Lido Implements Two-Way Governance System Empowering stETH Holders

Lido, the largest liquid staking protocol on Ethereum, has implemented a significant overhaul to its governance structure. The Lido DAO members have overwhelmingly approved a two-way governance system that empowers stakers, specifically stETH holders, to delay or veto governance proposals. This new system aims to balance the current governance model, where only Lido token holders (LDO) can submit proposals and vote on them. The primary goal is to prevent LDO holders from approving proposals that could negatively impact Lido’s stakers or the broader Ethereum ecosystem.

The new governance structure allows stakers to register their objections to a proposal by depositing their stETH assets into a special “escrow contract.” If 1% of the total staked ETH is deposited, the proposal will be postponed for five days. As the percentage of stETH deposited increases, the postponement period extends. If the threshold reaches 10%, the proposal will be completely frozen, and the protocol will enter “Rage-Quit” mode. In this scenario, dissenting stakers can withdraw all their assets, or Lido DAO can cancel the proposal entirely. During this period, no new proposals will be implemented.

The main phase of the vote concluded with 53.6 million LDOs voting “Yes,” just above the required quorum of 50 million LDOs. Only one person cast a “No” vote of 1.18 LDOs, indicating a turnout similar to previous Lido DAO votes. In the remaining “objection” phase, only LDO holders can vote “No” or change their vote from “Yes” to “No.” Unless there is a large-scale organized counter-campaign, the proposal is expected to be finalized on June 30 at 17:00 (GMT+3).

Ethereum co-founder Vitalik Buterin expressed support for the two-way governance structure. Buterin highlighted that this system creates an independent security layer, particularly against malicious actions, and allows Ethereum stakers to position themselves as true rights holders within the Lido ecosystem. The Lido team described this change as one of the most significant protocol upgrades in the entire Lido ecosystem.