Lido DAO votes to enable dual governance, giving stakers veto power

The governance DAO of Lido, Ethereum's largest liquid staking protocol that currently manages over a quarter of all staked ETH, is set to give its stakers the ability to delay or veto governance decisions following a near-unanimous vote. 

The dual governance system is intended to safeguard against a scenario where Lido's LDO token holders, who are the only ones allowed to create and vote in favor of governance proposals for the Lido DAO, attempt to vote in a proposal that would negatively affect Lido's stakers or Ethereum itself. 

In the new paradigm, Lido stakers (those who hold stETH tokens) will be able to register dissent against DAO proposals by depositing stETH into an escrow contract. If at least 1% of Lido’s total staked ETH is deposited in the escrow by dissenting stETH holders, the proposal is delayed for an initial period of 5 days, with the time delay increasing as more stETH tokens are deposited.

If 10% of the total stETH supply is locked, the proposal is frozen and the protocol enters a Rage-Quit state—no new proposals can execute until dissenting stakers have fully withdrawn or the DAO drops the measure. 

The unique structure, which has been discussed for years, grants stakers the ability to object to controversial proposals, and gives them enough time to rally support for the cause. Lido called the vote "one of the most important protocol upgrades across the Lido ecosystem" in a post on X. 

The main phase of voting for the proposal ended with 53.6 million LDO tokens voting in favor, narrowly surpassing the 50 million LDO needed for quorum, and just 1.18 LDO opposed, from a single dissenter. Turnout was in line with previous Lido DAO ballots, which often clear the 50 million-token quorum by only a few million despite near-unanimous support. Barring a massive last-minute organized opposition to the vote during the "objection" phase, which only allows LDO holders to either vote "No" or change their vote from "Yes" to "No," the vote will finalize on June 30 at 10:00 EDT. 

"Dual governance isn't perfect, but it solves important problems," Ethereum co-founder Vitalik Buterin wrote on X. Buterin said the structure serves as an extra independent layer against "particularly harmful actions," and also explicitly allows Ethereum stakers to serve as stakeholders in the Lido ecosystem. 

The price of LDO has risen about 3.5% in the past 24 hours, according to The Block's LDO Price page, compared to a 0.8% gain in the price of ETH. About 25.7% of staked ETH is staked with Lido, according to a Dune dashboard.