LIP-28 Dual Governance

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mechanics is triggered: execution of any motions under Dual Governance is blocked until all the stETHs in escrow are withdrawn to ether.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.

WIP, link to be changed: lido-improvement-proposals/LIPS/lip-28.md at 19aa2a3c9b1f6ebd4ea6914a91422faaef1f71a8 · lidofinance/lido-improvement-proposals · GitHub

19 Likes

So incredibly excited for DG to ship!

5 Likes

One of the most well thought-out and complex governance designs in the history of Ethereum, and all onchain minimizing trust.

Chapeau. Let’s go!

6 Likes

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.
:purple_heart: :purple_heart: :purple_heart:
:purple_heart: :droplet: :purple_heart:
:purple_heart: :purple_heart: :purple_heart:

7 Likes

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.

5 Likes

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.

7 Likes

Really excited to see DG finally happening! Will be super interesting to see how this evolves and increases participation over time.

Exciting stuff!
Great to see it coming live

The logic of the actions is quite complicated, but the goal is clear.

I have several questions:

  1. 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
  1. 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?

  2. 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