The central theses
- The Lido group is contemplating a brand new method to protocol decision-making dubbed twin governance.
- At the moment solely LDO holders can vote on choices; The brand new method would additionally give stETH holders a proper of veto.
- The plan additionally goals to solidify elements of the Lido protocol by inserting them exterior of the Lido DAO’s management.
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The Lido group is discussing a doable governance change that may leverage each of the protocol’s tokens.
All holders may have a governance position
The Lido group proposes a brand new method referred to as twin governance. It goals to resolve conflicts of curiosity between holders of staked ETH (stETH) and Lido (LDO) tokens.
The proposal first seeks to “introduce a dispute and backbone mechanism for perverse incentives” by giving each varieties of property a task in governance choices.
At the moment, solely these holding the LDO token have the best to take part in governance. Which means LDO holders have collective management over most technical points of the protocol. As such, they may doubtlessly band collectively to replace the stETH contract in a method that exploits stETH holders.
stETH tokens are distributed to customers who deposit ETH and are meant to be used with DeFi companies. The brand new proposal would add an extra governance position for these property: stETH tokens would have veto and anti-veto powers, giving holders the flexibility to counter the Lido DAO’s choices.
This method would create a “checks and balances” system discovered in lots of governments world wide that depend on the separation of powers to forestall harmful choices from changing into remaining.
Along with introducing this twin voting system, the proposal goals to “scale back the scope of governance… via ossification.” Which means the proposal would solidify a number of the parameters of the protocol – unchangeable even for the Lido DAO itself.
Nonetheless, ossification is not going to be speedy, and the proposal will initially give attention to twin governance.
The plan is taken into account however not remaining
Sam Kozin, Lido’s Lead Sensible Contract Developer, introduced an idea for twin governance on June tenth. The staff has but to create a extra technical model of the proposal earlier than a vote takes place. No voting date has been introduced but.
The proposal was effectively acquired by Lido and associated circles. Lido co-founder Cobie (Jordanian Fish) specified that “LDO’s purpose must be to reduce its personal leverage over time.” He added that this divestment will end in “the very best progress.” [and] Longevity potential.”
Some have advised that the plan represents a wholly new method to DeFi governance. Hasu, a paradigm-based researcher who co-authored the protocol, referred to as it a “revolutionary proposal for lido finance and DeFi normally.”
Lido is slowly changing into a sufferer of its personal success as greater than 30% of the entire ETH provide has been staked via the protocol. This has raised issues concerning the energy the protocol might need over the Ethereum community itself.
The Lido group additionally thought of capping the protocol’s share of ETH in Might to handle this subject.
Disclosure: On the time of writing, the writer of this text owned ETH and a number of other different cryptocurrencies.
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