News

Lido DAO Approves Dual Governance Structure

Jamie Larson

Jun 29, 2025 — 3 min read

Lido DAO approved a dual governance framework on June 29, 2025. The proposal passed with 53.6 million LDO tokens voting in favor. According to Coincu, nearly unanimous approval was reached, just clearing the required quorum. Only 1.18 LDO tokens voted against the measure.

The new system grants stETH holders veto power over LDO token holder decisions. The Block reports that stakers can register dissent by depositing stETH into an escrow contract. If 1% of total staked ETH enters the escrow, proposals face a five-day delay. A 10% threshold freezes proposals entirely until dissenting stakers withdraw.

The governance vote concluded during an objection phase ending June 30 at 10:00 EDT. Blockworks confirmed that the on-chain Aragon vote required a 5% minimum quorum. The proposal achieved this threshold despite historically low voter turnout patterns. Wrapped stETH versions used in EigenLayer or Pendle cannot vote directly.

Why This Matters

The governance change directly protects stETH holders from potentially harmful DAO decisions. Blockworks notes that the dynamic timelock adjusts based on user opposition levels. Simple changes pass quickly while controversial proposals automatically slow down. The mechanism prevents flash loan attacks through careful design choices.

Stakers now have predictable exit windows before major protocol changes take effect. Traditional timelocks offer fixed delays, but stETH withdrawals can take weeks. The new system scales delays to match opposition strength. CoinDesk reported in May that this design was years in development. Contributors paid security researchers to test the system's resistance.

According to DataWallet, Lido controls 27.7% of total staked ETH with 9.41 million ETH. The protocol's dominance makes this governance shift especially important for Ethereum's decentralization. This concentration previously raised concerns about single-entity control over network validation.

Ethereum co-founder Vitalik Buterin commented on the structure's importance. The Block quoted Buterin saying dual governance serves as protection against harmful actions. The system explicitly allows Ethereum stakers to become stakeholders in Lido's ecosystem. This alignment reduces trust requirements between protocol operators and users.

Industry Implications

This governance model could reshape DeFi protocol structures across Ethereum. SDLC Corp identifies institutional adoption as a key 2025 DeFi trend. Lido's changes reduce centralization risks that concern institutional investors. Banks and traditional finance firms seek governance protections before entering DeFi markets.

The dual governance approach addresses principal-agent problems in liquid staking protocols. Messari explained that LDO holders' interests don't always align with stETH holders. The veto mechanism creates accountability between token holders and actual stakers. This separation of powers mirrors traditional corporate governance checks and balances.

Market data shows measured response to the governance update. LDO trades at $0.72 with a $643 million market cap. Daily trading volume reached $2.92 billion. CryptoPotato reports liquid staking remains the largest DeFi category at 31.1% of staked ETH. Layer-2 solutions show 232% growth year-over-year with $37 billion total value locked.

Ethereum staking continues growing despite market volatility. CryptoSlate found 28.89% of ETH supply is now staked. Over 60% of stakers remain profitable at current prices. The governance upgrade may attract more institutional stakers seeking protection mechanisms. DataWallet shows 33.8 million ETH currently staked across 1,057,532 active validators.

Competition among liquid staking providers intensifies as protocols differentiate through governance models. TokenPost reported LDO token prices rose 6.5% following the initial proposal announcement. Centralized exchanges like Coinbase hold 8.4% market share while Binance controls 6.4%. Emerging competitors including ether.fi capture 5.3% as they gain ground on established players.

The governance innovation extends beyond technical improvements to address regulatory considerations. AppInventiv highlights democratic governance as essential for operational transparency. Enhanced accountability attracts both investors and regulatory approval. Cross-chain interoperability remains another major 2025 trend affecting staking protocols.

AI integration represents the next frontier for DeFi governance systems. TokenMinds notes AI helps automate market making and lending decisions. Future governance models may incorporate AI-driven risk assessment while maintaining human oversight. Reputation systems allow users to build on-chain identities without revealing personal data.

For readers interested in decentralized governance tools and infrastructure, DAO Times provides a comprehensive guide to DAO tools for 2025. This resource covers essential platforms for DAO creation, governance systems, treasury management, and community tools. The guide examines how artificial intelligence integration enhances governance processes and highlights emerging trends in cross-chain functionality, Zero-Knowledge technologies, and modular protocol architecture that support decentralized organizations.