Lisk DAO Cessation: Burn 100M LSK & Allow Instant LSK Unstaking

Proposals General
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Abstract

This proposal aims to reduce the number of ongoing activities of the Lisk project for better focus, and to align LSK token incentives between the Lisk project and the Lisk community.

To achieve this, it proposes to discontinue the Lisk DAO and its associated tools and services. This would reduce the number of ongoing efforts and allow the project to concentrate on what brings clear value to Lisk and the LSK token. It also proposes a community-aligned incentive for Lisk Ltd, putting the focus back on the LSK token.

For LSK token holders, the main advantages are the burning of 100M LSK, which greatly reduces the total supply, and the end of expenses being paid in LSK tokens, which reduces LSK selling pressure.

Motivation

For the past two-and-a-half years, since announcing the migration of the Lisk L1 blockchain to an L2 and the migration of the LSK token, the Lisk team has worked on bootstrapping an ecosystem around Lisk Chain and progressively decentralizing the project by launching the Lisk DAO and by actively involving more external stakeholders around Lisk. The goal has been to create a fly-wheel effect where more activity on the Lisk Chain creates value flowing back to the LSK token, which in turn allows for further incentivization of ecosystem activities. However, similar to most other L2s and L2 tokens, Lisk Chain has been struggling with generating enough revenue that can flow back to the LSK token, and ecosystem incentives paid in LSK tokens have created significant sell pressure leading to a significant decline in token price. On top of this, the original vision of L2s in the Ethereum ecosystem is now put into question.

This means that the current trajectory - marked by large LSK spendings, ongoing decline of LSK token price, operational fragmentation across many external stakeholders, and execution of non-core activities - needs to be corrected to significantly improve the Lisk project’s long-term standing. As a result, we need to adjust our strategy in order to support the recent price development of the LSK token, by focusing only on activities that actually contribute value to the LSK token and provide real utility for token holders.

In alignment with this new focus, we recently announced the Lisk Chain will shut down on October 31, 2026 and the release of a brand new product, Lisk, that is currently in early access.

To support this new direction, this proposal addresses the following issues:

  • Stop the Lisk DAO. Discontinuing the Lisk DAO is the next logical step after the announced shutdown of the Lisk Chain. We will burn the majority of the DAO treasury to reduce the overall LSK supply, and transfer the remainder to Lisk Ltd. to support the development of the new Lisk. This aligns our resources with ensuring we minimize non-essential efforts and focus entirely on creating value for Lisk and the LSK token.
  • Reduce LSK total supply and circulating supply growth. With the migration to an L2 the Lisk ecosystem was supposed to be progressively decentralized and incentivized with the significant LSK holdings of the Lisk DAO. Instead, with this proposal, the Lisk project and growth activities will again be fully financed by the Onchain Foundation. This allows for the majority of the Lisk DAO Treasury being burnt which greatly reduces the total supply of LSK, limits future increases to the circulating supply, and decreases on-going significant sell pressure.
  • More flexible LSK staking. The LSK staking process becomes more flexible for LSK holders by allowing them to unstake LSK at any time without penalty. Note that LSK staking rewards are only guaranteed until the Lisk Chain shutdown.

Specification

The following changes are proposed.

Staking updates

  • Enable emergency unlock without penalty: Allow anyone to immediately unstake by removing the penalty for emergency unlock. Note that there is still a waiting time of 3 days before funds can be unlocked.

Lisk DAO discontinuation

  • Transfer ownership of Arrakis vaults from Lisk DAO to Lisk Ltd: The Lisk DAO has deployed liquidity via Arrakis to an LSK-ETH pool on Uniswap v4 on Ethereum and to an LSK-ETH pool on Aerodrome on Base. The two respective Arrakis vaults are currently managed by the Lisk DAO Treasury Council and should be transferred to Lisk Ltd to manage the liquidity going forward.
  • Burn vested DAO Treasury for 2027-2033: Burn all tokens vested for the Lisk DAO Treasury from 2027-2033 (15,000,000 per year for 2027-2032 and 10,000,000 LSK for 2033 for a total of 100,000,000 LSK).
  • Redistribute Lisk DAO treasury up to 2026: Transfer all LSK vested over 2026 or currently liquid in the Lisk DAO Treasury to Lisk Ltd (approximately 47M LSK).
  • Wind down the Lisk DAO infrastructure:

Rationale

The reasoning for above changes is the following:

Staking updates

  • Enable emergency unlock without penalty: This change will allow any LSK holder, including those who committed to staking long-term, to flexibly unstake their tokens and bridge them back to Ethereum for the upcoming Lisk Chain shutdown.

Lisk DAO discontinuation

  • Transfer ownership of Arrakis vaults from Lisk DAO to Lisk Ltd: Providing onchain liquidity for LSK on DEXs will continue to be important such that trading LSK onchain is possible with low price impact and hence is similarly attractive to trading LSK on CEXs. Due to the discontinuation of the Lisk DAO, Lisk Ltd will oversee the deployment of the onchain liquidity going forward.
  • Burn vested DAO Treasury for 2027-2033: Burning 100M LSK holdings in the Lisk DAO treasury will significantly reduce the total supply of LSK tokens from 400M to 300M. This reduces circulating supply going forward and gives token holders more predictability. Future costs of Lisk are no longer paid by selling LSK from the Lisk DAO treasury (thereby increasing the circulating supply) but instead by the Onchain Foundation.
  • Redistribute Lisk DAO treasury up to 2026: Approximately 47M LSK (exact amount fixed at execution time) will be transferred from the Lisk DAO treasury to Lisk Ltd. This aligns Lisk Ltd’s incentives with the Lisk Community and puts the focus back on the LSK token.
  • Wind down the Lisk DAO infrastructure: With the decision to shut the Lisk Chain down, the DAO will naturally cease operations. Pausing it immediately saves the significant resources needed for managing it and running the related infrastructure.

