Stargate Finance merger proposal with LayerZero for $110 million in tokens
In a move aimed at accelerating both projects, the LayerZero Foundation has proposed a $110 million acquisition of Stargate Finance. The acquisition, if approved, would consolidate cross-chain infrastructure under a single token economy.
Stargate, originally developed and launched by LayerZero in 2022, allows users to transfer digital assets across blockchains using liquidity pools. It enables native asset transfers instead of relying on traditional blockchain bridges.
The proposal aims to merge the STG token economy into the LayerZero ecosystem. This would convert all STG tokens into ZRO at a fixed rate of 1 STG to 0.08634 ZRO. However, the announcement has sparked a mixed reaction among the community, particularly STG token holders.
STG Token Holders Unhappy with Swap Terms
Many STG token holders are unhappy with the proposed swap terms. They feel that the fixed rate of 1 STG to 0.08634 ZRO undervalues STG given its current and potential revenue generation.
Loss of Staking Rewards a Major Concern
Another major concern is the loss of staking rewards. Stargate currently pays staking rewards and revenue sharing from bridge fees to STG holders. The acquisition would eliminate Stargate’s current staking program, and the LayerZero token (ZRO) does not provide an equivalent yield or revenue-sharing mechanism. This has caused frustration among STG holders who would lose these direct income streams.
Strategic Rationale Understood but Not Fully Compensated
Some community voices acknowledge the benefits of consolidating the tokens, such as having a more liquid token, simplifying governance, and enabling a unified development roadmap with more resources. However, these benefits are seen as not fully compensating for the downsides in the current proposed terms.
Calls for Improved Terms
Many suggest that the swap ratio should be more favorable (possibly close to 1:1) and that LayerZero should raise its offer significantly to reflect Stargate’s revenue performance and future potential.
Market Reaction and Revenue Distribution Post-Merger
The market reaction to the announcement was initially positive, with both STG and ZRO tokens seeing price appreciation temporarily. However, overall token prices remain well below historical highs. If approved, Stargate’s bridge revenues (approximately $939,000 in payouts over the past three months) would be funneled into the LayerZero Foundation. Former STG holders would no longer receive direct staking payouts but might benefit indirectly through LayerZero’s ecosystem and potential buybacks funded by these revenues.
The proposal is currently open for community comment before a DAO vote, highlighting ongoing debate and uncertainty within Stargate’s community about the deal and its impact on their staking rewards and revenue. The proposal will remain open for community comments for seven days before Stargate's decentralized autonomous organization (DAO) votes on whether to approve the deal.
- Despite the strategic rationale of the proposal to consolidate tokens under LayerZero, many STG token holders are concerned about the unfavorable swap terms, especially since they feel the fixed rate undervalues STG's current and potential revenue generation.
- A significant cause of frustration among STG token holders is the loss of staking rewards and direct income streams; the acquisition would eliminate Stargate’s current staking program, which provides revenue sharing from bridge fees, and the LayerZero token does not offer an equivalent yield or revenue-sharing mechanism.
