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LayerZero Proposes $110 Million Stargate Buyout: Here’s What You Need to Know
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2025-08-12 | 15m
The LayerZero Foundation’s proposed $110 million acquisition of cross-chain bridge protocol Stargate Finance represents more than a corporate transaction—it signals a potential turning point for decentralized governance, tokenomics, and the strategic future of the LayerZero ecosystem. Announced on August 10, 2025, the all-token deal would see Stargate’s native STG tokens retired and exchanged for LayerZero’s ZRO tokens at a fixed ratio of 1 STG to 0.08634 ZRO. While the market reacted with double-digit price surges for both tokens, the proposal ignited fierce debate within Stargate’s community over valuation fairness, the dissolution of decentralized governance, and the implications for ZRO’s long-term value proposition. As the seven-day discussion period concludes and a decisive DAO vote approaches, ZRO holders stand at the precipice of transformative change, with potential gains in liquidity and buyback-driven scarcity balanced against centralization risks and unanswered questions about revenue integration.
The Mechanics: Token Swap, Valuation, and Immediate Market Response
The acquisition’s structure centers on a fixed conversion ratio valuing Stargate at $110 million based on ZRO’s price of $1.94 at proposal time. This translates to approximately $0.1675 per STG, a modest 2.3% premium over STG’s pre-announcement price of $0.1637. Critically, the deal would dissolve Stargate’s decentralized autonomous organization (DAO), bringing the protocol—which has facilitated over $70 billion in cross-chain transactions since its 2022 launch—under LayerZero Foundation’s direct operational control. Post-acquisition, all surplus revenue generated by Stargate would fund market buybacks of ZRO tokens, creating a deflationary mechanism intended to bolster ZRO’s value.
The market’s initial reaction was decisively bullish. ZRO surged 18-23% to $2.44, while STG jumped 12-17% to approximately $0.19, collectively pushing the deal’s implied value to $127 million. This upward momentum reflects trader optimism regarding synergistic potential, including streamlined development and deeper integration of Stargate’s liquidity infrastructure into LayerZero’s omnichain stack. CEO Bryan Pellegrino framed the merger as essential for accelerating both protocols’ roadmaps: "I want to move faster, ship faster... and create a single stack that anybody integrating within the LayerZero ecosystem can adopt". Despite this enthusiasm, both tokens remain far below historical peaks—ZRO is down 67% from its December 2024 high of $7.47, while STG has plummeted over 95% from its 2022 all-time high of $4.14, underscoring the pressure on both projects to reignite growth.
Community Backlash
Beneath the positive price action, significant discontent simmers among STG holders. Central to the controversy is the perceived undervaluation of Stargate relative to its revenue generation. The protocol generated $939,000 in fee revenue distributed to STG stakers over the past quarter alone, a recurring income stream that would vanish under the merger. Critics argue the swap ratio fails to capture this fundamental value, with some community members demanding a 1:1 exchange or substantial premium. As one user bluntly stated: "The offers are not attractive at all. They do not offer any advantages to STG holders, and STG’s revenue sharing system is not available on ZRO".
The elimination of Stargate’s staking program represents a tangible financial loss for long-term holders. Currently, participants locking STG receive direct fee shares alongside governance rights via veSTG (vote-escrowed STG). The merger replaces this yield with indirect exposure to ZRO buybacks—a shift that favors LayerZero’s tokenomics but abandons STG’s reward model. This is particularly contentious for veSTG holders who committed tokens long-term to support protocol security and governance. Some have proposed compensatory mechanisms, such as swap-rate premiums for locked tokens or partial retention of fee distributions. The discontent extends beyond economics to philosophical concerns over centralization. Dissolving Stargate’s DAO consolidates decision-making under the LayerZero Foundation, effectively ending community-led governance for one of DeFi’s most utilized bridges. While Pellegrino contends this will enhance efficiency, it directly contradicts the decentralized ethos underpinning DeFi, raising questions about whether "efficiency" justifies sacrificing stakeholder input.
Governance Hurdles and Voting Mechanics
Approval hinges on a high-stakes Snapshot vote requiring a 70% majority from veSTG holders and a quorum of at least 1.2 million veSTG tokens. This threshold introduces significant uncertainty. LayerZero has attempted to mitigate conflict-of-interest concerns by confirming that insiders holding STG will abstain from voting. However, the 70% bar leaves room for a determined minority to block the deal if opposition consolidates. Historically, DAO proposals of this magnitude face intense scrutiny—especially when they dismantle the DAO itself.
The compressed timeline further complicates consensus-building. The seven-day discussion period, ending imminently, precedes just three days of formal voting. Several community members advocate extending the deliberation window to negotiate better terms or even solicit competing bids. Others question the foundational fairness of a vote that terminates the governance entity conducting it—a structural paradox highlighting the unresolved tensions in decentralized governance. Should the vote fail, Stargate faces an uncertain path: continuing as an independent entity with strained resources or potentially becoming an acquisition target for rival omnichain projects like Wormhole. For LayerZero, rejection would represent a strategic setback in its ambition to dominate cross-chain interoperability through vertical integration.
