Metis, the first Ethereum Layer 2 to decentralize its sequencer, has finalized a governance proposal aimed at accelerating the growth of Liquid Staking Tokens (LST) and LST-focused products on its platform. This initiative leverages the $4.6 million Metis Ecosystem Development Fund to push the boundaries of the Ethereum Layer 2 ecosystem.
The governance proposal, approved through Community Ecosystem Governance, aims to further decentralize the network. This decentralization fosters community-driven growth while ensuring robust governance and economic security.
Liquid Staking Tokens (LST) offer inherent liquidity, allowing users to stake their assets and receive a receipt token. This receipt token can be used on other protocols, enabling users to maintain capital flexibility while earning rewards on their staked assets. The Metis DeFi landscape allows users to find additional yield while their tokens accrue value.
The approved LST Governance Proposal establishes a process for pairing node operators with LST protocols. A limited number of LST applicants will be paired with a decentralized sequencer node, enabling liquid staking in pools of 20,000 to 100,000 METIS tokens per node. Onboarding will occur in progressive stages.
Phase 1, the Alpha launch of the Decentralized Sequencer, was completed in March, opening four sequencer nodes to ensure smooth transitions and network stability for Metis LST protocols. Phase 2, completed in April, introduced multiple transactions within a block to enhance Metis' network throughput, a private transaction pool for sequencer nodes to facilitate a fixed confirmation time of two seconds, and sequencer mining to align incentives across network participants. Additionally, Artemis Finance and Enki Protocol became the first two LST protocols for the Alpha Phase.
Phase 3, the Main launch, will be completed this month. During this phase, the Metis Foundation will facilitate the opening of additional sequencer nodes to be paired with LST protocols. A community governance process will determine which proposals receive the most METIS votes and quorum, giving them the opportunity to be paired with a sequencer node.
In Stage 1 of this process, potential LST protocols will submit their proposals on a Metis Governance Forum for community voting. In Stage 2, the sequencer node provider will choose a qualified LST protocol that passed the voting and announce their decision on the Metis Governance Forum.
The next phase will consider subsequent LST protocol applications if the sequencer nodes onboarding community opts to open external access to newly added nodes. The steps in Stage 2 will be repeated during onboarding.
The LST protocol will be proposed using the Metis Governance Forum, and voting will take place on Snapshot using the LST Protocol Proposal suffix. Only the top vote-getting LST protocols will be eligible for pairing with a sequencer node, requiring a quorum of 20,000 METIS tokens and participation from 500 or more wallet addresses. An approval rate of 80 percent or more is required for passage.
