Lido, the leading Ethereum liquid staking protocol, has announced the implementation and proposal of a dual governance system for stETH holders. This change empowers users who stake ETH and receive stETH to have increased influence over protocol decisions.
The new model introduces veto and exit rights, designed to allow stETH holders to oppose or delay governance decisions that misalign with their interests. This mechanism, already in effect since April 2023, provides stETH holders with formal powers to veto contentious proposals put forth by LDO token holders in the DAO. If enough stETH is locked to signal disapproval, the proposal is paused or may enter a 'rage quit' state, requiring conversion of locked tokens back to ETH before further action.
Lido representatives and advisors emphasize that the dual governance framework is meant to prevent governance capture, boost protocol security, and enhance confidence among stakers. Initial market response indicates that stakeholder confidence has grown, with potential to attract further institutional involvement. Experts suggest this upgrade could set a precedent for more balanced and resilient governance models across the DeFi sector.