1. Background
First of all, with the continuous development of the blockchain industry, various forms of chains have emerged, such as Layer1, Layer2, Layer3, side chains, Rollups, etc. There are homogeneous chains and heterogeneous chains, and each blockchain is divided into many different protocols.
These different blockchains and different protocols divide the blockchain world into information islands. A large number of encrypted assets are distributed on these different chains and different protocols, which undoubtedly reduces the efficiency of capital utilization.
The emergence of cross-chain bridges can build bridges between these different chains, and can bridge the assets on one chain to other blockchains.
For example, the emergence of the second-layer network Base cross-chain bridge launched by Coinbase can bridge the encrypted assets on other chains to the Base network, allowing users to enjoy some early dividends of the Base chain. At the same time, the assets on the Base chain can also be bridged to other blockchains through the cross-chain bridge.
The emergence of cross-chain bridges has greatly improved the efficiency of capital utilization.
According to defillama’s statistics, in the current DeFi landscape, the total TVL of cross-chain bridges ranks fourth, reaching US$9.7 billion, second only to the Dex track.
In addition, in the cross-chain bridge track, there are generally problems such as low security, high costs, and slow cross-chain speed. Stargate emerged in this context.
2. Overview of Stargate Protocol
Stargate Finance is a multi-chain cross-chain bridge protocol based on LayerZero. It was created by LayerZero Labs in March 2022. It is also the first DApp based on the LayerZero protocol. It is a protocol that can realize asset transfers between multiple blockchains.
Stargate aims to simplify the process of transferring assets from one blockchain to another, eliminating tedious steps such as locking, minting, burning, and redemption to achieve the convenience of completing the transfer in one transaction.
Since Stargate is a cross-chain protocol built on LayerZero, when talking about Stargate, we need to start with LayerZero.
What is LayerZero
LayerZero is an Omnichain interoperability protocol. LayerZero builds a new ultra-light node model to provide a secure and reliable infrastructure for various cross-chain protocols.
Theoretically, LayerZero can transmit messages on any chain that supports smart contracts. For example, if a user sends a message on chain A, the message can be transmitted to chain B, allowing the smart contract on chain B to perform the corresponding operation. LayerZero can realize information communication between different chains, which of course also includes asset transfer between different chains.
LayerZero is not a public chain or an application ecosystem, but a lower-level protocol. LayerZero is positioned similarly to the TCP protocol of the transport layer in the Internet, on top of which many different DApps can be built.
How LayerZero achieves full-chain interoperability
Let us first understand the difference between full nodes, light nodes, and ultra-light nodes.
Full node: A node that synchronizes all blockchain data, storing both block headers and specific transaction information.
Light node: only stores a small part of the blockchain data, such as the block header and some other information, but does not store the specific transaction information within the block.
Ultra-light nodes: do not retain all block headers, but instead transmit streaming block headers on demand through oracles, thereby more efficiently synchronizing off-chain entities to achieve the desired state.
Layerzero's full-chain interoperability is achieved by deploying an Endpoint (client) on each chain. The Endpoint will run an ultra-light node (ULN), and then use Oracle to transmit block headers containing cross-chain information on demand (rather than transmitting all block headers in sequence to reduce costs), and then use Relayer to transmit transaction proofs (Proof information). The two verify each other to ensure the correctness of cross-chain information.
The following figure shows the process of a user application (UA) on Chain A sending a message to a user application on Chain B through LayerZero.
LayerZero's full-chain interoperability is achieved through the joint efforts of these three core components: Endpoint, Oracle, and Relayer.
Based on the full-chain interoperability of LayerZero, many businesses that were not easy to implement in the past can be run, such as full-chain cross-chain bridges, cross-chain transactions, cross-chain lending, etc. Stargate is the cross-chain bridge officially launched by LayerZero. It is also the first DApp based on the LayerZero protocol. It is called by the LayerZero team as the first product to solve the "bridging trilemma".
3. How does Stargate achieve cross-chain
As we all know, there is an "impossible triangle" theory in the public chain, which refers to the degree of decentralization, security and scalability. A public chain can only meet two of them at the same time.
For example, for Bitcoin, its decentralization and security are relatively high, but its scalability is poor. For many public chains, although scalability and security are improved, it sacrifices decentralization.
The "impossible triangle" dilemma in the public chain field can be solved through modular public chains.
