LayerZero takes the lead, Wormhole raises prices, who can take down Stargate?

Written by ChandlerZ, Foresight News

The cross-chain infrastructure ushered in a hotline transaction.

The LayerZero Foundation proposed in early August to acquire the Stargate cross-chain bridge and its STG token for $110 million. The proposal includes that STG tokens will be deactivated, and STG holders can exchange their tokens for LayerZero's native token ZRO, with an exchange ratio of 1 STG for 0.08634 ZRO, equivalent to $0.1675 per STG and $1.94 per ZRO. Additionally, Stargate will be incorporated into the LayerZero Foundation, and its DAO will be dissolved.

On August 18, the LayerZero Foundation's proposal to acquire Stargate opened voting, with an approval rating of 88.65% as of press time on August 21, and the voting will end on August 24.

Subsequently, the Wormhole Foundation expressed its position in the community, believing that this offer underestimated Stargate's assets and operations, and was ready to submit a higher offer and requested a temporary suspension of ongoing snapshot voting for 5 working days. The incident aroused strong discussions in the community in a short period of time, and the "ownership dispute" between the cross-chain message layer and the unified fund pool came to the fore.

What is Stargate Stargate

Finance is a cross-chain asset transfer protocol that focuses on unified fund pools and instant endgame guarantees, allowing users to complete cross-chain asset transfers in a single operation without the need for cumbersome multi-step exchanges. Since its launch in 2022, Stargate has been an important participant in the cross-chain bridge track, providing stable cross-chain liquidity between networks such as Ethereum, Arbitrum, BNB Chain, Avalanche, Polygon, and Optimism.

The relationship between Stargate and LayerZero is very close. Stargate's whitepaper, co-authored by the three co-founders of LayerZero, overlaps at the developer level, with Stargate relying almost entirely on LayerZero's messaging capabilities in its early days. The founding team of LayerZero Labs consists of Bryan Pellegrino, Ryan Zarick, and Caleb Banister, all of whom graduated from the University of New Hampshire majoring in computer science and have collaborated on entrepreneurship multiple times before founding LayerZero, accumulating rich engineering and management experience. Additionally, Sushiswap co-founder 0xMaki has joined the team as a strategic advisor.

In terms of governance, Stargate is jointly managed by the Stargate Foundation and the DAO, and DAO members hold STG and can obtain veSTG to participate in voting and profit sharing through lock-up.

Key points of LayerZero's proposal: exchange ratio, governance arrangement, and transition period distribution

LayerZero's plan is written very straightforwardly. If the transaction is successful, STG will be exchanged at 1 STG : 0.08634 ZRO, and the valuation anchor will be converted to the market price of ZRO at the time of the proposal's release; Stargate's operations and assets are taken over by the LayerZero Foundation, and the DAO no longer assumes a governance role. The governance process is set as follows: 7 days of forum discussion, followed by 3 days of snapshot voting, the legal minimum participation amount is 1.2M veSTG, and the approval vote must reach 70%.

If approved, STG holders will be informed how to convert to ZRO. The LayerZero Foundation will assume the ownership and operation of all responsibilities of Stargate Finance. Stargate will continue to operate without interruption; During the transition, users of Stargate bridges will not experience any downtime or functional changes.

Additionally, STG will no longer be involved in Stargate Finance's operations. Each STG token will be exchanged for 0.08634 ZRO through a fixed-rate redemption contract, which is based on ZRO's market price of $1.94 at the time of the proposal's release. This swap contract will remain valid indefinitely.

After community feedback, the proposal supplements the arrangement for lock-ups: veSTG will continue to receive 50% of the protocol's "top-tier revenue" 6 months after the merger, and the remaining 50% will be used to buy back ZRO; At the end of the 6-month period, all net proceeds will be used to buy back ZRO. This patch directly points to the issue of "locking up positions to bear long-term risks and equity should be differentiated" in an attempt to ease voting sentiment.

Wormhole's posture: Request to postpone the vote and give room for a higher price

Wormhole Foundation left a clear signal on the Stargate forum: prepare to submit a "higher" offer and request a 5-business day pause for the current snapshot to complete the draft offer and supplement due diligence. The accounting table they gave listed the DAO's treasury and business indicators: about $76.47 million in stablecoins, about $15.9 million in ETH, about $55 million in STG, and about $5.24 million in other assets; The protocol side caliber is about $4 billion in bridging volume, TVL about $345 million, expected annualized revenue of about $2 million, and integrating 80+ chains in July.

