How I envision such an initiative would work is that the people can pass federal laws. In order for a federal law to get passed via referendum, the proposal would have to
1) get a 50%+1 majority of votes nationwide
2) get a 50%+1 majority within a number of states equal to 50%+1 in the Union (currently 26 states).
So with this "double majority" system, proposed laws can get passed by the people directly and bypass Congress.