Similarly, there is also an "impossible triangle" theory in the cross-chain field, which are:
Instant Guaranteed Finality
Unified Liquidity;
Native Assets).
That is to say, in most cross-chain bridges, only one or two of the above points can be achieved at the same time, and all three cannot be achieved to the best of their ability.
The Stargate cross-chain bridge built on the LayerZero protocol can simultaneously meet the three major characteristics of a cross-chain bridge, namely, it can ensure instant finality, achieve unified liquidity, and support native assets.
In some common cross-chain bridges, the "lock + mint + destroy" method is mostly used, that is, the assets are first locked in the source chain, and synthetic assets are minted in the target chain. When the assets are transferred back to the source chain, the previously minted synthetic assets need to be destroyed and then the original tokens are redeemed. This does not actually achieve instant finality.
Stargate has developed a new resource balancing algorithm that unifies liquidity native to all blockchains while providing instant guaranteed finality.
Stargate adopts the [Liquidity Swap] solution for cross-chain assets. Unlike most cross-chain bridges that set up independent liquidity pools for specific networks, Stargate uses a unified liquidity pool to support cross-chain asset operations.
In other words, Stargate can achieve unified liquidity pool management, and each chain can access the liquidity on other chains.
For example, if there is a USDT liquidity pool on chain A, then USDT-related transactions initiated by other chains can borrow and return USDT liquidity from chain A, so that the algorithm can maintain liquidity balance when facing unbalanced transaction volumes, thereby improving the efficiency of fund utilization.
However, when multiple chains share a liquidity pool, they will face the problem of transaction failure due to insufficient liquidity depth. Because when multiple chains share a liquidity pool, the number of users and the number of parallel operations will increase accordingly, thereby reducing the liquidity in the pool and causing some cross-chain transactions to fail.
For example, there is 100 USDT liquidity on chain A, chain B requests 60 USDT liquidity, and chain C requests 50 USDT liquidity. The sum of USDT liquidity on chain B and chain C exceeds the sum of USDT liquidity on chain A, then the cross-chain request of one of the chains will fail.
To this end, Stargate introduced a set of "resource balancing algorithms" to solve the above problems. Stargate divides the liquidity pool on each chain into multiple intervals according to different blockchains for management, also known as soft partitioning.
For example, 100 USDT on chain A is soft-divided into 50 USDT on chain B and 50 USDT on chain C.
In order to make it more likely that liquidity can meet cross-chain needs, the protocol allows liquidity to be “borrowed” and “returned” between different chains, allowing the algorithm to maintain liquidity balance in the face of unbalanced trading volumes.
When a cross-chain request is received, the resource balancing algorithm will review the liquidity of each interval and allocate the assets deposited by the user to the interval with insufficient liquidity for replenishment, thereby avoiding transaction failures caused by liquidity depletion.
If cross-chain inquiries on chain B are frequent, then it can be set to a higher weight. When new liquidity comes in, in addition to filling the liquidity gap of each chain, the excess liquidity will be virtually allocated to other chains according to the pre-assigned weights.
In addition, Stargate also introduced Equilibrium Fees (Equilibrium Fees, which encourages liquidity to be evenly distributed across chains).
For example, when too much funds are transferred out of chain A, further transfers out of chain A will be charged higher fees, so that the liquidity on each chain can be maintained by relying on the spontaneous trading behavior of users.
In general, Stargate improves the utilization rate of funds through a set of "resource balancing algorithms", using the liquidity of single-currency assets on each chain as a complete liquidity pool, avoiding the exhaustion of a single chain as much as possible, and achieving timely allocation and on-demand mobilization under a unified liquidity pool.
4. Team
The exact number of people in the Stargate Finance team is currently unknown. However, given that Stargate Finance is the first application on LayerZero Labs, early community feedback shows that Stargate Finance has a close relationship with LayerZero and has a certain degree of overlap in developers. The Stargate white paper was co-written by the three co-founders of LayerZero.
So, in the team section, we can start with the LayerZero team members.
The team has three co-founders, Bryan Pellegrino as CEO, Ryan Zarick as CTO, and the other one is Caleb Banister.
All three graduated from the CS major at the University of New Hampshire, and had a lot of career overlap after graduation.
The details of the founding team members are as follows:
Ryan Zarick：
Co-founder and CTO of LayerZero Labs, graduated from the University of New Hampshire with a master's degree in computer science.
