The Barbarians at the Gate: Wormhole Disrupts the LayerZero Family Reunion

Recently, a significant event occurred in the cross-chain world of Crypto Assets: the LayerZero Foundation wants to repurchase its originally created cross-chain bridges project StarGate with Tokens worth $110 million. At first glance, this seemed quite reasonable, after all, it's a "family reunion".

But a dramatic scene unfolded - LayerZero's old rival Wormhole suddenly jumped in, saying that the price was too low and was prepared to offer a higher price to snatch StarGate! In an instant, this internal acquisition turned into a public bidding war, reminding me of the movie 'The Barbarian Invasions'.

This is not just a simple acquisition; it marks the official entry of the encryption industry into the "merger and acquisition era." Previously, everyone mainly competed in technology and users, but now they have started to play with capital operations. More importantly, this incident has shown us the true performance of DAO governance in the face of real money, as well as the subtle balance between decentralized ideals and commercial reality.

Why does LAYERZERO want to "bring the bridge home"?

To understand this acquisition battle, we need to clarify the relationship between LayerZero and StarGate. Simply put, StarGate is LayerZero's "favorite child".

The blood relationship between father and son is thicker than water.

LayerZero positions itself as a cross-chain messaging protocol, aiming to become the TCP/IP of blockchains. It is not specifically aimed at cross-chain asset transfer scenarios, such as Ethereum DeFi projects using LayerZero for cross-chain governance voting, and game developers using it to synchronize multi-chain game states, etc.

In March 2022, the LayerZero team launched StarGate Finance, an application built on the LayerZero protocol for cross-chain asset transfer. It focuses on the most practical asset cross-chain transfer scenarios, bringing tremendous capital flow and user volume to the LayerZero ecosystem. Simply put, StarGate is a "showroom" of LayerZero's technical strength, showcasing how powerful its cross-chain technology is to the market. In this landscape, StarGate holds a unique position — it is not only a core product crafted by the LayerZero team but also one of the major contributors to network traffic, serving as LayerZero's "front-end product" and "cash cow."

Interestingly, although they are one family, LayerZero deliberately kept StarGate "independent" from the beginning: it has its own DAO, its own Token STG, and its own governance structure. This was originally for compliance reasons and aligned with the trend of decentralization at that time. However, although nominally independent, in reality, half of the members of the StarGate Foundation's board are appointed by LayerZero. As the community puts it: "StarGate is LayerZero, and LayerZero is StarGate."

But this separation also laid the groundwork for today's acquisition.

Why now?

LayerZero chose to take action at this time for several considerations:

• Explosive Business Growth: The data for StarGate is very impressive. In just July 2025, its cross-chain transaction volume reached 4 billion USD, soaring 10 times compared to the same period last year! Since its launch, it has processed over 70 billion USD in cross-chain transfers, and its treasury funds amount to approximately 92 million USD. Such achievements have made LayerZero realize that StarGate has become a strategic stronghold for cross-chain infrastructure. Especially during the current wave of RWA and stablecoin trends, the demand for efficient and secure cross-chain infrastructure is booming. LayerZero also recognizes that to secure a place in this wave of RWA, it must firmly grasp StarGate, the star product in the cross-chain realm.
• Eliminate internal friction and improve efficiency: Although the management of StarGate and LayerZero is highly overlapping, to reflect their respect for the core value of "decentralization" in blockchain, these superficial acts of "governance decisions" still need to be done. However, when it comes to voting, the differences in token distribution lead to a split in positions. LayerZero Labs has brought in institutional investors (such as a16z, Sequoia, etc.) through multiple rounds of financing, leading to a high proportion of team and investor ownership; on the other hand, StarGate's STG was initially sold through auctions, resulting in a more dispersed token distribution and a stronger voice from retail investors. LayerZero's CEO Bryan Pellegrino candidly stated, managing two independent entities is too cumbersome, and the coordination costs of various daily small decisions distract the team. It would be better to merge, as this would allow them to "run faster and iterate products more quickly".
• Good Timing for Bottom Fishing: From an investment perspective, acquiring StarGate now is simply bottom fishing. The STG Token has fallen from its peak of 4.14 dollars in early 2022 to the current range of 0.1-0.2 dollars, a drop of over 95%. The acquisition price offered by LayerZero is about 0.1675 dollars per STG, which is slightly higher than the market price, but compared to the historical peak, it's a bargain.
• Preventing Competitive Threats: LayerZero clearly does not want its cultivated StarGate to be taken away by others or to turn to competitors. This concern has proven to be justified - the involvement of Wormhole is the best evidence.
• Vertical Integration: Just like Apple produces both hardware and software, acquiring StarGate is equivalent to LayerZero shifting from a "neutral platform" to a "vertically integrated" strategy. LayerZero aims to control both the underlying protocol and the upper-level applications, upgrading LayerZero from a pure communication protocol to a comprehensive platform for communication and liquidity, thereby filling a key gap in its business landscape.

