Lido, Ethereum's top liquid staking protocol, is changing the rules with a new dual governance model. This structure allows stakers (those holding stETH) to delay or even veto proposals, protecting their interests ahead of the big regulatory changes coming.
Regulatory Landscape Impact
This overhaul could change the game in terms of how crypto companies are regulated in Europe. Lido’s governance now involves a three-step process—discussion, off-chain voting, and on-chain voting. More transparency and accountability could make it easier for crypto companies to play by the EU's Markets in Crypto-Assets (MiCA) regulation rules.
By giving veto rights to stETH holders, Lido sets a precedent for how decentralised finance (DeFi) protocols can operate. This might mean smoother sailing for crypto companies looking to set up shop in the EU.
Benefits for Stakers
This dual governance model has its perks for stakers. They can now register objections through a special contract, which postpones proposals if 1% of total staked ETH is deposited. This gives the community a chance to weigh in before decisions are made.
It creates a sense of ownership and improves security against rushed or malicious proposals. It also encourages trust and collaboration within the community.
Startups Emulating Lido's Model
Crypto startups can learn a thing or two from Lido. A dual governance setup could create a balance between token holders and those with economic exposure but no voting rights, reducing risks.
Conflict resolution mechanisms could also be used to de-escalate tensions. By separating strategic and operational governance, startups could improve efficiency and cut down on governance fatigue.
Risks and Challenges
Of course, no system is perfect. Governance attacks and centralization risks could arise if safeguards aren't in place. Technical vulnerabilities could also lead to exploitation, causing loss of staked assets.
Liquidity constraints are another concern. Staking usually locks assets for a while, which could limit quick reactions to market changes. Startups have to be aware of these risks and build in strong governance safeguards.
Summary
Lido’s governance changes could be a significant evolution in cryptocurrency governance. They are aligning with regulatory expectations and creating a more engaged community. The future of cryptocurrency payments and governance is looking good, and Lido is paving the way.