Based on this, the $110 million consideration is "just a slight increase on the treasury, but it will take away all future cash flow", which is not a decent deal.

The focus of this round of debate is on bidding coverage. According to Wormhole's statement, the net worth caliber is close to $90 million; If the brand, code, team and cash flow in operation are included, the purchase price should give a wider premium band. LayerZero's pricing logic tends to use the endorsement price and market price as a reference, add a little premium, and then combine it with ZRO's buyback expectations to shift the value bearer from STG to ZRO.

The gap between the two sets of caliber is directly reflected in the perception of the interests of lock-up holders and circulation holders. Over the past three months, Stargate's proceeds have been distributed to stakers of approximately $939,000, and this visible cash is a source of arguments for many naysayers; Once the transaction is complete, this allocation line will be merged into the ZRO buyback pool after a six-month transition.

What it means for the market

acquisition proposal proposed by LayerZero and Wormhole's potential bid have led the community to re-discuss Stargate's independence and development path. In its conference call and forum response, the Stargate Foundation acknowledged team and budget pressures, emphasizing that mergers and acquisitions can help secure future development resources, while some in the community are concerned about undervaluation and hope for more bidders to participate.

LayerZero provides cross-chain messaging and stands on the underlying communication layer; Wormhole is positioned similarly to this and has a say in the coverage and breadth of cooperation in the multi-chain ecosystem. This acquisition actually touches on the issue of control of the messaging layer + capital pool: if LayerZero acquires Stargate, the interests of the messaging and capital pool will be tighter. If Wormhole wins, the pool will be tied to another messaging network, and a new confrontation will appear in the market. These changes affect rate design, path selection, partner access preferences, and security models, which will ultimately be reflected in users and developers.

For circulating STGs, the core is "currency exchange". If the proposal takes effect, STG will withdraw from the stage and the value bearer will move to ZRO. In the short term, it is affected by the fixed exchange ratio, and in the long term, it depends on ZRO's buyback strength, unlocking rhythm, and LayerZero's business advancement on Stargate. For veSTG, the six-month delay allowed the existing share to continue for a period of time, after which it would face the reality of the termination of the distribution logic. For ZROs, if the integration goes smoothly, the repurchase source will be more sufficient, and the governance narrative will be more concentrated, but at the same time, they will have to bear the pressure of delivery and public relations after the integration.

Known parts of LayerZero include a fixed conversion ratio, DAO exits, veSTG distribution six months after closing, and subsequent earnings being incorporated into ZRO buybacks. The unknown lies in the intensity and rhythm of ZRO buybacks, the beat of team integration, and the resource allocation of the roadmap. Wormhole's known offerings are higher price intents, suspension requests, and due diligence lists; What is unknown is the offer structure and governance commitments, such as whether to retain the right to earn for a certain period of time, whether to give additional consideration to the lock-up, and whether to set a transitional governance period. These contents determine the voting preferences of different groups and the temperature of public opinion after the transaction is completed.

LayerZero's motivations are not difficult to understand. Bundle user-facing bridges and underlying message layers into an asset and a governance center, reduce duplication routes and internal competition, and concentrate resources to chase large-scale payments, stablecoins, and cross-chain applications. Wormhole aims to hang a unified fund pool on its own network, combined with ecological coverage, to form another combination. Both have taken a fancy to cross-chain capital flows and developer minds, and Stargate's bridge is on an upward stake, and this deal is related to who can get the core entrance in the next few years.

Summary

Judging from the caliber given by Wormhole in the post, Stargate recorded about $4 billion in cross-chain volume in July, with a TVL of about $345 million, and an estimated annualized revenue of about $2 million. These figures reflect the intensity of use and capital capacity, but the guidance for valuation still depends on the cost model, competitor price wars and future product lines.

If you estimate it based on asset book + operating cash flow, LayerZero's consideration is more like a defensive price, leaving the core growth return to ZRO and the integrated group layer. If the goal is to expand the overall ecological market, a unified narrative is conducive to the integration of resources. The two lines of thought are not compatible, and voting will give a preference.