Strategic Implications for LayerZero and ZRO Value Drivers
Beyond immediate token metrics, the acquisition aims to fundamentally reshape LayerZero’s competitive positioning. Absorbing Stargate—which already accounts for a major share of LayerZero’s message volume—creates a "single stack" solution for developers, potentially accelerating adoption across Ethereum Virtual Machine (EVM) and non-EVM chains 58. Critically, it transforms Stargate from a partner into a wholly owned infrastructure asset, enabling tighter security integration and roadmap alignment as regulatory scrutiny of bridges intensifies.
For ZRO holders, the primary value accretion mechanism lies in Stargate’s revenue-directed buybacks. This mirrors tokenomic strategies successfully deployed by projects like Chainlink, where systematic supply reduction combats selling pressure. However, ZRO currently generates no independent protocol revenue—meaning the buybacks depend entirely on Stargate’s performance. This creates a direct, albeit indirect, value funnel for ZRO holders but also concentrates risk. Should bridge activity decline due to competition, regulatory actions, or technological disruption (e.g., zero-knowledge proof-based alternatives), buyback capacity would diminish. The timing coincides with potential macro tailwinds, including the U.S. GENIUS Act’s expected expansion of the stablecoin market—a key driver of cross-chain transfer volu. Successfully capturing this growth could amplify Stargate’s fee generation, thereby accelerating ZRO buybacks.
DeFi Consolidation and Governance Centralization
LayerZero’s move exemplifies a maturing DeFi sector prioritizing efficiency over ideological purity. The proposal explicitly frames maintaining separate tokens and governance structures (Stargate’s sub-DAO) as redundant and counterproductive—a stance with implications beyond this deal. As one observer noted: "This proves: multi-token models; sub-daos and all of that bulls**t has always been inherently bearish for projects". If successful, the acquisition could inspire similar consolidation among protocols wrestling with fragmented governance or overlapping tokens.
Nevertheless, dissolving a DAO to centralize control invites regulatory attention. Agencies like the SEC have consistently argued that sufficient centralization renders tokens unregistered securities. By explicitly absorbing Stargate’s operations and revenue streams, LayerZero risks strengthening that narrative not just for STG/ZRO, but for the broader "DeFi" governance model. The merger thus becomes a test case: Can foundational DeFi infrastructure scale without abandoning decentralization? For ZRO holders, the trade-off is between the potential upside of streamlined operations (faster innovation, clearer tokenomics) and the systemic risks of creeping centralization (regulatory targeting, reduced community input).
Four Potential Futures for ZRO Holders
Scenario 1: Approval & Successful Integration (Bull Case)
The DAO approves the merger, triggering efficient technical integration. Stargate’s revenue, buoyed by stablecoin expansion under the GENIUS Act, funds aggressive ZRO buybacks. Supply contraction, coupled with unified developer adoption, propels ZRO toward its previous highs ($7+). LayerZero emerges as the dominant omnichain player.
Scenario 2: Approval & Underperformance (Bear Case)
Despite approval, operational friction delays integration. Stargate faces rising competition from ZK-based bridges, reducing fee revenue. Buybacks fall short of expectations, leaving ZRO without its yield catalyst. Centralization concerns trigger regulatory action, depressing valuations long-term.
Scenario 3: Rejection & Stargate Independence
The DAO vote fails. STG rallies short-term but struggles without LayerZero’s resources. ZRO dips on the setback, but LayerZero pivots to building or buying alternative bridging capacity. Long-term ZRO value depends on organic ecosystem growth.
Scenario 4: Revised Offer
Community pressure forces LayerZero to improve terms—e.g., higher swap ratio, temporary STG fee-sharing, or veSTG bonuses. This calms unrest and passes the vote, but dilutes ZRO’s per-token buyback potential.
Conclusion
LayerZero’s bold gambit transcends a mere corporate acquisition. It challenges prevailing DeFi orthodoxy by asserting that efficiency, security, and scalability require concentrated control—even at the cost of decentralized governance. For ZRO holders, the merger promises enhanced liquidity, a deflationary buyback engine, and exposure to a more cohesive omnichain ecosystem. However, it also ties ZRO’s fate inextricably to Stargate’s commercial performance while inviting regulatory scrutiny. The impending DAO vote is not merely a shareholder referendum; it is a referendum on whether DeFi’s next evolution prioritizes pragmatism over principle. As voting commences, ZRO holders must weigh short-term token appreciation against the long-term implications of a more centralized, and perhaps more contentious future.
References:
BeInCrypto. (2025, August 11).
LayerZero Proposes $110 Million Stargate Buyout: Here’s What You Need to Know.
https://beincrypto.com/layerzero-proposes-110-million-stargate-merger/
CoinCentral. (2025, August 11).
LayerZero
proposes
$110 million Stargate acquisition
in
token merger deal.
https://coincentral.com/layerzero-proposes-110-million-stargate-acquisition-in-token-merger-deal/
FinanceFeeds. (2025, August 10).
LayerZero
proposes
$110 million buyout of Stargate bridge, token swap for ZRO.
https://financefeeds.com/layerzero-proposes-110-million-buyout-of-stargate-bridge-token-swap-for-zro/
CoinCatch Team
Disclaimer:
Digital asset prices carry high market risk and price volatility. You should carefully consider your investment experience, financial situation, investment objectives, and risk tolerance. CoinCatch is not responsible for any losses that may occur. This article should not be considered financial advice.
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