Lido Finance DAO Considers New Dual Governance Model

Lido Finance, the industry’s most popular liquid staking solution, is considering a significant change to its tokenomics. Marin Tvrdić, a business development contributor to LidoDAO, revealed during this year’s EthCC event that members are advocating for a dual governance model.

Lido Finance DAO Considers New Dual Governance Model

If approved, this model would grant veto power on governance proposals to Lido users, specifically those staking Ethereum and holding stETH, even if these proposals have been approved by LDO holders.

“The LDO token is a governance token. Its main function is to vote on proposals, giving power to the holders to choose what happens with the protocol. However, this raised concerns among stakers,” said Tvrdić.

Lido Finance’s Proposed Dual Governance Model

Lido is a leading decentralized platform for liquid staking ETH. It allows investors to stake ETH with the network’s validators and earn rewards. In return, they receive a token representation of their deposit called stETH. The stETH token has been integrated throughout the DeFi sector, enabling stakers to remain liquid while their funds are securing the network.

Currently, Lido commands 31.7% of the entire staking market. With such a significant user base and substantial funds, the protocol’s DAO is considering new checks to ensure alignment within its community.

Concerns Over Current Governance System

The current governance system for Lido is based on LDO, meaning only LDO holders can vote on proposals. This system gives LDO holders a degree of power over the protocol that stETH holders don’t have, which could lead to decisions that negatively impact liquid stakers.

On June 22, a core contributor to LidoDAO, a pseudonymous developer named skozin.eth, introduced the concept of dual governance. This proposal aims to grant stETH holders veto power over the DAO’s governance decisions.

The Potential Impact of Dual Governance

“What will change for the protocol, as an LDO holder, you can vote, but if the proposal is not good enough, and stakers decide it is not good enough, they can shut it down,” Tvrdić explained.

The proposal is still under discussion and has not yet moved to a vote. If implemented, this dual governance model could significantly change the dynamics within the Lido Finance community, providing more power and security to stETH holders.