LayerZero’s acquisition of Stargate didn’t actually cost them anything. In fact, LZ made at least $45M out of it.

LayerZero launched in March 2022, alongside Stargate, which the LZ team also built. At the same time, LZ raised $135M at a $1B valuation from investors like a16z, Sequoia, Coinbase, FTX, and others.

Stargate, however, was positioned as a separate protocol with its own token and funding. It raised $30M through a public ICO, but in practice, Stargate functioned as a frontend for LayerZero. Eventually, a Stargate DAO was created to govern the protocol independently.

Three years later, Stargate’s treasury has grown to about $95M in ETH and stablecoins (btw not sure what's the source of these funds, definitely not via revenue). Now, LayerZero is paying $110M worth of ZRO tokens to buy Stargate back.

This effectively means LZ is exchanging ~5% of its token supply for $95M in liquid assets. This is the far better terms than they got in 2022, when the same 5% of ZRO would have only raised $50M at their $1B valuation. Net $45M profit in three years.

And the actual cost may be even lower. Many STG holders have lost wallet access or are inactive, meaning not all of the ZRO allocated will ever be claimed.

In short, this is an "art of the deal" type of deal:

• If STG goes to zero, LZ still reacquires Stargate on better terms than their original 2022 raise.

• If STG appreciates, LZ benefits further by selling STG and locking in even stronger terms.

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