Dual Governance: An Overview

in Governance by Lido

Dual Governance introduces a mechanism that gives stakers a direct role in protocol governance through the dynamic timelock system. Live on Ethereum mainnet since 4 July 2025, it lets stETH holders exit the protocol before potentially contentious proposals take effect.

 

This article is designed to be a starting point, helping to navigate among other in-depth blog posts and technical documentation. 

 

What is Dual Governance?

Lido is the leading liquid staking protocol on Ethereum. When staking through the Lido Protocol, users receive a liquid token called stETH, which represents their staked ETH and reflects earned rewards. The protocol is governed by the Lido DAO, with LDO holders voting on upgrades and onchain releases.

 

The two main tokens in the Lido staking ecosystem, stETH and LDO, carry an inherent tension. LDO via the DAO controls upgrade rights, while stETH holders bear execution risk. A decision LDO holders pass can affect stETH holders who never voted for an upgrade. 

 

Dual Governance was designed to resolve this tension by giving stETH holders time to leave before contentious proposals take effect. This calls for additional architecture, because of how Ethereum handles exits: all validator exits are processed through a single queue with limited throughput, so withdrawing at scale can take weeks or even months.

 

How Dual Governance works

The mechanism relies on an immutable escrow contract, which accepts stETH, wstETH, and unstETH withdrawal NFTs. Two thresholds apply to the escrow:

  • 1% threshold: Once 1% of the total stETH supply is deposited, Veto Signalling is triggered. This delays governance proposals for 5 to 45 days, depending on the level of opposition.
  • 10% threshold: Once 10% of the total stETH supply is deposited, Rage Quit is triggered. This blocks all governance motions until all escrowed stETH, wstETH, and unstETH tokens are fully withdrawn.

 

While LDO holders maintain voting power, Dual Governance ensures stETH holders can signal opposition, delay execution, and exit the protocol before changes impact their assets.

 

Once the 1% threshold is reached, there are two potential paths.

 

1. The Happy Path: De-escalation

stETH holders signal opposition to the contentious proposal passed by the Lido DAO. Seeing the opposition, the DAO cancels the proposal and returns to a discussion with the community. stETH holders then revoke their stETH from the escrow, and Dual Governance state returns to normal.

 

A moderately bad proposal passed by LDO holders. Examples: well-intentioned but flawed proposals, mistakes, or governance gaps.

 

The proposal enters the Dual Governance review process.

 

stETH holders pick up on this proposal and signal their disagreement. Once more than 1% of the stETH supply is committed in opposition, Veto Signalling is triggered and proposal execution is paused.

 

LDO holders cancel the problematic proposal and return to discussion with the community.

 

stETH holders remove their stETH from the escrow, and the DAO resumes a normal state of affairs.

 

2. The Unhappy Path: Escalation

A contentious proposal is pushed through, and the DAO does not back down. stETH holders escalate, locking enough in the escrow to block execution, and begin exiting. The proposal cannot take effect until the opposed holders have fully left the protocol, swapping their stETH for ETH. Once they are out, governance resumes.

 

A malicious proposal gets enough LDO support to pass. Examples include governance attacks by concentrated LDO holders or hostile changes to withdrawal contracts, fees, or security parameters.

 

The proposal enters the Dual Governance review process.

 

stETH holders catch this proposal and deposit stETH into the escrow. Once more than 1% of the stETH supply is committed in opposition, Veto Signalling is triggered, pausing proposal execution.

 

More stETH holders are alarmed and add their stETH to the Veto Signalling escrow. The more stETH placed, the longer the timelock. If the 10% threshold is reached, Rage Quit activates at the end of the Veto Signalling period (maximum 45 days).

 

The DAO governance process remains frozen until all stETH holders who joined the veto have fully withdrawn their ETH.

 

After all stETH holders have exited the protocol, the DAO returns to its normal state.

 

Dual Governance Development Timeline

  • June 2022: Dual Governance is first proposed on the Research forum. 
  • April 2024: The design and implementation plan is approved by the DAO via a Snapshot vote
  • September 2024 to February 2025: Independent audits and formal verification by Certora, Statemind, OpenZeppelin, and Runtime Verification.
  • 8 May 2025: LIP-28: Dual Governance (Implementation, Parameters, Committees) proposal is approved by the DAO via a Snapshot vote
  • 30 June 2025: The DAO approves Dual Governance in an onchain vote
  • 4 July 2025: Dual Governance goes live on Ethereum mainnet: dg.lido.fi

 

Further Reading

 

Articles

  • The Dual Governance 101 covers the core idea, thresholds, states, and committees.
  • The guide for stETH holders walks through each scenario, the UI guide covers the interface, and you can monitor and signal at dg.lido.fi.
  • Full documentation: LIP-28, the mechanism and specification docs, and the contracts repo.
  • Parameters: research and stress-tests behind the Dual Governance parameters

 

Podcasts

The information provided in this blog is for informational purposes only and reflects our views and understanding at the time of writing. The content does not constitute professional advice of any kind, including but not limited to legal, financial, investment, or regulatory advice.

Readers should not rely solely on the information presented here, and are strongly encouraged to conduct their own independent research and consult with qualified professionals before making any decisions based on the content.

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