LayerZero’s $110M Buyback Approved, Stargate Holders Dispute Valuation

LayerZero Foundation has announced a $110 million buyback initiative targeting 50 million ZRO tokens from early backers, marking a significant step in the project’s strategy to consolidate its ecosystem and realign governance. The proposal, detailed in a 24 August 2025 update, involves converting Stargate’s STG tokens into ZRO at a ratio of 1 STG = 0.08634 ZRO, effectively merging Stargate’s cross-chain liquidity infrastructure into LayerZero’s framework. The buyback and token swap received 88.6% approval in a contentious governance vote, outpacing a rival $120 million cash bid from Wormhole. This move aims to centralize fee structures and user flow under ZRO, though some STG holders criticized the valuation as undervalued relative to Stargate’s $4 billion July bridging volume.

The buyback announcement triggered immediate market reactions, with both STG and ZRO tokens surging in price. ZRO’s price climbed over 20% following the proposal, driven by speculation that Stargate’s $20 million+ annual revenue would now fuel ZRO buybacks. Analysts highlighted the potential for ZRO to benefit from reduced supply dynamics, as protocol fees collected from cross-chain transactions—estimated at $0.01 per transfer—will be burned via a Treasury Contract. This mechanism aligns incentives between users and long-term protocol health, a key focus of LayerZero’s governance roadmap.

The integration of Stargate’s infrastructure is expected to expand ZRO’s utility. Stargate’s $70 billion+ bridge volume will now be routed through LayerZero’s ecosystem, consolidating governance under ZRO and redirecting future Stargate revenue to token buybacks. However, challenges remain. STG holders have expressed concerns over the swap ratio, which critics argue fails to reflect Stargate’s market value. Additionally, the acquisition’s success hinges on continued DAO approval, with 70% of veSTG holders required to activate the plan.

LayerZero’s strategic moves extend beyond the Stargate merger. A 20 August 2025 partnership with Wyoming’s state-backed FRNT stablecoin further underscores its enterprise adoption potential. The FRNT stablecoin, overcollateralized by 2% USD/Treasuries, now operates across seven chains via LayerZero’s omnichain infrastructure, with plans for trading on Kraken. This collaboration could drive protocol fees from institutional transactions, though FRNT’s success depends on regulatory clarity under the GENIUS Act.

Market volatility and tokenomics risks persist. ZRO faces a $46 million token unlock in 2025, representing 23% of its circulating supply, which could exert downward pressure. Additionally, a surge in airdrop scams exploiting LayerZero’s popularity has raised concerns, with Chainalysis reporting $12.5 billion lost to crypto scams in 2025, including LayerZero-related phishing campaigns. Despite these risks, LayerZero’s brand resilience remains intact, and the project has emphasized verifying claims via official channels.

The buyback initiative aligns with broader trends in the crypto space, including institutional adoption and cross-chain consolidation. Corporate Bitcoin holdings and spot ETF launches have signaled growing confidence in digital assets, a trend LayerZero aims to leverage through its governance and liquidity strategies. While short-term volatility and token unlock risks are present, the long-term outlook for ZRO hinges on successful execution of its buyback plan and integration of Stargate’s infrastructure.

Source: [1] Latest LayerZero News - (ZRO) Future Outlook, Trends & Market (https://coinmarketcap.com/cmc-ai/layerzero/latest-updates/) [2] LayerZero Announces $110M Buyback Plan for Stargate (https://coinlive.me/layerzero-110m-buyback-stargate-swap/)