Stargate Rejects $138M LayerZero Buyout to Preserve DAO and Fee-Sharing

In a bold rejection that has sent ripples through the decentralized finance (DeFi) sector, Stargate token holders have decisively opposed the LayerZero Foundation’s $138 million buyout proposal, choosing to safeguard their project’s independence and governance structure over potential integration with a larger platform [1]. The proposed acquisition would have merged Stargate, a leading omnichain liquidity protocol, into LayerZero’s ecosystem, with all STG tokens being converted into ZRO tokens. However, the move has been met with strong resistance from the community, which views the offer as undervaluing the project and undermining its decentralized ethos [1].

The core of the controversy lies in the structure of the deal itself. The LayerZero Foundation’s proposal included the dissolution of Stargate’s independent DAO and the termination of fee-sharing incentives for locked STG token holders—mechanisms that have been instrumental in aligning token holder interests with the long-term growth of the protocol [1]. Critics argue that these changes would dilute community influence and remove key financial incentives, effectively transferring control to LayerZero without commensurate benefits for Stargate’s stakeholders [1].

Community members have raised four major concerns regarding the buyout. First, they argue the $138 million valuation is far below what Stargate’s technology and growing user base deserve. Second, the loss of the DAO would remove independent governance, transferring decision-making authority to a centralized entity. Third, ending fee-sharing directly impacts the returns of long-term STG holders. Finally, many see the deal as heavily skewed in favor of LayerZero, granting it access to Stargate’s liquidity infrastructure without offering a fair counterbalance [1].

Despite potential benefits from deeper interoperability and shared resources, the dominant sentiment among Stargate holders remains focused on preserving their rights and investment value. The community has demonstrated its collective power through vocal opposition, rejecting the proposal during its feedback phase and signaling the need for a revised, more equitable offer [1].

The next steps in this unfolding saga depend on whether LayerZero will adjust its proposal to address these concerns. If revised, the offer would likely proceed to a formal on-chain vote, where the final decision will be made by token holders. This process not only highlights the role of community governance in decentralized projects but also sets a significant precedent for future acquisitions in the DeFi space [1].

This situation reflects broader trends in the evolving Web3 landscape. As protocols grow in complexity and value, strategic partnerships and acquisitions are becoming more common. Yet, the decentralized nature of these projects introduces unique challenges—chief among them, the necessity of securing community buy-in. Unlike traditional corporate mergers, where board decisions can finalize deals, in crypto, token holders hold real decision-making power. The LayerZero-Stargate proposal serves as a case study in the importance of aligning incentives and respecting stakeholder rights in any acquisition attempt [1].

The outcome of this negotiation could shape the future of decentralized acquisitions. A successful resolution—one that satisfies Stargate holders and maintains the project’s autonomy—would offer a model for how large-scale crypto integrations can be structured without compromising core decentralized values. Conversely, if the merger fails to gain traction, it may reinforce the notion that token holders must remain vigilant to prevent dilution of their governance and financial interests [1].

The current standoff underscores the growing influence of decentralized communities in shaping major strategic decisions. As DeFi continues to evolve, the ability of token holders to reject unfavorable deals will remain a critical factor in ensuring that the decentralized vision of the ecosystem is preserved [1].

Source:

[1] title: Stargate Holders Defy LayerZero’s $138M Buyout Offer

url: https://coinmarketcap.com/community/articles/689a1354292cb809b62cb1fc/