I’d like to share some ideas that came to my mind regarding how we can reform the DAO to make it more decentralized and community-driven. This is more of a collection of concepts that can be developed further rather than a concrete guide for action. Some ideas may be rejected, others improved and implemented over time. All figures are just examples from my side and can be adjusted.
The pause mechanism should be removed completely. It allows for strong exploitation of the system. This issue was raised at the very start of the DAO’s launch.
Remove long-term locks. It’s hard to trust a project with high price volatility, so a better option would be a system similar to Lido — a unified staking system with the ability to unlock funds within 7 days for everyone. This alone would increase staking attractiveness in the eyes of investors and the community. We shouldn’t fear that all rewards will flood the market — they already do. Instead of punishing this, we should create incentives not to do it (the carrot, not the stick).
Staking itself is currently separate from delegation. Therefore, we need a mechanism that connects staking and voting into a unified system, where voting affects whether or not you receive rewards. This would significantly increase community engagement in voting. That is, you either don’t receive rewards or receive less if you don’t participate in governance. A possible implementation might look like this: if a delegate doesn’t vote on proposals, then both the delegate and everyone who delegated to them lose staking rewards for a certain period. For example, staking rewards could be distributed in monthly “voting epochs”. A slashing mechanism would be introduced: if proposals were present in the previous epoch and the delegate didn’t vote, they would lose all staking rewards for the current epoch, and so would their delegators. After a month, the rewards would be restored. This would make voting more meaningful. Delegators would be incentivized to choose delegates who vote regularly.
There’s also a problem of centralization. The team likely wouldn’t be happy if the whole community suddenly delegated to just one person. To reduce centralization, I propose a maximum delegation cap of 20% of total DAO voting power per delegate. The absolute number would be dynamic, but this would help prevent a scenario where everyone blindly delegates to one person. It’s not a problem now, but once we implement DAO reforms, we’ll need to address it.
The total team stake should not exceed 25–30% of quorum (including Max and Oliver). Currently, it’s around 16.5M out of 24M — 67%. I propose that the team gradually reduces its stake from 9M to 3M (referring to the team’s own stake; community delegation to the team would also be capped at 20%, allowing them to retain some influence). The first step could be reducing it to 6M. Few people will want to join a DAO where the team’s influence is overwhelming, yet their opinion doesn’t necessarily define decisions. Everyone should operate on equal footing.
I would suggest increasing staking rewards, because currently, a large portion is absorbed by Lisk, the Onchain Foundation, and the Onchain team (i.e., Oliver and Max). Max recently sold 3.5M LSK, which isn’t a good sign, yet they continue to stake through the Onchain Foundation. As a result, these three entities probably take about 40–60% of rewards (I haven’t done exact tracking recently, but it’s a lot). This shouldn’t be the case. If we introduce a single staking system with indefinite duration and a simple 7-day unbonding period, it would reduce the reward imbalance and eliminate manipulation by the team or Onchain Foundation who can afford 2-year locks — something the community cannot. As a result, the DAO currently doesn’t reflect real decentralization because the community lacks motivation to participate.
Additionally, I would consider allocating 24M LSK for staking rewards rather than burning the entire 100M DAO fund. These 24M could be spread over 3 years as a new incentive layer on top of the remaining 2 years. To expand DAO capacity, I’d slightly raise the total staking reward to around 20% annually, but with slashing rules for not voting. If our goal is to involve 50–75M tokens in staking — and hence in the DAO — we need to adjust rewards so that at least 20% is actively staked. (Reminder: the pause mechanism must be removed so that each token equals one vote.) I understand that the remaining two years of the current staking program cannot be changed. However, we can launch a new staking mechanism, which accepts both fresh LSK and re-staked tokens from the old program with a decreasing multiplier as a transitional measure. Once the old staking program with different lock periods ends, we can move fully to the new model. Those currently locked will remain locked according to their original terms — that’s unavoidable.
And lastly — utility. I can’t ignore this: currently, holding LSK solely for DAO purposes makes no sense, as the token drops in value quickly. Staking rewards don’t offset the losses. We need to think about how to give the token real use in the ecosystem. As of now, it’s barely useful beyond speculation.
First of all, why do we need to reform the DAO in such a drastic way?
It’s still early, and the current system works well enough to support gradual evolution. Not every perceived inefficiency is a flaw — sometimes it’s just the nature of decentralized governance.
The pause mechanism is fine.
A pause mechanism is crucial in decentralized governance. We’re not dealing with traditional software — we’re managing community funds and governance rules. A pause provides a safeguard against rushed or potentially malicious proposals. Yes, it can be abused if misused, but the solution isn’t removing it — it’s making the conditions for using it more transparent and democratic.
