Ethereum (ETH) Price Update: Lido Staked Ether Holders Get Governance Boost
Lido represents an ambitious governance model that gives stETH holders the opportunity to participate in the protocol's decision-making process.
The proposal comes amid a 30% surge in ETH following the Pectra upgrade, which has brought attention to Ethereum protocols.
Shaurya Malwa | Edited by Aoyon Ashraf May 10, 2025, 4:11 PM
Important points:
- Lido Finance proposed a two-tier governance system that gives holders of staked ether (stETH) veto power over important protocol decisions.
- Lido Improvement Proposal (LIP) 28 aims to improve accountability and decentralization in the Ethereum staking ecosystem.
- The proposal is currently under discussion and a formal vote is expected, which could set a precedent for other DeFi protocols.
Lido Finance, the leading Ethereum liquid staking platform, has unveiled a proposal that gives staked ether (stETH) holders direct voting rights alongside existing DAO token holders.
The update, called Lido Improvement Proposal (LIP) 28, outlines a dual governance model that allows stETH holders, who stake ETH via Lido and receive a liquid token in return, to participate in a veto mechanism on key protocol decisions. Currently, only LDO holders $1.07 , Lido's governance token, has the ability to influence the development of the protocol.
Under the new system, stETH token holders will be able to veto some proposals that are approved by LDO token holders, although this power does not allow them to make proposals unilaterally.
Dual Control: Coming Soon
The Lido DAO project's long-time contributors are proud to present the roadmap for the upcoming Dual Governance release, including design and code, parameters, deployment, and implementation. https://t.co/Iu7J1cOlcr
— Lido (@LidoFinance) May 9, 2025
The proposed system is designed as a mechanism to increase accountability and decentralization, especially given that Lido continues to lead the way in Ethereum staking, with over 25% of all ETH staked on the network through its infrastructure.
How it works
The dual governance system introduces a special time contract between Lido DAO decisions and their implementation, giving stETH holders the opportunity to intervene if they strongly oppose a proposal.
“Dynamic” time locking is necessary because this is how the process in the chain is controlled.
In the current system, decisions do not take effect immediately, as there is a set period before they are implemented. This gives users time to react if they do not agree with certain changes.
However, Ethereum staking is different in that you can't quickly unstake or withdraw ETH, even with a time lock in place. It takes time, liquidity is limited, and there is often a queue that can take days to clear.
The new proposal aims to address this problem.
The proposed dynamic timelock means that as enough users unhappy with the proposed change deposit their stETH (or wrapped stETH and NFTs for withdrawal) into a special escrow contract for withdrawal, the timelock duration begins to increase—this is called a “p” crossing.
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