The LayerZero Foundation has proposed acquiring the closely-related Stargate (STG) and merging its token economy into the LayerZero (ZRO) ecosystem, a move that would consolidate the two protocols’ cross-chain infrastructure under a single asset.

Stargate Finance was developed by the same team that created the LayerZero protocol, and the two companies share cofounders.

The plan would see all STG tokens converted into ZRO at a fixed rate, effectively retiring STG as a standalone governance and rewards token.

Post-merger, Stargate’s bridge revenues — which generated $939,000 in payouts to STG stakers over the past three months — would flow directly to the foundation. ZRO holders would benefit from potential buybacks funded by these revenues, while governance and utility would shift fully to the LayerZero token.

LayerZero said combining the two tokens will make the system simpler, cut overlap, and focus value in one asset.Furthermore, if approved, the acquisition would also remove Stargate’s staking program in its current form, ending fixed-yield payouts to locked STG holders.

Instead, former STG holders would participate in LayerZero’s token economy directly, without a dedicated staking yield mechanism. While the proposal is still under discussion, early community responses are highlighting valuation concerns, with some STG holders arguing the swap ratio undervalues their tokens relative to past price highs and ongoing revenue streams.

Others have called for LayerZero to improve the terms or introduce alternative incentives to offset the loss of staking income.

The proposal represents one of the larger token mergers in the layer 1 ecosystem this cycle, and its outcome could set a precedent for how closely linked protocols navigate governance, valuation, and revenue redistribution in similar consolidations.

LayerZero's ZRO and Stargate's STG tokens are both up more than 20% in the past 24 hours, per CoinGecko.