The Lido Governance Community is examining a new proposal to give more influence on Ethereum holders (STETH) in protocol decisions.
The May 8 proposal, nicknamed the LIDO 28 improvement proposal (LIP-28), introduces a double governance framework.
Currently, only LDO token holders can vote on changes to the Lido protocol. This gives them total control over the decisions that affect everyone in the ecosystem, including those who jalene ETH and receive Steth in return.
Although STETH holders are essential to the success of the platform, they have no formal means of opposing or influencing DAO proposals.
The proposal of the DEFI protocol aims to give STETH holders a more active role in protocol decisions, in particular in cases where the proposals adopted by LDO token holders can be considered controversial.
Commenting on the proposal, Hasu, leader in strategy at Flashbots, described it as the “most important upgrade of the Lido of all time”.
Lido is the largest liquid Éthereum ignition platform, controlling approximately 27% of the total highlight of the ETH. The protocol allows users to mark ETH with validators and to receive Steth in exchange. This STTH can then be used in DEFI applications, offering users flexibility and liquidity.
How is Lido’s double governance model works
The proposed system adds a timelock mechanism between the DAO proposals and their execution.
According to the proposal, this delay creates an opportunity for Steth’s holders to answer if a decision could impact them negatively. They would do it by locking their NFT STETH, WSSTH or withdrawal in a special whole contract.
Once the deposits in the sequestration reach 1% of the total Lido Ethereum value (TVL), a period of delay begins. If the deposits reach 10% TVL, the proposal enters a state of “rage quit”. This means that no action can be taken on the proposal until the locked tokens are converted into ETH.
This model gives Steth holders a significant voice without forcing them to completely abandon the protocol. It also allows the DAO to stop and reconsider the division proposals.
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