The Decentralised Autonomous Organisation (DAO) that administers Lido, and is the largest provider of staking services for Ethereum (ETH), has recently put forward a transition of its governing system.
This move is being taken in order to lessen the current scope of governance for the token holders. Lido DAO is a decentralized autonomous organization that is governed by the holders of LDO, the DAO’s governance token.
Governance tokens basically refer to when the holders take part in the transparent on-chain voting to decide on the parameters and proposals of the platform.
Though Ethereum presently powers the Lido DAO, the holders of LDO possess governance power over liquid staking protocols on other chains such as Solana and Polygon.
According to Sam Kozin, the lead smart contract developer at Lido, who highlighted through a blog post, under the DAO’s current multichain governance system, LDO holders have incentives regarding other chains, which are not necessarily aligned with those of the Ethereum network’s participants.
A Suggestion On Moving From Multichain To Dual Governance
And in order to solve this issue, the team behind Lido has put forward a dual governance solution that sits between the LDO stakers and holders. The proposal would introduce a dispute and resolution mechanism for misaligned incentives between stakers and LDO holders.
Kozin also highlighted during a Twitter spaces event held to talk on the dual governance proposal recently, this mechanism is designed to be triggered when LDO governance becomes captured resulting from attacks or misaligned with stakers and the network. And that as this mechanism facilitates two stakers to block governance decisions, it has the effect of disincentivizing LDO governance from executing decisions that go against the interest of stakers.
The entire crypto market has witnessed a lot of bearish trends in recent times, and Lido’s staked Ethereum (stETH) was also affected by it. It has been losing value compared to Ether, and this split has been one of a cause of the squeezed liquidity in the crypto space.
Every stETH token is completely backed by Ether locked in Ethereum’s beacon chain, and stETH would not be redeemable for Ether on a one-on-one basis till the blockchain’s Merge and a network upgrade to allow withdrawals projected to occur probably next year.
And therefore, staked Ethereum is exchanging hands below 0.94 ETH per token as of yesterday. It’s also getting affected by crypto hedge fund company Three Arrows Capital’s heavy selling.
At the time of writing, the second largest crypto asset, ETH, is trading at $1,078 with a market cap of $130,735,203,871 and is down by approximately 1% in the last twenty-four hours.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2022/06/18/lido-dao-brings-forward-governance-transition-proposal/