The Dual Governance is a dynamic timelock mechanism allowing stETH holders to exit Lido on Ethereum in face of contentious Lido DAO governance motion. Given the dynamic nature of Ethereum staking, usual timelocks aren’t a feasible solution.
Dual Governance introduces timelock contract between Lido DAO governance motions and execution. The timelock is connected to escrow, allowing stETH holders to voice their intention to exit the protocol by depositing stETH, wstETH and stETH withdrawal NFTs into a specific escrow contract. Once the amount locked there crosses the “first seal” threshold (proposed to be 1% of Lido on Ethereum TVL), the timelock duration starts growing proportionately. As the amount locked crosses the “second seal” threshold (proposed to be 10% of Lido on Ethereum TVL), the rage quit mechanics is triggered: execution of any motions under Dual Governance is blocked until all the stETHs in escrow are withdrawn to ether.
Dual Governance allows for de-escalation between stakers and the DAO: stakers could withdraw stETH from the escrow until rage quit is triggered, and DAO governance could cancel the contentious motion queued in the Dual Governance. The Dual Governance design mitigates a number of potential misuse scenarios along this basic flow.
The Lido Improvement proposal outlines the design, specification, parameters pick, deployment plan and operational concerns regarding the Dual Governance.
Excited for dual governance, it’s been in the works for a long time.
Faded by ‘OGs’ and the twitter ‘normie-core’ audiences alike for what feels like eons…
LidoDAO has the chance to be the shining example for not only other DAOs, but possibly even trail-blaze a new societal anti-class.
Global democracy and open governance is quietly regressing.
At the same time, this open-experiment has the capacity to empower ETH a more democratizing value settlement layer-- a more open forum.
I believe in the contributors that are humbly and quietly working in the background to make this happen; when you’re doing the right thing, you’re never doing the wrong thing.
For what it’s worth, I think you’re doing the right thing.
Has been in the making for a long time, it’s complex to implement and yet it’s extremely simple to understand:
signal your disagreement.
if enough disagreement is shown (first seal), timelock increases so others can disagree as well.
if more disagreement is signaled (second seal), timelock is permanent until all those who disagree have exited so they are not affected by the governance change.
After everyone that disagrees leaves, governance can proceed.
Good job guys, can’t wait to see it implemented to protect Ethereum, stETH holders, and keep LDO holders and delegates in check.
Great to see dual governance finally happening. Congrats to the team for implementing a solution that may look “simple” from the outside but solves a trully complex problem.
The logic of the actions is quite complicated, but the goal is clear.
I have several questions:
For what reasons were specific days chosen for TimeLock?
first we give 3 days to reach (or not) 1% of those who are against
then, upon reaching the threshold of 1%, we extend this period to 5 days
if this percentage reaches 10%, then up to 45 days. If we count roughly (with an average withdrawal duration of 7 days), then in order to last more than 45 days, we need a total withdrawal flow of: 10% * 45 days / 7 days = 64%
Correct me if I have calculated something incorrectly (the system is not the simplest)
I mean that in 45 days Lido can lose more than half of the stakers and this will lead to a collapse
Can this system be used by fraudsters?
For example, a DAO votes for some useful action that one of the stakers does not like. Can they hack the system, in fact, without having LDO votes, to reject/postpone the decision for a while?
Will such voting always be used?
At the moment, there is an urgent vote to change the address of one of the oracles. In theory, such votes should not be subject to dual governance, or not?
The hidden advantage - as it seems to me, is that this can give us more voters from stakers, when they can understand that it is better to vote as they need than to use the mechanism to save their funds through Dual Governance
The calc itself is a bit different (I’ll look to have a better explainer of that), but long story short: if there’s a ragequit — something terribly wrong has happened and significant portion of stakers would be willing to exit the protocol either way. The goal of Dual Governance to allow them to do so and not get caught by the LDO governance motion which is perceived as malicious by such a wide group of stakers.
The complexity of the design is a result of this kind of “what if” discussions; long story short — there’s always a breaking point, but in DG it’s quite expensive to do anything of essence (starting with locking 1% of TVL in escrow to just delay the LDO motion); in order to negotiate / push for rejection of the motion even more capital deployed + actual negotiations with LDO holders would have to be made.
Say, Treasury management 100% doesn’t touch DG; most committees’ flows are staying the same as well. For anything of “high danger” you want to cover it with DG (that’s the reason to have it set in the first place), so the game is having the resilient design not relying on “main governance pipeline” for anything urgent.
I’d say the more attention to “what’s happening” the better =)
We are in support of this LIP going live and also to participate in the committee work. The Dual Governance system improves the robustness and user protection of Lido staking users, a value proposition that aligns with market demand (transparency and controls). It’s also a key implementation that can/should be leveraged with institutional staking (go to market) efforts from the Lido team. Once executed, its important that the DRIs runs committee fire drills and operational audits are completed on a adequate cadence as well as in advance of the Emergency Committees retirement after one year.