Action plan

The implementation of this proposal requires the following steps:

Staking updates

  • Enable emergency unlock without penalty: The Lisk Security Council updates the staking contract to remove the penalty for the emergency unlock by calling setEmergencyExitEnabled(true). Note that there is still a waiting time of 3 days before funds can be unlocked. This step will be executed right after the proposal passes.

Lisk DAO treasury updates

  • Transfer ownership of Arrakis vaults from Lisk DAO to Lisk Ltd: The Treasury Council transfers the ownership of the two DAO-owned Arrakis vaults to Lisk Ltd.

Lisk DAO discontinuation

  • Burn vested DAO Treasury for 2027-2033: The Lisk Security Council will handle necessary contract upgrades and burn 100,000,000 LSK vested for the Lisk DAO Treasury from 2027-2033.
  • Redistribute Lisk DAO treasury up to 2026
    • After approval, shortly before executing the proposal, we release the LSK ready to be released from the Guaranteed DAO 2025-2026 vesting wallet.
    • Then, the remaining LSK tokens in the Lisk DAO treasury will be transferred to Lisk Ltd.
    • Afterwards, the Onchain Foundation will perform the necessary contract upgrades to sweep the remaining balance of the Guaranteed DAO 2025-2026 vesting wallet.
  • Wind down the Lisk DAO infrastructure: Lisk Ltd will shut down the Lisk Governance Forum.
3 Likes
The Lisk DAO Fund Has Closed
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The proposal is now live on Degov and ready to be voted on!

2 Likes
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Don’t know if anyone still reads this forum but I think it’s just sad how this project have been managed thus far.

3 pivots in 2yrs
No real revenue
More than 10yrs moving round in circles and not listening to community opinion.

So we eventually came round to burning 100M tokens after months of kicking against it.

@maxkordek you should have done this way earlier, as no real results will come from burning it now.

1 Like
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Hello everyone :slightly_smiling_face:

I voted against this proposal, and I want to publicly explain why.

First of all, I am genuinely very sorry to see how this chapter of Lisk’s history is coming to an end. I have been part of this project for almost ten years, believed in it throughout all these years, and despite everything that has happened, I still want to believe that Lisk has a future. I sincerely hope the team finds a new model that works, and I am looking forward to seeing what comes next.

But that is exactly why I do not think it would be right to simply vote “for” to everything that is being proposed now.

The proposal itself came completely out of the blue. As I understand the governance process, the community is supposed to be given 14 days for discussion. Instead, we received a massive package of decisions that was put to a vote almost immediately.

Special thanks to @Mona for yet another “exemplary” governance process.

In my view, this is especially problematic because too many completely different issues have been bundled into a single proposal. I support most of the proposed changes. But if I agree with nine points and strongly disagree with the tenth, I should not be forced to choose between “accept everything” and “reject everything.”

The main reason for my against vote is the 47M LSK.

These funds do not belong to Lisk Ltd.

They were minted for the DAO. Around 14M LSK of this amount had not actually been minted at the time of Lisk’s transition to L2, but that does not automatically make them the property of Lisk Ltd. Their original purpose did not change. These were DAO funds.

Therefore, if we are making the decision to wind down this structure and burn the remaining 100M LSK in DAO funds, then in my view all 147M LSK should be burned, not just 100M while the remaining 47M is transferred to Lisk Ltd.

For me, this is a fundamental enough issue to vote against the entire proposal, even though I support most of its other points.

There is one more thing that disappoints me even more than the outcome of the vote itself.

It is how thoughtlessly a significant part of the community votes on decisions of this magnitude with almost no discussion. After all these years, this perhaps illustrates better than anything else how poor the state of our governance community really was.

Yes, I fully understand that even with a proper discussion, the proposal would most likely still have reached quorum and received enough votes to pass.

But that brings us to another problem that I have written about repeatedly for a long time. The team gradually created a structure in which it gained effective control over DAO governance. I warned that this concentration of voting power would eventually make both the DAO itself and the voting process largely a formality.

Today, in many ways, we are seeing the result of exactly that model.

Despite all of this, I do not want to end this post on a negative note.

Ten years is a very long time. There have been many good things, many mistakes, enormous expectations and, unfortunately, significant losses. I do not blame anyone for my own losses. I made my own decisions, and I believed in Lisk until the very end.

And I still want to see what comes next.

I sincerely wish Lisk and the team success in this new direction. If the new model really works, perhaps it will at least partially compensate for what has been lost over the past few years.

But looking forward to the future does not mean agreeing with every decision being made today.

That is why my vote is against.

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I am voting AGAINST this proposal because it combines several very different decisions into one vote.

I support the 100M LSK burn and penalty-free unstaking. However, I do not support transferring around 47M LSK from the DAO treasury to Lisk Ltd without a separate vote, clear rules, and proper accountability.

These funds were meant for the DAO and for the community. Part of them also comes from unclaimed migration tokens, which were supposed to benefit the whole Lisk community.

If the DAO is being shut down and these funds are no longer going to be used by the DAO, I believe burning them would be a much fairer option than transferring them to Lisk Ltd. At the very least, the community should be able to vote separately on what happens to these 47M LSK.

I also think the decision to shut down the Lisk chain should have been put to a DAO vote, especially because the DAO was presented as a way for the community to take part in important strategic decisions.

For these reasons, I cannot support this proposal in its current form.

Since we won’t have a place to discuss things anymore soon, I’d like to thank the whole community for all these years. It’s been quite a ride, lol.