$110 million: Is this price reasonable?

LayerZero's acquisition plan looks quite simple: replace all STG tokens with an equivalent of $110 million in ZRO tokens at a rate of 1 STG = 0.08634 ZRO. Once the acquisition is complete, StarGate DAO will be dissolved, STG will exit the historical stage, and all future revenues of StarGate will be used to repurchase ZRO tokens.

The Core of Valuation Disputes

However, once this quote was announced, it sparked doubts about "the price being too low." Why is that?

Wormhole issued an open letter in the StarGate community, which pointed out incisively: StarGate's treasury has about $92 million in cash and liquid assets such as Ethereum! Based on a total offer of $110 million, LayerZero effectively only used about $18 million in net costs ($110 million - $92 million) to try to buy the entire business of StarGate.

Moreover, StarGate's business is flourishing: in July 2025, the monthly trading volume reached $4 billion, the total locked value was $345 million, and the annual protocol revenue was approximately $2 million. This offer from LayerZero is almost equivalent to purchasing StarGate's net assets without paying a premium for its future business valuation, which amounts to acquiring a rapidly growing business at net asset value.

Some people estimate that StarGate is worth at least 450 million USD by comparing it with Axelar's market capitalization. In this light, the price of 110 million does seem a bit "getting a bargain".

The "conflict of interest" cloud in the governance process

What makes the community even more unhappy is that this acquisition has obvious suspicions of "conflict of interest." Half of the members of the StarGate Foundation's board are appointed by LayerZero, which raises doubts among many that no matter how the community votes, this proposal will pass.

Although the LayerZero team promised that all internal personnel's STG would not participate in voting, the feeling of "insider trading" still makes the community very uncomfortable.

Amendment: "Incentives" for Long-term Supporters

In response to the doubts, LayerZero quickly made adjustments: in the first 6 months after the merger, 50% of StarGate's total revenue continued to be distributed to those who staked STG long-term (veSTG holders). This move proved to be very effective. Although the total price did not change, by taking care of the most loyal holders, the new proposal received overwhelming support, with a final approval rate of 88.6%.

This process is very enlightening: in DAO governance, soothing core stakeholders is more important than simply raising prices. Those who have staked for a long time represent the project's die-hard fans, and their attitudes often determine the voting outcome.

WORMHOLE is making strong moves: what is its intention?

As the acquisition vote for LayerZero and StarGate was in full swing, on August 21, 2025, the Wormhole Foundation suddenly took action, publicly stating that LayerZero's offer "severely undervalued the value of StarGate," and prepared to propose "a higher offer," while requesting a suspension of the ongoing voting for 5 working days.

