Lido DAO Votes on Dual Governance to Empower stETH Holders

Lido DAO is on the brink of implementing a significant governance change known as “Dual Governance.” A vote by LDO holders, concluding at 10:00 a.m. ET on Monday, June 30, will decide whether to alter the distribution of power within Ethereum’s largest liquid staking protocol. If approved, the proposal will introduce a new framework that empowers stETH holders—users whose ether is staked via Lido—to delay or veto governance actions, adding a layer of accountability to the voting system. This change is expected to have implications beyond Lido, according to prominent researcher and advisor Hasu.

Hasu highlighted that the new governance structure reduces the risk of governance attacks and the trust users need to place in maintainer companies and LDO holders. This is anticipated to further institutional adoption of stETH. The core of Dual Governance is a custom-built dynamic timelock module. Unlike static timelocks that delay execution by a fixed period, this design scales in response to opposition from stETH holders. For instance, if 1% of the total stETH supply signals objection to a proposal, execution is delayed by an additional five days. If opposition grows to 10%, the delay extends linearly up to 45 days. This mechanism ensures that in the event of a controversial or potentially harmful decision by LDO token holders, stETH users have a predictable window to exit before changes take effect.

This dynamic timelock aims to bridge the gap between providing liquidity and minimizing trust assumptions. Liquid staking protocols inherently rely on pooled delegation and active protocol maintenance to stay compatible with Ethereum upgrades. Traditional time locks give users a chance to exit before governance decisions are enforced, but exiting Lido back to native ether can sometimes take weeks or months, making a short fixed period inadequate. The dynamic timelock adjusts execution delays to match the scale of user opposition, allowing simple or uncontroversial changes to pass quickly while automatically slowing down the process if significant stETH holders object.

Lido contributors, including Hasu and Victor from the DAO operations team, noted that the design has been years in the making and has undergone dedicated stress tests to ensure it can resist governance attacks and flash loan manipulation. Victor mentioned that the design has been tested against flash loan attacks, with subsequent adjustments made to enhance its resistance. Wrapped versions of stETH, such as those used in EigenLayer restaking or Pendle yield strategies, are not eligible to vote directly, but the withdrawal process gives holders time to reclaim their base stETH and participate if needed.

Hasu explained that Dual Governance addresses the dilemma between trust and liquidity, allowing users to have both. The initiative has drawn comparisons to MakerDAO’s “emergency shutdown” lever, but it offers a non-destructive, graduated response rather than a single catastrophic reset. It reflects a broader trend in DeFi governance toward more nuanced, multi-stakeholder systems that separate capital voting from user safeguards. Hasu expects Lido’s implementation to serve as a blueprint for other protocols facing similar governance risks.

An earlier Snapshot vote on the proposal passed nearly unanimously. If the on-chain Aragon vote passes as anticipated, it will formally decouple the authority to propose and pass measures from the power to immediately execute them, placing stETH holders effectively in the role of constitutional overseers of the DAO. As of 9:00 a.m. ET Friday, just 4% of token holders have participated. To pass, the on-chain Aragon vote requires a minimum quorum of 5%.