Lido Finance Proposes LIP-28 Dual Governance Proposal, Aiming to Grant stETH Holders Veto Power
Lido Finance, the largest liquid staking platform in the Ethereum ecosystem, has recently put forward an important governance proposal named LIP-28. The core of this proposal is to grant millions of stETH (Lido staked ETH) holders veto power over key protocol decisions, potentially having a profound impact on the governance model of the entire DeFi (Decentralized Finance) space.
Currently, governance voting rights for the protocol are primarily held by LDO (Lido DAO governance token) holders. The LIP-28 proposal aims to introduce a dual governance system. This means that even if LDO holders vote to approve a resolution, if it raises general concerns among stETH holders, the latter will have the opportunity to block its final execution.
This initiative seeks to more effectively balance the interests between governance token holders and the main users of the protocol (i.e., ETH stakers), ensuring that the development direction of the protocol aligns more closely with the well-being of a broad user base. How this bold initiative will operate and what transformations it will bring to DeFi governance are worth observing closely.
Detailed Explanation of the Dual Governance Mechanism: “Timelock” and “Angry Exit”
The operation of this dual governance system hinges on the addition of a special “timelock contract” between any decision made by the Lido DAO and its final execution, providing a window for stETH holders to intervene.
Specifically, if stETH holders are dissatisfied with a proposal, they can deposit their assets into a designated custody contract as a form of protest. Once the deposited stETH reaches the first threshold (First Seal, initially set at 1% of Lido’s total staked ETH), the duration of the timelock will be extended, giving stETH holders more time to express dissent while retaining control over their assets.
If the scale of the protest further expands and reaches the second threshold (Second Seal, initially set at 10% of Lido’s Total Value Locked (TVL)), the “Angry Exit” clause will be triggered.
At this point, the execution of DAO decisions will be completely halted, forming an effective “safety valve” that allows stakers to exit safely if they disagree with protocol changes (the more stakers that exit, the longer the time will be). This also gives the DAO time to reassess, respond to, or cancel controversial proposals.
Under this system, the minimum execution delay for any proposal is three days; after reaching the first threshold, the shortest timelock will be extended to at least five days. Additionally, the DAO can actively cancel proposals during the timelock period.
Outlook and Challenges: The Future Path of the LIP-28 Proposal
According to the current status, the LIP-28 proposal remains in the community discussion stage and is expected to enter the formal on-chain voting process soon.
Although the proposal aims to enhance governance efficiency and protect the interests of stakers, its implementation may still face challenges, such as the technical complexity of execution and the difficulty of effectively coordinating among various stakeholders (including LDO holders, stETH holders, node operators, and others).
However, once the proposal is approved and successfully implemented, it is expected to have a significant positive impact on the long-term health and user trust of the Lido protocol. Lido’s bold attempt and its potential profound implications for the future development of decentralized governance are worthy of continued market attention.
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