The Multiple Motivations of WORMHOLE

Wormhole's action can be described as "killing multiple birds with one stone":

Strategic Acquisition: Both in the cross-chain track, Wormhole and StarGate have completely different methods for cross-chain asset transfers, each with its own advantages and disadvantages:

• Wormhole adopts a typical Lock-Mint bridge model. Users lock assets in a smart contract on the source chain, and then Wormhole cross-chain verifies and mints an equivalent wrapped token (such as the Wormhole version of USDC) on the target chain. If users want to return to the source chain, they burn the wrapped token on the target chain, triggering the source chain contract to release the native asset. In this model, each cross-chain asset generates a corresponding wrapped asset (for example, ETH on Solana is actually weETH minted by Wormhole). Wormhole's lock-mint model has higher capital efficiency—there is no need to pre-allocate massive funds across multiple chains, as long as users lock their own assets, they can bridge out an equivalent amount of assets; however, the drawback is the introduction of wrapped tokens. Users and applications need to trust that these tokens have a 1:1 asset backing, which may lead to redemption issues.
• StarGate adopts a multi-chain shared liquidity pool model. In simple terms, it deploys liquidity pools (mainly for stablecoins and other assets) on each supported chain. When users withdraw assets from the source chain bridge, they inject funds into the source chain pool and withdraw equivalent assets from the target chain pool, achieving direct cross-chain exchange of native assets. The entire process is coordinated by LayerZero's messaging to adjust the assets in both pools. The highlight of StarGate is that it does not require the issuance of wrapped Tokens, and users receive the native assets of the target chain (for example, when transferring USDC across chains, after depositing from Ethereum, they can directly withdraw native USDC on Polygon), avoiding the complexity and slippage risk associated with traditional bridges that create various wrapped versions of assets and convert them into native assets. However, the downside is that it requires a considerable amount of liquidity to be prepared in advance on each chain, leading to relatively low capital efficiency, and there are issues with pool depth and balance across chains.

Wormhole believes that if it can combine StarGate (which excels in liquidity pools) with itself (which excels in lock-and-mint), it can create a "super aircraft carrier" in the cross-chain field and establish a dominant market position.

Tactical Harassment: Many people believe that the true purpose of Wormhole might be to "hinder" LayerZero. Just think, even if a deal doesn’t go through in the end, forcing LayerZero to pay a higher premium or "spend more money to buy back their own products" consumes their resources invisibly; or creating some chaos in their community to slow down their development pace. For them, it’s a surefire profit-making deal.

Establishing an Image: Wormhole has established a good image of "fighting for the interests of the community" through this statement. By playing the role of a "white knight" seeking greater benefits for StarGate shareholders, it can be said that it has caught plenty of attention.

This is a competitive strategy with almost no risk of failure — either seize the core assets or make the opponent spend more money and lose face.

Is WORMHOLE really a game?

Any assessment of Wormhole cannot overlook an important historical event: in February 2022, Wormhole suffered one of the largest hacks in DeFi history, with losses exceeding $320 million. However, the subsequent developments were quite dramatic: Wormhole's main supporter, Jump Crypto, immediately dug into their own pockets and fully compensated all user losses. This unprecedented "bailout" action, while exposing early security issues, also demonstrated the substantial financial strength behind Wormhole to the market.

At that time, the more than 300 million gap could be filled instantly, and raising funds should not be a problem. In addition, Wormhole's statement also emphasized that they need time to research StarGate's financial and risk status, suggesting that they do indeed have serious due diligence and financing intentions. The Wormhole Foundation requests the StarGate team to provide detailed asset lists, user data, legal risks, and other information for their assessment. These actions indicate that Wormhole is taking this potential acquisition seriously, rather than purely creating chaos and shouting prices.

Who is the winner? Market impact analysis

Initial reactions from all parties

After Wormhole's announcement, StarGate's official social media took a notably silent stance compared to their previous active interaction with LayerZero. LayerZero co-founder Bryan briefly responded on the X platform: "This is not going to happen"("That's not happening."). This indicates that LayerZero is quite resistant to Wormhole's sudden move, showing that they will not easily concede or withdraw.

Most voices in the market still believe that the StarGate team has already reached an internal agreement with LayerZero. Even if Wormhole raises its price, it is mostly just to make LayerZero spend a bit more money. In the end, StarGate will still be integrated into LayerZero, and there will be no dramatic reversal.

Therefore, whether the StarGate community decides to suspend the original voting and initiate a new round of competitive processes in the next few days will be a key point to watch.

