
If a new deposit joins at the back of that queue, then under the article’s assumption of a fixed 2.59% annual reward rate and the stated wait period, the deposit would lose potential rewards equal to about 0.24% of principal before fees and compounding. The figure is only an estimate of delayed rewards under those assumptions. Actual wait times and rewards will change.
Existing liquid staking positions, by contrast, can begin earning staking rewards immediately, subject to custody arrangements, platform terms, pricing and liquidity constraints. That changes the investor experience, even though the underlying validator still must pass through Ethereum’s activation queue.
For existing validators, Lido’s blog described a validator migration option. Under that setup, most existing staked funds can keep earning while the target validator moves into stVault and then waits for activation. Even there, the initial deposit and the later movement of funds still involve timing gaps.
New deposits, existing liquid staking positions, and migrated validators all face different forms of queue-related cost. For Lido, the business question is whether liquidity features and validator migration routes can attract capital and then turn that capital into revenue for the DAO.
Why NEST did not execute a buyback on Sept. 9
The full path behind an LDO buyback is straightforward: staking assets generate fees, those fees become DAO revenue, and NEST then applies its reserve formula to determine surplus. A market purchase happens only when funds are available and all execution conditions are met.
According to the unaudited first-half financial report, Lido’s staking business produced $27.51 million in gross revenue after paying rewards to stETH holders. After expenses, staking net revenue was $15.71 million. Including the Earn business, total DAO net revenue came to $15.94 million.
The report said the drop in dollar-denominated revenue was mainly due to a lower ETH price. Even so, the staking business still produced $6.73 million in product-level profit. At the DAO and foundation level, foundation expenses were $14.33 million, leaving an operating surplus of $1.61 million. After a one-time $6.06 million loss related to the Kelp project, the overall result was a net loss of $4.45 million.
Once those income and expense lines are separated, it becomes harder to attribute all financial pressure simply to weaker market share.
Recent data from the DeFiLlama protocol fees dashboard showed Lido revenue at $101,935 over 24 hours, $696,955 over seven days, and $2.71 million over 30 days. Those numbers can serve as a reference point, but NEST decides whether buybacks can proceed based on Lido’s own on-chain revenue accounting system.
Under the rules in proposal LIP-36, NEST deducts a daily reserve of $109,589 from measured revenue, equivalent to about $40 million per year. Half of the surplus is then added to the cumulative budget. If that budget turns negative, surplus must build up again before spending can restart.
The initial ETH price floor is set at 0. The first-half report’s estimated ETH break-even level of about $2,730 is determined by staking scale, reward rates and the DAO’s share of rewards. That figure describes a daily revenue balance state, while the contract also carries forward historical deficits. A higher ETH price on its own is not enough to erase the accumulated accounting shortfall.
NEST also requires funds to be in place and operating eligibility to be satisfied. The daily buyback cap is $50,000, and the total cap across a rolling 365-day period is $10 million. Those figures are only maximum permitted levels. Actual spending remains constrained by budget conditions and other eligibility requirements.
On-chain data from Sept. 9 showed the funding distribution contract had recorded only one inbound transfer of 41 stETH on Aug. 28 as reserve funding, with no outbound allocation transactions. That matches the skipped buyback action at the Sept. 9 checkpoint. The money was in the contract, but the budget condition was not.
Lido had previously run a separate discretionary buyback program that purchased 10,025,866 LDO at a cost of 1,591 stETH, with the second batch completed in July. That program is independent from the automated NEST buyback process.
LDO bought through NEST goes into the DAO treasury. The tokens belong to the DAO, are not burned, and are not automatically distributed to holders.
The three numbers LDO holders need to watch
For LDO holders, the more useful indicators are fee-generating staking scale, the share of rewards retained by the DAO, and the cumulative budget available for buybacks.
Institutional staking growth improves this model only if the capital reaches Lido through paid products. The Sept. 9 contract checkpoint made that plain: even with Ethereum staking still expanding and reserves already sitting in place, an automated buyback system can still remain inactive if there is no usable surplus.