Lido Proposes Dual Governance Model to Empower stETH$ETH

Holders in Protocol Decisions

As Ethereum’s$ETH price jumps on the heels of the Pectra upgrade, Lido steps up decentralization efforts with a new governance framework.

Lido Finance is introducing a transformative governance structure that could redefine how staked ETH (stETH) holders participate in the future of Ethereum’s largest liquid staking protocol. The proposed framework — Lido Improvement Proposal (LIP) 28 — introduces a dual governance system aimed at giving stETH holders veto power on major protocol decisions currently controlled solely by LDO$LDO

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What’s Changing?

Until now, governance over Lido has been limited to LDO holders. With LIP-28, however, stETH holders — users who stake their ETH through Lido and receive stETH in return — would gain a critical layer of influence. Specifically, they would have the ability to block proposals passed by LDO holders if a large enough share of the staked ETH expresses opposition.

How Dual Governance Works

At the core of this model is a new dynamic timelock contract. Once the Lido DAO passes a proposal, there’s a buffer period before execution. During this window, stETH holders can signal disapproval by locking their tokens in an escrow contract. If the amount deposited crosses 1% of Lido’s total staked ETH (“first seal”), the execution delay begins to stretch. Should deposits reach 10% (“second seal”), the proposal is halted entirely, giving protesting users the opportunity to withdraw their ETH before any changes take effect.

This mechanism serves as a "rage quit" safety net — ensuring user exits are protected while giving Lido DAO a chance to reconsider potentially controversial changes.

Why Now?

The proposal comes just as Ethereum is gaining renewed market momentum. The Pectra upgrade, which enhances scalability and validator operations, has pushed ETH up by over 30% in a week. As Ethereum-native protocols gain traction, Lido’s move positions it as a leader in progressive, community-inclusive governance.

With over 25% of all staked ETH running through Lido, the stakes are high. If approved, this governance upgrade could set a new benchmark for how DeFi platforms balance power between tokenholders and protocol users.

LIP-28 is still in the discussion stage, with an official vote anticipated soon. Meanwhile, LDO has surged 6.5% in 24 hours, outpacing the broader crypto market.

More to Watch: Competitors like Rocket Pool and Frax Ether may soon feel the pressure to follow suit — further decentralizing Ethereum’s staking layer.

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