Lido DAO approves proposal to introduce dual governance model

Dual Governance, a major update that will give stETH holders more control over important protocol decisions, has been formally approved by Lido DAO.

The decision was confirmed on June 30 post on X by Lido, following a successful vote by holders of Lido DAO (LDO) tokens. The new system is set to launch on-chain on July 4. A dynamic timelock mechanism introduced by Dual Governance enables stETH holders to block or delay proposals approved by LDO holders if they disagree.

The more stETH that is locked in opposition, the longer the delay. An additional timelock of 5 to 45 days is added to any proposal if at least 1% of the entire supply of stETH is locked in protest. When 10% opposition is reached, a “rage quit” is triggered, which completely halts governance activities until the opposing stakers have exited the protocol.

https://twitter.com/lidofinance/status/1939742934003253656?s=46&t=nznXkss3debX8JIhNzHmzw

The feature is intended to mitigate governance capture risks and ensure that Ethereum (ETH) stakers are not excluded from governance decisions that they disagree with. It resolves long-standing issues regarding the power disparity between those who actively stake ETH through Lido and those who hold LDO.

According to Lido, the new system acts as both a signal of contention and a safety mechanism. This structure aims to prevent rushed or potentially harmful proposals from being executed without giving stakers time to respond. It also gives those who stake ETH through Lido a clearer path to exit if they disagree with the DAO’s direction.

The design incorporates several safety measures as well, such as a Reseal Committee to control delays, a Tiebreaker Committee to break deadlocks, and an Emergency Committee to step in the event of a critical failure.

The LDO token has not responded positively to the update. It has dropped 2% in the last day and 13% in the last month, indicating that the market is being cautious as the new system is implemented.

To date, the Dual Governance framework marks one of the most advanced DAO structures introduced in decentralized finance. By aligning incentives between stakers and token holders, Lido hopes to create a more resilient and inclusive governance process for Ethereum staking.