Lido Finance, the dominant liquid staking protocol on Ethereum, has unveiled a groundbreaking governance proposal that could reshape decentralized decision-making in DeFi. The initiative, known as Lido Improvement Proposal (LIP) 28, introduces a dual governance model, granting stETH holders veto rights over crucial protocol decisions—a power previously exclusive to LDO tokenholders.
Key Features of the Dual Governance Proposal
Veto Power for stETH Holders
The new system establishes a dynamic timelock between Lido DAO decisions and their implementation. This allows stETH holders to challenge decisions by depositing tokens into a protest contract:
- First Seal (1% of staked ETH): Extends the execution delay
- Second Seal (10% of staked ETH): Triggers a "rage quit" mechanism, pausing execution until dissenting stakers can exit
Protection for Long-Term Stakers
This safety net addresses challenges faced by stakers constrained by Ethereum’s unbonding process, particularly relevant given Lido’s position as the platform handling over 25% of all staked ETH.
Market Context and Competitive Landscape
The proposal emerges alongside:
- Increased interest in Ethereum staking platforms post-Pectra upgrade
- Growing competition from alternatives like Rocket Pool and Frax Ether
- A 6.5% surge in LDO token prices following the announcement
Next Steps for Implementation
- Community discussion ongoing
- On-chain vote anticipated soon
- Potential to set new DAO governance standards across DeFi
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Frequently Asked Questions
What is dual governance in Lido's proposal?
It’s a system where stETH holders gain veto power alongside LDO tokenholders, creating checks and balances in protocol decisions.
How does the protest mechanism work?
stETH holders can deposit tokens to trigger:
- Extended timelocks at 1% threshold
- Full execution pause at 10% threshold
Why is this proposal significant?
With Lido controlling 25%+ of staked ETH, this shift could influence Ethereum governance decentralization and inspire similar DeFi reforms.
When will this be implemented?
After community discussion and an on-chain vote, expected soon.
How did markets react?
LDO prices rose 6.5%, outperforming broader market gains.