LDO+stETH dual governance

[Chuck]

@skozin

Option: burn rogue LDO after successful veto

For this, the following mechanism could be implemented:

• Change the main LDO voting mechanics to use vote escrow-locked LDO (veLDO) as the source of governance power instead of pure LDO, similar to the veCRV mechanics.
• If, for a certain LDO vote, an anti-veto vote gets the quorum and gets rejected, all LDO tokens that supported the LDO vote get burned.

This effectively redistributes the LDO governance power of the attacker or incentives-misaligned DAO members between other LDO holders, allowing the protocol governance to unstuck without involving social consensus.

A variation of the mechanics is possible: instead of burning all LDO tokens supporting the vetoed vote, burn some percentage of them (from each LDO supporter) that’s proportional to the amount of veto power that voted against lifting the veto.

One important effect of this approach is that, since stETH effectively gets the power of burning LDO, the governance power of LDO is mostly transferred to stETH.

The burning mechanism may not be the best choice, since it will also make normal community members hesitate to participate in governance, just because of the fear of standing on the wrong side. The alternative option is a 3~6 months $LDO token locked up(for veLDO, a 3~6 months lock time extension) penalty, with a 1~3 months voting power frozen would be fine. With this kind of “Impermanent loss” risks, the attackers will need to pay a price for their behaviors. In the meantime, normal community members will feel more calm while they need to make a choice.