Lido Finance, Ethereum’s largest liquid staking platform, has gone all in. They suggested providing staked ether (stETH) holders with direct voting rights, enfranchising them alongside LDO tokenholders who were already well-entrenched. This move could significantly alter the platform's governance structure and further solidify Lido's influence within the Ethereum ecosystem. That proposal, known as LIP-28, is a live discussion. Look for a real on-chain vote in the next few weeks!

Right now, only owners of LDO, Lido Finance’s governance token, have a vote in how the protocol develops. The proposed amendment would attempt to open up the levers of governance power more broadly. It recognizes the indispensable function that the stETH holders serve for the platform’s overall operation. Over a quarter of all ETH staked on the network depends on Lido Finance’s infrastructure. This begs the question – how important is Lido to the Ethereum ecosystem?

Lido Finance’s proposal to V2 introduces a variable timelock mechanism based on stETH withdrawal activity. As users deposit their stETH into a dedicated escrow contract to await withdrawal, the timelock duration adds up. This particular mechanism was meant to be a bulwark against hasty, destabilizing governance choices.

The “first seal” is activated when deposits exceed a value of 1% of the total Lido Finance ETH staked, at which point the timelock is engaged. When deposits reach the "second seal" limit of 10% of Lido Finance’s ETH TVL, a "rage quit" will be activated. This move essentially prevents the DAO’s decision from going into action. This measure is to safeguard the platform against possible exploits or bad governance attacks.

Remember, liquidity doesn’t happen overnight. Withdrawals are frequently subject to a queue that may take days to clear. The ultimate purpose of the timelock is to give citizens and the public an extra layer of security.

Lido Finance is a critical piece of infrastructure facilitating capital flow and validator participation all over Ethereum. Being the largest liquid staking platform, Lido Finance has a substantial impact on ETH market structure. Today, competitors in the liquid staking space include Rocket Pool and Frax Ether.

The rally has not only made stakers richer, it’s given Ethereum-native applications such as Lido Finance a renewed spotlight. The high demand seen around the governance proposal news has created new and exciting bullish momentum across the entire market. Consequently, Lido Finance’s governance token—LDO—has surged 6.5% in the last 24 hours.

Lido Finance is a key piece of the DeFi ecosystem. StETH holders will receive direct voting power themselves! The Ethereum community will be watching closely as the fate of LIP-28 vote unfolds. Its findings would create a strong precedent for other DeFi platforms.