Stakeholder Interest Analysis

• STG Holders: Face a tough choice: Accepting the LayerZero proposal grants access to ZRO ecological rights, but the acquisition price of $0.1675 is questioned as being too low. The ideal situation is for competition to drive up the price, yet ultimately still be acquired by LayerZero, ensuring ecological synergy while obtaining a higher price. It is worth noting that many STG holders already have confidence in the LayerZero ecosystem, thus the support rate is relatively high.
• StarGate Team: The core team has a close relationship with LayerZero, and the acquisition by LayerZero is the most secure for them, allowing for continued development in a familiar environment. If Wormhole takes over, the team's retention is uncertain, and they may leave due to cultural incompatibility, affecting the continuity of the project.
• LayerZero Team: The successful acquisition by LayerZero will bring multiple benefits such as technological integration, financial enhancement, and consolidation of market position, with ZRO rising 15% reflecting market expectations. The risk is that competition may drive up acquisition costs and dilute existing equity. However, LayerZero is basically certain to do everything possible to preserve this core asset.
• Wormhole Stakeholders: Regardless of the outcome, there are benefits: a successful acquisition will create a cross-chain giant, while failure can still weaken competitors, enhance one's own reputation, and test the limits of opponents. This is a strategic game of "offense and defense."
• Ordinary Users: Short-term impact is limited, but long-term differences in affiliation will affect product forms. The acquisition of LayerZero may bring more integrated services (completing cross-chain information and asset transfers on one platform), while the acquisition of Wormhole may combine the "liquidity pool" and "Lock-and-Mint" bridge models. However, the increasing concentration of cross-chain bridges is a trend, which brings both efficiency advantages and centralization risks.
• Other Competitive Projects: This merger battle has a demonstrative effect on other cross-chain bridges. Axelar and Synapse may also become acquisition targets in the eyes of major players. They may seek to strengthen their moats to avoid being acquired at low prices; or consider alliances with larger platforms for self-preservation.

The most likely outcome

Considering the close relationship between LayerZero and StarGate, which is akin to "blood is thicker than water," and given that the LayerZero amendment has received a support rate of 88.6%, the most likely outcome is that StarGate will ultimately be acquired by LayerZero. The historical collaboration, technical integration, and strategic synergy between the two teams are advantages that external bidders find hard to match.

However, Wormhole's involvement was not without effect. It successfully brought the "undervaluation" issue to light, putting public pressure on LayerZero. Therefore, LayerZero may appropriately raise its offer or add other incentives in the final proposal.

Industry Significance: A hallmark of mature markets

This event marks the transition of the encryption industry from the technology-driven "barbaric era" to the "mature era" where strategic integration and commercial competition coexist.

We have seen three important trends:

1. "The era of "protocol mergers and acquisitions" has arrived: In the future, competition among projects may not just be about writing code and attracting users, but will also involve real monetary acquisitions, similar to the traditional business world, including "hostile takeovers".
2. DAOs are no longer just a decoration (at least not this time): We have seen the power of the community. A well-organized DAO can truly gain a voice and benefits in business decisions worth hundreds of millions of dollars.
3. Balancing Idealism and Reality: The tension between the ideal of decentralization (initially operated independently by StarGate) and the demand for business efficiency (now needing to merge into one) has become more apparent. The ideal of decentralization is beautiful, but in the face of brutal market competition, sometimes centralized integration and decision-making are a helpless but realistic choice for the sake of efficiency and survival.

Conclusion

Regardless of who ultimately acquires StarGate, this legendary acquisition will become a classic case for the crypto world in dealing with traditional business strategies. It reminds us that as the industry matures, mere technological innovation is no longer sufficient; capital operations, governance wisdom, and strategic vision are equally important.

The battle of cross-chain bridges is still ongoing, and let us wait and see the final result. In any case, it has already written a vivid chapter for the development of the entire industry. It is like a crossroads, signifying that we are transitioning from an era of free exploration to a new stage of numerous giants and alliances.

• This article is based on publicly available information and does not constitute investment advice. Investing in crypto assets carries significant risks; please make careful decisions and DYOR.
• If you like this article, feel free to follow, like, and share your support!