Towards Multisig Administration in Lido for Solana

The ways in which multisig reduces trust surfaces and speeds up project execution

Rishi Sidhu
Aug 20 · 9 min read

Lido for Solana is governed by the Lido Decentralized Autonomous Organization (Lido DAO). Members of the DAO — holders of the LDO governance token — can vote on high-level proposals, such as whether to expand to a new chain. For day-to-day tasks, we have a much more narrowly scoped need for somebody to execute privileged operations: an administrator.

The administrator rights reside with a 4-out-of-7 multisig that consists of established validators and ecosystem partners. Last week, we successfully set up the multisig on Lido for Solana Testnet. In the coming days, the same will repeat for the mainnet launch, beyond which all new proposals by Lido DAO will be processed via this multisig structure.

This post explores why multisig is important in making Lido for Solana secure and efficient and the way forward for governance in Lido for Solana.

The concept of multisig

Multi-signature is a digital signature scheme that allows a group of users to sign a single transaction. The transaction could be a governance proposal, a snapshot vote, or even a simple fund transfer instruction. A common terminology to describe a multisig setup is m-of-n multisig. Given n parties with their own private keys, at least m of the private keys must sign a transaction to perform a transaction. For example, a multisig that has 7 members in the group and requires 4 signatures for a transaction to be fully signed — will be termed 4-of-7 multisig

The need for a multisig administration

Before we answer the question — why do we need multisig administration? — let us first understand how it supplements DAO governance.

DAO Governance

In a DAO governance model, decisions get executed automatically through smart contracts as a result of LDO governance token holders voting on these decisions. This results in a decentralized governance model and eliminates dependence on a centralized authority to execute decisions thereby removing the risk of a single point of failure.

On-chain DAO Governance

However, in the case of Lido for Solana, even though decisions are taken by the Lido DAO, they are executed by the multisig administration.

DAO takes decisions | Multisig executes them

To understand why offloading the decision-execution to multisig administration is a good approach let’s look at the different administration methods that are possible in such a scenario

  1. A single person could act as the administrator. This has a very low overhead, and the administrator can move quickly when there is a need to deploy a critical bug fix. However, it also places a high degree of trust in a single person.
  2. On the opposite side of the spectrum, a DAO program could act as the administrator. Administrative tasks could only be executed after a majority of LDO token holders approve. This is decentralized, but it makes it very difficult to act quickly when needed.

A good middle ground between these two extremes is multisig, a program that executes administrative tasks after m out of n members have approved. For m greater than one, no single party can unilaterally execute administrative tasks. At the same time, we only need to coordinate with m parties (instead of a majority of LDO holders) to get something done.

The benefits of multisig don’t end here. Using a multisig eliminates a lot of concerns that a typical user might have while investing. Let’s take a look at some of the other problem areas that the use of a multisig addresses.

1. Reducing points of trust

Can I trust the creators of the program to not change critical parameters of their own accord?

There is always the risk that an administrator (the authority that executes the DAO’s decisions) can start executing decisions arbitrarily. By including multiple parties in the multisig, we reduce the points of trust and make the decision execution more decentralized.

2. Execution Pace

Can Lido for Solana perform program upgrades quickly, in case of a critical bug?

A pitfall of on-chain governance is that in the case a critical bug-fix is required, achieving consensus on-chain could prove to be too slow and very costly as a result.

A completely decentralized model of governance slows down project execution, especially if a project is in its initial stages. There is always a tradeoff between the ease of execution and the degree of decentralization. However, that does not mean that one should do away with decentralization completely.

A governance model carried out by a multisig administration is the perfect compromise for a project like Lido for Solana. This lends it speed to execute decisions quickly in the earlier stages and also mitigates the risk of delayed fixing of critical bugs.

3. Decentralized program upgrades

Who decides which upgrades will happen in the future and can I trust them to remain benevolent?

Decision on Program Upgrades
The multisig decides on program upgrades. To understand why this is a reasonable solution, we need to take a look at the two possible extreme cases.

1) Single upgrade authority — In Solana the upgrade authority — the address that can sign upgrades — has a lot of power. A single upgrade authority could upgrade programs maliciously at will. For example, a malicious upgrade authority could upload a new version of the Lido program that withdraws all Lido funds into some address and runs away with the funds!

2) No upgrades allowed — On the other hand, if we don’t allow the program to be upgraded at all, and then if it turns out to contain a critical bug, we can’t fix it.

So, a multisig is a good middle ground, where no single entity can take control over the programs and their funds, but we can still enable upgrades.

