Lido DAO Introduces Dual Governance Mechanism to Empower stETH Holders

Lido DAO has introduced a Dual Governance mechanism aimed at empowering stETH holders with enhanced control over governance proposals. This new system allows stakers to lock their stETH, wstETH, or withdrawal NFTs into an escrow contract, initiating a timelock if the locked amount exceeds 1% of Lido’s Ethereum TVL. This delay provides stakers with time to assess and react to contentious proposals. If the locked amount surpasses 10%, a “rage quit” mechanism is triggered, halting the execution of the proposal until all escrowed assets are withdrawn. This approach is designed to balance the authority of the DAO with the autonomy of stakers, thereby enhancing the protocol's resilience.

The Dual Governance mechanism features a two-tiered threshold system to protect stETH holders. The first threshold, set at 1% of Lido’s Ethereum TVL, activates a proportional timelock on governance proposals, giving stakers the opportunity to evaluate and respond. If the second threshold of 10% is met, the “rage quit” mechanism is engaged, blocking the execution of the proposal until all escrowed stETH is converted back to ETH. This design ensures that stakers have a tangible means to oppose and exit from decisions they find disagreeable, reinforcing trust in the protocol’s governance.

The Dual Governance mechanism aims to balance the power between LDO token holders and stETH stakers by incorporating mechanisms that allow stakers to influence protocol decisions. Through a dynamic timelock and escrow system, stakers can delay or block governance proposals once predefined thresholds are met. This check on DAO authority not only empowers stETH holders but also encourages more inclusive decision-making. The system includes de-escalation safeguards, allowing stakers to withdraw before a rage quit is triggered and enabling the DAO to cancel proposals during the timelock.

The proposal outlines the technical and operational foundation of the Dual Governance mechanism, including design specifications, rationale for parameter selections, rollout strategies, and risk mitigations. The Lido DAO community is actively reviewing the framework to ensure it supports long-term protocol integrity and aligns with the evolving landscape of Ethereum staking. This collaborative review process exemplifies Lido’s commitment to transparent governance and reinforces its role as a leader in decentralized finance infrastructure.

The introduction of Dual Governance represents a significant step in Lido DAO’s evolution, aiming to fortify the protocol against unilateral decisions that may not align with staker interests. By providing structured exit options and control over governance results for stETH holders, the system plans to create a more balanced and responsive governance model. This shift reflects an overall trend in decentralized finance towards empowering users and sharing power for decision-making more equitably.

The Lido DAO community is actively proceeding with the implementation of the Dual Governance mechanism, focusing on fixing its technical structure and preparing for large audits. The community will be closely engaged to ensure transparency and alignment with larger staker interests. The future deployment aims to implement a secure, fair, and effective model of governance. Lido aims to increase protocol resilience and create a model for decentralized, participatory governance across the growing DeFi space through the priority of staker autonomy and DAO accountability.