LayerZero's Stargate Acquisition: Where Do the Real Gains Go Among 97% Voters?

The Merger Narrative Taking Shape

LayerZero Foundation’s proposal to acquire Stargate is sailing through governance with overwhelming support—currently sitting at 97.09% approval as voting continues through August 24. The acquisition framework is straightforward: LayerZero will acquire both the STG token and Stargate’s treasury at $0.1675 per STG (a rate supported by the treasury at $0.1444), with an exchange mechanism of 1 ZRO = 0.08634 STG. Given the support trajectory, the deal appears to have crossed the finish line, requiring 1.2 million minimum votes and 70% quorum for final approval.

The Token Economics Reshaping

What makes this acquisition particularly interesting is how it fundamentally restructures token economics. Once completed, Stargate’s future protocol revenue—currently running at approximately $1.74 million annually according to DefiLlama—will funnel directly into ZRO buyback mechanisms. This revenue stream will shrink ZRO’s circulating supply, creating deflationary pressure on LayerZero’s native token.

For ZRO token holders, the math appears favorable. The acquisition represents a 16% premium over the treasury’s valuation floor, while simultaneously expanding the ZRO holder base through token conversions. It’s essentially LayerZero acquiring a functioning revenue-generating protocol without massive cash outlays—instead deploying its own token as acquisition currency. The cross-chain infrastructure integration also vertically enhances ZRO’s utility proposition within LayerZero’s expanding ecosystem.

The STG Holder Dilemma: Between Compromise and Uncertainty

However, the picture looks markedly different for Stargate’s token base. STG holders face an uncomfortable reality: this acquisition leaves limited room for gains. While ZRO’s recent appreciation has theoretically reduced what once appeared as a steeper discount, STG holders are essentially choosing between permanent token liquidation or accepting reduced returns through the ZRO conversion.

The situation becomes more complex for veSTG holders—those who locked their tokens for governance participation. Facing an average one-year lock-up period, these stakeholders receive only six months of protocol revenue as compensation. With roughly $8.1 million in STG currently locked as veSTG, the incentive structure appears insufficient to retain long-term believers in Stargate’s standalone future.

Some community members have vocalized demands for 1:1 ZRO-to-STG exchange rates, arguing this reflects fair value. However, such terms ignore the fundamental asymmetry: a 1:1 swap would grant STG holders 12x immediate returns, while LayerZero would be committing its entire fully-diluted value to acquire a project with strong infrastructure but limited current revenue generation.

The Acquisition’s Hidden Trade-Offs

This deal ultimately represents a market reality check for Stargate. The protocol’s FDV stands only 10% below ZRO’s valuation, yet Stargate has generated just $2 million in annual revenue while watching its token hemorrhage over 95% from historical peaks. The project has exhausted expansion capacity under its current standalone model—limited by both token economics and capital availability.

LayerZero’s acquisition resolves this impasse, offering Stargate access to superior technology infrastructure and institutional support mechanisms that would accelerate feature delivery and market expansion. For Stargate as an entity, this represents strategic repositioning rather than failure.

The Real Beneficiary Question

Yet this creates the central tension: LayerZero and ZRO holders capture the lion’s share of acquisition synergies through token economics restructuring and revenue redirection. STG holders occupy an uncomfortable middle ground—neither catastrophic losses nor meaningful upside capture.

The acquisition’s ultimate success depends on how LayerZero management navigates post-acquisition integration. Should the team undersell the value proposition to STG holders or fail to establish robust revenue-sharing frameworks for stakers, LayerZero risks hemorrhaging newly converted ZRO holders who previously comprised Stargate’s core supporter base. Community retention will make or break whether this transforms into a genuine consolidation win or merely a liquidity arbitrage exercise.

This acquisition isn’t predatory—LayerZero’s expanding revenue clearly exceeds both STG and veSTG holder earnings potential. But it does represent a transfer of control economics toward ZRO holders, making the real beneficiary question less about “who wins” and more about “who optimizes capture most effectively.”