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Lido Finance, Ethereum’s leading liquid staking protocol, has proposed a major governance upgrade that could redefine decision-making in DeFi. The proposal, Lido Improvement Proposal (LIP) 28, introduces a dual governance model allowing stETH holders — users who stake ETH via Lido and receive staked ether (stETH) — to gain veto power over key protocol decisions, previously reserved solely for LDO tokenholders.
The proposed system adds a dynamic timelock between decisions made by the Lido DAO and their execution. This mechanism grants stETH holders the ability to protest decisions by depositing their tokens into a designated contract. If deposits hit 1% of total staked ETH (“first seal”), the execution delay increases. If deposits reach 10% (“second seal”), a “rage quit” is activated, halting execution until all dissenting stakers have had the chance to exit.
This safety mechanism aims to protect long-term stakers who face withdrawal limitations due to Ethereum’s complex unbonding process. With over 25% of all ETH staked through Lido, the proposal marks a significant step toward decentralization and user inclusion in Ethereum governance.
The upgrade comes amid renewed interest in Ethereum staking platforms following the Pectra upgrade, which improved network efficiency. Lido’s dominance in the staking market means any governance shift could have wide-reaching effects across DeFi. Competitors like Rocket Pool and Frax Ether are also watching closely.
LIP-28 is currently under community discussion, with an on-chain vote expected soon. If passed, it would set a precedent for balancing DAO control with user sovereignty, and could inspire similar reforms across decentralized finance.
LDO token prices rose 6.5% following the announcement, outperforming the CoinDesk 20 Index’s 2.5% gain.
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