Lido’s Power Play: stETH Holders Get Voting Rights in Bold Dual Governance Move

Lido shakes up DeFi’s status quo by handing governance keys to stETH holders—because what’s decentralization without a little drama?

The new Dual Governance model lets liquid stakers veto protocol changes, a rare win for the ’little guys’ in an ecosystem dominated by whale-sized wallets.

Will this actually decentralize power—or just add bureaucratic speed bumps? Either way, it’s a slick PR move for the $30B staking behemoth.

Bonus jab: Finally, stETH holders can do something besides ape into overcollateralized leverage farms.

Lido Dual Governance mechanism explained

Meanwhile, the Dual Governance Proposal, known officially as Lido Improvement Proposal (LIP) 28,  explains how it will work in detail. According to the post, the model introduces a timelock contract between Lid DAO governance motions and execution with the timelock connected to an escrow.

When there is a motion that the stETH holders do not support, they can communicate their intention to exit the protocol by depositing their stETH, wstETH, and stETH withdrawal NFTs into a specific escrow contract.

If the funds deposited in the contract reach a first threshold, the duration of the timelock will start growing proportionately to the amount deposited. Once the locked funds reach the second threshold, the rage quit mechanism is triggered, which blocks the execution of any motion under Dual Governance until the stakers withdraw their stETH into ETH.

For the first threshold, Lido DAO has proposed to be 1% of the Lido total value locked (TVL) on Ethereum, while the second threshold is currently set at 10% of Lido on ethereum TVL. Beyond the percentage required to trigger the model, the proposal also includes parameters such as minimum or maximum hours or days required before any step would be taken.

For example, a proposal held in Dual Governance must be there for a minimum of 3 days before execution, while the minimum duration of the dynamic timelock is 5 days as long so far the shares of stETH locked are higher than the first threshold.

Ethereum stakeholders praise Lido’s proposal as LDO sees a rise in value

Meanwhile, the proposal has attracted positive reactions from many in the Ethereum community who believe it represents a great step for Lido and Ethereum by mitigating governance risks for the protocol on Ethereum. Lido is the second biggest DeFi protocol on Ethereum, with $21.48 billion in TVL, mostly on Ethereum.

According to Flashbots strategy lead Hasu, this proposal is the most important Lido upgrade ever. Ethereum developer Tim Beiko also congratulated the Lido Team on the proposal, even though the date for implementation remains unknown.

With Lido set for an upgrade, its native token, LDO, has also seen massively positive performance in the last seven days with over 19% gains. It is up 8.66% in the last 24 hours and trades at $1.02. However, it remains down 43.31% year-to-date.

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