Lido DAO Upgrades Its Governance Model to Meet the Growing Demands of the Crypto Landscape

As DeFi protocols like Lido DAO expand in size and influence, so do their responsibilities.

Lido DAO, known for its DeFi liquid staking protocol, is upgrading its governance model to handle the growing pains of the crypto space. As protocols like Lido expand in size and influence, managing millions in assets demands not just decentralization, but also robust security, operational efficiency, and full transparency.

This upgrade brings several key changes to Lido’s governance structure, introducing more time for voting and a critical emergency measure. It also highlights the importance of specialized committees in managing specific aspects of the protocol.

New Voting Timelines and More Time to Decide

With the increasing size and scope of Web3 protocols, ensuring optimal voter turnout is crucial for any DAO. However, recent data shows a concerning trend in decreasing participation in Lido’s voting rounds.

In response to this, one of the most notable updates from the recent Lido governance upgrade extends the on-chain voting phases. The Main Phase, which usually begins on Wednesday, will now run for a total of 72 hours, concluding on Saturday. After a 24-hour cooling period, the Objection Phase will commence and last for 48 hours until Monday.

This change was introduced to provide more time for LDO tokenholders to engage in voting. In 2023, voter participation was strong, with an average of 88.3 million LDO tokens used in Quarter 4 alone. However, in 2024, voter numbers dropped significantly, reaching 63 million LDO tokens by Quarter 4.

This time window is crucial for enabling community members to intervene if needed. If a particular proposal is passed by a majority of delegates but a significant portion of the community wishes to overrule that decision, they can do so during this phase, provided they pool enough voting power.

The three-step governance process—discussion, gas-free off-chain voting, and on-chain execution—will remain in place, ensuring that each proposal is subject to a rigorous, community-wide review before implementation. Throughout these stages, transparency is maintained, from the initial draft of the proposal to its final on-chain action.

GateSeal: An Emergency Shield for Smart Contracts

Another major advancement introduced by the upgrade is "GateSeal", an emergency mechanism designed to halt critical smart contracts in the case of exploits, bugs, or governance attacks. This "emergency brake" can only be activated with the approval of a committee—3 out of 6 quorum—preventing any single actor from abusing its power to freeze the protocol.

Its duration was set at 11 days, providing ample time for the Lido DAO to assess the situation, prepare a vote, and take the necessary action to disable or re-enable the smart contract. Key components like user withdrawals, validator exits, and new deposits will be affected, rendering large-scale exploits nearly impossible.

Specialized Committees for Internal Operations

Lido has also integrated specialized committees to manage internal operations in a more focused manner. These groups, appointed by the House, will oversee specific areas of the protocol.

These committees, crucial for efficient and targeted decision-making, will report directly to the House. Their decisions will require multisig authorization and be recorded on-chain, ensuring complete transparency and accountability.

Even routine tasks will benefit from this system with the introduction of Easy Track. This tool will streamline administrative processes without sacrificing transparency, as all actions will still be subject to multisig authorization and on-chain registration.

Closing Thoughts

As DeFi protocols like Lido DAO expand in size and influence, so do their responsibilities in managing large sums of assets. In an industry that prides itself on decentralization, protocols like Lido are now integrating advanced governance mechanisms to meet the growing challenges of the crypto landscape.