Trusting Multisig to remain benevolent
The DAO can be trusted because the Lido DAO is large and decentralized, and consists of stakeholders who are aligned long-term. The proposals they vote positively on are by definition aligned with the interests of the stakeholders.

The multisig executes the decisions taken by the DAO. The multisig can be trusted because the multisig participants in turn are all reputable industry partners; their reputation is at stake if they suddenly go rogue!. Additionally, no single multisig member has anything to gain by going rogue.

4. Cross-Chain Governance Complications

Why can’t Lido DAO’s proposals be executed directly on-chain?

This is because Lido DAO uses Ethereum for governance and to be able to implement Lido DAO’s decisions on Solana blockchain cross-chain execution is required. Cross-chain governance, at this point, is not mature or fast enough to be a feasible solution.

Therefore, the role of multisig then becomes that of executing the decisions made by the Lido DAO. The governance authority, which is Lido DAO, sets the long-term goals and decides on major proposals. The administrator, multisig in this case, then upgrades the program accordingly and changes its parameters.

Governance — Lido DAO
Administration — Multisig.

5. Transparency

Is the source code public and has it been verified that the Lido program is built from that source code?

It is imperative for users, who invest their SOL in Lido, to be sure that the Lido program does not contain any backdoors or hidden features that might hurt their investments. One way to be sure of this is to know that the multisig owners have verified that the Lido and multisig programs were built from the source code that is publicly available

Furthermore, even the users can verify this fact themselves if they wish to do so.

6. Credibility

How can I trust the parties involved in this multisig?

Another aspect of transparency inherent to Lido for Solana is the fact that we have made public the names of all 7 organizations that are part of the multisig ceremony. By doing so, users know which parties control the program and can decide whether they trust these parties. We embolden the trust of our users by including only reputable participants and by making sure that this is public information.

Multisig Ceremony

Multisig ceremony is the process that the multisig uses to execute decisions. On a high level, this process works as a series of steps.

  1. Build a Solana transaction to propose
  2. Wrap the transaction in a multisig transaction (Instead of signing it with a wallet and executing, like we normally would)
  3. Sign and broadcast the wrapped transaction to the blockchain
  4. Notify the other N-1 signers to review the transaction
  5. The signers sign and submit their approval transactions to the blockchain
  6. When the multisig transaction has enough approvals, anybody (usually the last party to approve) can step in and execute the transaction

As explained earlier, multisig programs require multiple signatures to approve a transaction. This allows the signers to review an action on the blockchain before it is executed — making for decentralized governance. Chorus One is using the Serum Multisig program to introduce decentralization in Lido for Solana. The Multisig that we have set up has 7 participants and requires at least 4 of them to sign for a transaction to be approved.

The 7 parties that comprise the multisig are

  1. Staking Facilities
  2. Figment
  3. Chorus One
  4. ChainLayer
  5. P2P
  6. Saber
  7. Mercurial

The Way forward — On-Chain Governance

For now, the power to upgrade the Lido program (upon recommendation of DAO) rests with the multisig, but in the long-term Lido for Solana’s governance would be a completely on-chain decision-making process where the LDO token holders vote with their share on a proposal and collectively accept or reject it.

Decentralized policy-making in the crypto world is a complex problem. Top-down governance, as in the case of centralized organizations, is easy to implement but may not represent the best interests and needs of the stakeholders. On the other hand, a horizontal mode of decentralized governance promises a fairer representation of the voice of stakeholders but is much harder to implement.

There are multiple governance frameworks out there that exhibit varying degrees of decentralization and ease of execution. There is always a tradeoff between how easily one can implement a governance model v/s how decentralized it is. Early on, in a project’s life cycle a less decentralized but easily executable governance model makes more sense.

The long-term goal for Lido for Solana is to have a decentralized governance system with on-chain execution of decisions. In the meantime, executing decisions through a multisig helps us move quickly in the early stages, without having to trust a single party.

In terms of the project roadmap, going ahead we are looking for another audit of our code. That coupled with the results of a bug bounty will put us on the path to the mainnet launch.

Lido for Solana is poised to become the largest liquid staking solution in the market and through DAO governance and multisig administration, we make it secure and efficient. We are committed to reduce the trust surfaces required in Lido for Solana and to keep securely developing this project at a swift pace.

Disclaimer

Our content is intended to be used and must be used for educational purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. The information is general in nature and has not taken into account your personal financial position or objectives. Before making any commitment of financial nature you should seek advice from a qualified and registered financial or investment adviser. Chorus One does not recommend that any cryptocurrency should be bought, sold, or held by you. Any reference to past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit. Always remember to do your own research.

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Chorus One is offering staking services and building protocols and tools to advance the Proof-of-Stake ecosystem.

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