Lido Finance's Bold Move: Dual Governance Model Explained

LidoDAO, the decentralized autonomous organization behind the Lido protocol, is considering a significant change in its governance model.

The proposed model is a dual governance system, which, if passed, would give Lido users, specifically those staking Ethereum and holding stETH, the power to veto governance proposals approved by LDO holders.

The Current Governance System

The current governance system of Lido is based on LDO, meaning only LDO holders can vote on proposals.

This system naturally gives LDO holders a degree of power over the protocol that stETH holders don’t have.

This imbalance can have consequences, especially if LDO holders decide to change something that could negatively impact liquid stakers.

stETH Enters the Stage

Staked Ether (stETH) is a token that represents staked Ether on the Ethereum 2.0 blockchain. It's a product of Lido, a liquid staking solution that allows users to stake any amount of ETH and still maintain its liquidity.

For every ETH staked on Lido, users receive an equivalent amount of stETH. This token can be used in the same way as regular ETH, especially within the DeFi ecosystem.

The mechanics of stETH are based on oracles and the rebase function.

The stETH token balances are updated daily based on an oracle report on changes in the total staked ETH.

Once a user stakes their ETH with Lido, they begin to receive daily rewards starting from the first day of staking. This is possible because Lido applies a socialized staking mechanism where the rebases affect all the stakers regardless of whether their ETH has been deposited into the queue.

The Concept of Dual Governance

On June 22, a core contributor to LidoDAO, a pseudonymous developer named skozin.eth, introduced the concept of dual governance.

Marin Tvrdić, a business development contributor at Lido DAO, revealed in an interview with Decrypt that community members want to have a say in the network's governance.

This proposal aims to grant stETH holders veto power over the DAO's governance decisions. The proposal is still in the discussion phase and has yet to move to a vote.

The dual governance model could be a game-changer for LidoDAO. It would give stETH holders, who are essentially the users of the protocol, a say in the governance decisions.

This could lead to more balanced a decisions, as tenths of hundreds of stETH holders aren’t actively into LidoDAO governance.

Some users claim that this is potentially enhancing the overall health and stability of the protocol. However, some early-age governors may feel that’s an unfair move.

LDO Price Takes a Tumble

The Lido DAO (LDO) token price has been on a downward trajectory, shedding 6% of its value, which brought it down to $1.90.

This price drop effectively erased the gains made during the July 13 rally, which was fueled by Ripple's win against the US Securities and Exchange Commission (SEC).

However, there isn’t a confirmed relation between the price shift and the recent governance change proposal.

On the other hand, the Ripple effect had a significant impact on the altcoin market, including LDO.

The positive news from Ripple's camp led to an influx of buying pressure among LDO holders, which sent the Lido price up by almost 35% to an intra-day high of $2.52 on July 14.

However, the gains have been gradually eroding since then due to profit-taking activities.

LDO Price Forecast

As of now, the LDO price is sitting on the $1.87 support level. The overall outlook for LDO is bearish, with momentum indicators pointing south.

If the selling pressure increases, the LDO price could flip the $1.87 support into resistance, leading to a prolonged downtrend that could see the governance token revisit the mid-June lows around $1.64. This would represent a 15% slump from the current levels.

On the flip side, if the bulls regain control, they could pivot the $1.87 support, sending the LDO price north.

A breach of the 50-day Exponential Moving Average (EMA) at $1.97 could clear the path higher for the token to confront the 100-day EMA at $2.02.

A decisive daily candlestick close above this hurdle will solidify the uptrend. However, conservative traders should remain cautious until Lido DAO breaks above the 200-day EMA at $2.23.

In a highly bullish scenario, the Lido DAO price could reach the range high at $2.63, which would constitute a 40% climb from the current level.

So, there you have it. The Lido DAO price has been on a rollercoaster ride, and it seems the ride isn't over yet.

The proposed dual governance model could bring about significant changes in the Lido Finance ecosystem, and it will be interesting to see how this impacts the LDO price in the future.

The Road Ahead

In the ever-evolving world of DeFi, governance models like Lido's are becoming increasingly important. They empower token holders and ensure that the ecosystem evolves in a way that benefits all stakeholders.

However, the recent LDO price drop and the proposed changes to the governance model highlight the volatility and unpredictability of the crypto market.

Navigating this landscape can be challenging, especially for newcomers. That's why it's crucial to have a reliable guide to help you make informed decisions.

Whether you're interested in Lido's dual governance model, the dynamics of decentralized organizations, or any other aspect of the crypto world, having the right information at your fingertips is key.

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