Lido Approves Dual Governance Model for Ethereum Staking

The much-anticipated Dual Governance model for liquid Ethereum staking protocol Lido has finally been approved by LDO holders. This approval marks a significant milestone in improving governance mechanisms for Ethereum stakers, culminating three years of efforts to address the risk of governance capture on Lido and ensure that the Lido DAO continues to keep Ethereum decentralized.

With the governance model now approved, Lido DAO is set to see a change in the voting process. Currently, voting has phases, including forum discussion, followed by off-chain and on-chain voting. However, dual governance adds a new phase in which holders of staked ETH (stETH) can now oppose the decisions of LDO holders. This mechanism ensures that stakers have a say in the protocol’s governance by allowing them to delay proposals they disagree with for as long as 45 days while withdrawing their staked ETH. The governance model will be fully launched on-chain by July 4, and it will be the first proposal where the dual governance model will be implemented.

Meanwhile, the protocol is giving Proof of Attendance Protocol (POAP) non-fungible tokens (NFTs) for free to users who voted for Dual Governance. So far, 11 POAP NFTs have been minted while 176 POAPS remain unclaimed. Users can enter their addresses to see if they are eligible to claim the NFT. This aligns with its appreciation for those who contributed to the dual governance model, from the developers to the voters.

The community’s reaction to the approval has been positive, with many noting that Lido has always been a pioneer. The protocol already dominates the Ethereum staking category with 25% of the market share due to having over 9 million ETH staked. Many expect its adoption to increase further with this new governance model. Lido Strategic advisor, the pseudonymous Hasu, noted that this new governance will improve the quality of proposals that can be passed on Lido and prevent any hostile takeover of the protocol, making it one of the most secure liquid staking products.

Hasu shared his view on the Unchained podcast, adding that he expects the protocol to attract more users given its improved security since stakers no longer have to worry about the DAO approving any proposal that will harm them. Interestingly, the protocol is already working on its newest version, which will bring new features to Lido. The v3 has already launched on the testnet and aims to bring customizable modular staking to Ethereum. One of the key features in the Lido v3 is stVaults, a personalized staking solution that allows users to set up their staking products.

Although the recent development did not positively impact the Lido token LDO, which is down, the token has been struggling throughout the year, falling year-to-date, with no signs of recovery. Although it is unclear why LDO is struggling, many have expressed concerns that the new governance model could further affect the token. However, Hasu believes that dual governance will have a positive impact on LDOs because it only strengthens the network and prevents bad decisions. He expects that the improved security on the protocol could further onboard more users and boost LDO value over time.