13 February 2026
Lido Finance, the largest liquid staking platform for Ethereum in terms of locked value, has unveiled a proposal that would grant staked ether (stETH) holders direct voting power, alongside existing DAO token holders. This is a bold step towards greater engagement, allowing stETH holders, who ETH staking via Lido and receiving a liquid token in return, can now also participate in a veto mechanism around important protocol decisions. Until now, only holders of LDO, Lido's governance token, were allowed to have a say in the evolution of the protocol.
The new structure allows stETH holders to veto certain proposals from LDO token holders, although not outright, as the veto does not provide the ability to unilaterally push through proposals. This proposal is an important move towards accountability and decentralization, especially as Lido continues to play a dominant role in the Ethereum staking landscape, with over 25% of all ETH staked through their infrastructure.
The Dual Governance system introduces a special timelock contract between the Lido DAO’s decisions and their execution. This gives stETH holders the ability to intervene if they strongly oppose a proposal. The “dynamic” timelock is crucial because it allows on-chain governance to work behind the scenes.
In the current system, decisions are not implemented immediately; there is a period of time during which users can react to changes they disagree with. However, staking on Ethereum is different. Users cannot simply withdraw their ETH; it takes time, liquidity is complex, and there is often a queue that can last days.
The new proposal aims to address these issues. The dynamic timelock assumes that when a number of users who are unhappy with a proposed change deposit their stETH or wrapped stETH into a designated escrow contract for withdrawal, the length of the timelock will start to increase. This is called “crossing the first seal”, set at 1% of the total Lido ETH staked.
If dissatisfaction continues and deposits exceed the “second seal” threshold of 10% of Lido’s ETH TVL (total locked value), a “rage quit” will be triggered: the execution of the DAO’s decision will be completely frozen until all protesting stakers have the chance to withdraw their ETH. This creates a sort of safety valve, allowing stakers to voice their objection and withdraw, while giving the DAO time to respond or cancel the contested action.
These plans come at a particularly interesting time; Ethereum has surged more than 30% in the past week, fueled by its Pectra upgrade, which introduced reforms to the execution layer to improve scalability and efficiency. The rally has sparked renewed interest in Ethereum-based applications like Lido, which is crucial to on-chain capital flows and validator participation, directly impacting ETH’s market structure.
The LIP-28 proposal is still in the discussion phase, with a formal on-chain vote expected in the coming weeks. If approved, the change could significantly alter how governance is allocated within Ethereum’s staking ecosystem, setting a precedent for other DeFi protocols that involve users – and not just token holders – in decision-making. Lido’s competitors include Rocket Pool and Frax Ether. Recently, LDO prices are up 6,5% in the past 24 hours, while the broader CoinDesk 20 Index is up 2,5%.
What does the Lido Improvement Proposal (LIP) 28 entail?
LIP-28 introduces a dual governance structure that gives staked ether (stETH) holders voting power alongside LDO token holders, with the ability to veto provisioning.
Why is this change important for stETH holders?
It gives stETH holders the opportunity to influence key decisions and increases accountability and decentralization within the Lido ecosystem.
What could this mean for the future of Ethereum?
If the proposal is approved, it could set a precedent for other DeFi projects to actively involve users in decision-making, which could reshape the way governance functions in the blockchain space.
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