Long-term locks are healthy for a DAO.
Long-term locks show commitment. They prevent speculative behavior and strengthen the DAO’s long-term stability. Projects like Lido might offer more liquidity, but they also face more sell pressure and volatility. If you want stable governance, you need committed stakeholders — and locking tokens proves that commitment. Removing long-term locks turns staking into yield farming, not governance.
Staking and delegation should remain separate.
Not everyone wants to vote. Forcing people to vote or punishing them for not doing so risks centralizing governance in the hands of power users or delegates with time/resources. Participation should be encouraged, not mandatory. People should be able to stake for rewards, and delegate only if they care about governance. Let people choose their level of involvement.
Slashing for not voting will backfire.
Slashing or denying staking rewards for not voting creates anxiety, especially for passive users. Also, some proposals are simply not relevant or don’t require broad attention. This mechanism could force unnecessary engagement and reduce confidence in staking, especially among casual users. It turns governance into a chore, not a choice.
Delegation caps could fragment the DAO.
Artificially capping delegates sounds fair, but in reality, it could weaken decision-making. Good delegates earn trust — capping them just because they’re too popular goes against the principle of merit-based influence. If someone gets 50% of the votes, maybe it’s because they’ve proven they deserve it. Let the community decide, not an arbitrary rule.
The team stake is not a problem.
Having a strong stake from the core team ensures alignment with the project’s success. The team built this — they should have a say. The 67% figure is temporary and transitional. Reducing the team’s influence prematurely could invite whales or external manipulation. Community governance is great — but let’s not cut out the people who’ve carried the project this far.
Current rewards structure isn’t broken.
Yes, rewards are not perfectly distributed, but the current staking system works. Max selling 3.5M LSK might raise questions — but individuals have the right to manage their funds. The DAO’s future should not hinge on individual transactions. Long-term holders still benefit from staking. Adding more rewards or layers risks inflation and further devaluation of the token.
Burning the DAO fund has a purpose.
The 100M DAO fund isn’t just a pot of gold to hand out as staking incentives. It was meant to bootstrap the DAO and fund meaningful proposals — not endlessly reward holders. Burning shows commitment to deflation and value preservation. Reallocating 24M for staking may sound good short-term, but what happens when it runs out? We need sustainable mechanisms, not temporary boosts.
Utility comes from real use cases, not tweaks to staking.
LSK utility won’t be fixed by changing staking rules or adding incentives. That’s just window dressing. Real utility comes from developers building on the platform, from real-world integrations, and from adoption. Until then, the token will remain speculative, regardless of how attractive staking looks. Let’s focus energy there — not just on tokenomics tweaks.
After participating in the Season 1 DAO Quest and exploring the staking system firsthand, I wanted to offer some thoughts:
It’s promising to see that the Foundation is exploring the distribution of its delegation across ecosystem groups and individuals, especially from the Ethereum and broader governance communities.
This is a strong first step toward decentralization and will likely help bring in new governance talent. That said, I’d still recommend that we revisit the quorum configuration.
Why?
Increasing the quorum threshold gradually as participation grows will prevent over-reliance on the Foundation’s weight.
It encourages broader engagement from LSK holders without diminishing the Foundation’s current supportive role.
Decentralization should be progressive, not reactive and adjusting quorum as part of that journey will help build trust and resilience.
On Participation Incentives — Reward, Don’t Penalize
I see the suggestion that we tie staking rewards to governance participation. While I agree that participation should be encouraged, I don’t support penalizing those who choose not to vote.
Here’s an alternative:
Introduce additional rewards for delegates who vote consistently
Keep staking rewards separate and unaffected for all stakers
This approach respects the autonomy of all participants while still rewarding active decision-makers. Governance is stronger when it’s driven by informed and voluntary participation, not obligation.
On Lock Periods — Current Setup Feels Fair
After testing the staking interface, I noticed the available lock durations are: 2 weeks, 1 month, 6 months, 1 year, and 2 years.
This seems like a healthy range of options already. Instead of reducing it to something like 7 days, which could attract short-term behavior, perhaps we could explore:
Offering custom durations with dynamic reward scaling
Introducing optional soft-exit mechanisms, where early withdrawal has time-based penalties but doesn’t force full lock expiration
That way, the system can remain committed-friendly while still offering flexibility to users.
Clarifying the Pause Mechanism
There’s been mention of a “pause mechanism,” and it could be useful I can get some clarity on what it is