Many people are still unfamiliar with the governance mechanisms of decentralized protocols. Today, let's take a deep dive into this topic.

How do decentralized protocols make decisions? Simply put, it’s through community voting. Taking lending protocols like Lista as an example, $LISTA token holders can stake their tokens to gain governance voting rights and directly participate in major protocol decisions — this is true decentralization.

**What rights do staked tokens confer?**

If you hold LISTA and choose to stake, you can participate in voting on the following aspects:

First is protocol parameter adjustments. Are borrowing interest rates too high? Is the collateralization ratio reasonable? Will liquidation penalties be too harsh? These are decided by community votes, not by a centralized team making arbitrary decisions.

Next is the review of new collateral types. Want to add a new asset class as collateral? It must be approved by community voting. This ensures the security and reliability of the protocol.

There are also protocol upgrades, ecosystem fund allocations, incentive plan designs, and more—all require community approval. Power is truly decentralized into the hands of token holders.

**What is the voting process like?**

Any LISTA holder can submit a governance proposal, of course, with a proposal fee (this helps prevent spam proposals). After submission, the community has a 7-day discussion period, during which everyone can review, discuss, and modify the proposal.

Once the discussion period ends, a 7-day voting phase begins. Holders cast their votes for or against based on their judgment. When voting concludes, if the proposal passes, the protocol automatically executes the related actions. The entire process is transparent, open, and tamper-proof.

**How is voting weight calculated?**

Here’s the interesting part — your voting weight isn’t simply equal to the amount of LISTA you’ve staked; it’s also multiplied by a "staking time coefficient."

Voting weight = amount of $LISTA staked × staking time coefficient

The longer you stake, the higher the coefficient, and the greater your voting power. This mechanism is cleverly designed — it encourages long-term participation rather than short-term speculation. Those genuinely concerned with the protocol’s long-term development can gain more influence.

In other words, if you stake 1000 LISTA for 3 months, and someone else stakes 1000 LISTA but only for 1 month, your voting weight will be higher. This helps ensure the quality of governance decisions.

**Why is this design important?**

This mechanism not only incentivizes long-term holders but also helps maintain the stability and democracy of the protocol. It’s not a small group of whales making all the decisions, but the entire community guiding the protocol’s development through voting. Every participant has the opportunity to vote on proposals they care about, embodying the spirit of Web3.

As the DeFi ecosystem becomes increasingly complex, transparent governance mechanisms like this will become even more important.