You are missing one of the most significant acquisitions in the history of the DeFi field.

Written by: mattdotfi

Compiled by: AididiaoJP, Foresight News

Currently, only a few people are paying attention to @LayerZero_Core's acquisition of @StarGateFinance, but since such mergers are extremely rare, I think it's worth exploring in depth.

Proposal Summary

LayerZero plans to acquire the tokens and treasury of StarGate (currently, each $STG is supported by $0.1444 in funds) and terminate the StarGate DAO, merging it into the $ZRO-led economic system.

Acquisition price: $0.1675 per $STG, or 0.08634 $STG for 1 $ZRO.

The proposal will follow the standard procedures of StarGate DAO, requiring at least 1.2 million votes and a support rate of 70% to be approved.

In the future, the excess revenue generated by StarGate will be used to reduce the circulation of $ZRO through buybacks.

Cost-benefit analysis

This raises a key question: "Who will benefit the most from this?"

In the current situation, LayerZero and $ZRO holders seem to be the biggest beneficiaries, as this is a liquidity acquisition conducted through their tokens, specifically manifested as:

Acquire $STG supported by the StarGate treasury at a moderate premium of 16%, while increasing the number of $ZRO holders.

Earn fees generated by the protocol (approximately $1.74 million annually according to @DefiLlama data), which will be used to repurchase $ZRO on the open market.

Through repurchase vertical integration of the $ZRO token economy and cross-chain business (LayerZero is at the forefront), and enhance its utility.

What can holders of $STG and $veSTG (locked STG) obtain? Not much:

Due to the recent price increase of $ZRO, its exchange discount is relatively low; $STG has only a slight premium due to market fluctuations, but the price floor is clear.

After the initial 24 hours of discussion, LayerZero decided to pay six months of StarGate revenue to $veSTG holders, as they are unable to unlock their tokens before the end of the lock-up period.

Drawbacks and Concerns

The issue here is complex, but it ultimately boils down to one word: compromise.

LayerZero is profiting more under the current circumstances, while StarGate token holders are finding it hard to be satisfied. Here are three major issues and uncertainties:

How should the reasonable premium for LayerZero's acquisition of $STG be calculated?

For $STG holders, how to choose between the "lesser of two evils"? Is it to continue enduring the ongoing token sell pressure, or to opt for a safe solution that lacks upside potential?

The average lock-up period for $veSTG holders is about one year. If the proposal is approved, they will only receive compensation for six months. Where is the incentive in that?

Currently, the fully diluted valuation (FDV) of $STG is less than 10% of $ZRO, while $STG worth 8.1 million is locked in the form of $veSTG.

Many holders are requesting a 1:1 exchange of $ZRO for $STG, but this is unreasonable, as it would mean they instantly gain 12 times the profit, while LayerZero would need to use the entire FDV to acquire a stable but limited income business.

personal opinion

Although I believe that the LayerZero team should reevaluate the premium paid to $STG holders and design a more reasonable revenue sharing plan for stakers, this acquisition may not necessarily be a disaster for the project itself.

DAOs mainly rely on revenue and token issuance to maintain operations, while $STG has plummeted over 95% from its historical high, and with an annual revenue of only $2 million, StarGate has little room for expansion. Furthermore, StarGate is already dependent on LayerZero's infrastructure, making it easier to leverage its tech stack and funding for growth after the integration.

Nevertheless, I believe the proposal makes sense for StarGate, but there is no need to rush to conclusions. The retention and loyalty of $STG holders to LayerZero largely depends on how the team handles this matter. Otherwise, they might lose a group of potential new loyal $ZRO holders and participants who have supported StarGate since the project's inception.

Update:

The proposal has been launched on StarGate DAO, with the minimum threshold achieved. Currently, 2.3 million circulating $veSTG (out of a total of 17 million) have voted "in favor" (98% to 2% "against").

I don't think this is a hostile takeover, but at this stage, the benefits of LayerZero clearly far exceed those of $STG and $veSTG holders.