22011.11–2013.03 Served as CTO of BuzzDraft; 2010.09–2020.13 Served as co-founder of Coder Den; 2018.01–2020.03 Served as co-founder of 80Trill; 2019.06–2021.01 Served as co-founder of Minimal AI; In 2021, he founded LayerZero and served as CTO.
Bryan Pellegrino：
Co-founder and CEO of LayerZero Labs, graduated from the University of New Hampshire, USA, majoring in computer science.
2010.10–2013.01 Co-founder and COO of Coder Den; 2011.06–2013.01 CEO of BuzzDraft; 2017.10–2019.08 Co-founder of OpenToken; 2016.06 — present, Chief Engineer of Rho AI; Founded LayerZero in 2021.
Prior to founding LayerZero, Pellegrino was a professional Texas Hold'em player and co-founded a machine learning company with Ryan Zarick, successfully selling a set of machine learning tools to an MLB team.
Caleb Banister：
Founder of LayerZero Labs, graduated from the University of New Hampshire, USA, majoring in computer science.
2005.06–2010.12 Served as a software developer at the UNH Interoperability Lab; 2010.09–2021.02 Served as a co-founder of Coder Den; 2018.03–2021.02 Served as a co-founder of 80Trill; 2019.06–2021.02 Served as a co-founder of Minimal AI; Founded LayerZero in 2021.
From the resumes of the three core members of the team, we can see that the three of them gathered again in 2021 and co-founded LayerZero Labs. Moreover, the team has excellent innovative capabilities in machine learning algorithms and blockchain development, and they have long-term cooperative relationships with each other and have many years of development experience and successful entrepreneurial experience.
In addition, Sushiswap's co-founder 0xmaki also joined the team full-time and served as chief strategic advisor to help Layerzero build a cross-chain ecosystem.
5. Basic Products
1. Cross-chain function (Transfer)
The cross-chain function is the most important function of Stargate, and it is very intuitive in the operation interface. It can realize the cross-chain 1:1 exchange of native assets and guarantee instant final results.
Currently available chains include Ethereum Mainnet, BNB Chain, Avalanche, Polygon, Arbitrum, Optimism, Fantom, Metis, Polygon zkEVM, zkSync Era Mainnet, and the recently supported Base network.
In addition to stablecoins, ETH, etc., the cross-chain currencies supported in the Stargate platform also include tokens such as CAKE, STG, CRV, and RDNT.
2. Providing Liquidity (Pool)
Liquidity providers can add liquidity to Stargate and receive certain rewards in each Stargate cross-chain (transfer) transaction.
Users can choose different liquidity pools to add liquidity. Currently, the pools are mainly stablecoin pools. After providing liquidity, they will get LP tokens and receive cross-chain fee rewards from the protocol.
3. Liquidity Mining (Farming)
Stargate liquidity providers can stake their LP tokens in exchange for STG rewards.
After users provide liquidity and obtain LP tokens, they can use them for liquidity mining and receive STG rewards. The current APY is at most 12%, which is a very good return for stablecoin mining.
4. STG Stake
Users can stake their STG tokens and choose the duration of the stake. The longer the stake period, the more veSTG tokens they can get.
veSTG will serve as the governance token of the Stargate platform. The more you hold, the more governance weight you will gain.
6. Token (STG) Economic Model
The token of the Stargate platform is STG, with a total of 1 billion pieces, distributed as follows:
17.50% — Stargate Core Contributors (1 year full lock, then 2 years linear unlock);
17.50% — Investors (1 year full lockup, followed by 2 years of linear unlocking);
65.00% — Stargate is allocated to the community to work towards achieving the protocol’s vision: making cross-chain liquidity transfers a seamless single transaction process.
Here is a breakdown of the community allocations:
1) 15.00% — Stargate Protocol launch;
a. 10.00%: STG started auction purchase (sold out by 2 addresses of Alameda).
b. 5.00%: STG-USDC pool on Curve.fi.
2) 15.95% — Bonding Curve Auction, after launch;
3) 2.11% — initial emission plan;
4) DEX on BNB, Avalanche, Matic, Arbitrum, Optimism, and Fantom will increase by up to 1.55%;
5) The remaining 30.39% is committed to future community initiatives and the long-term success of Stargate.
Token release cycle:
STG tokens can be used for staking to obtain governance tokens veSTG, which can be used for voting. The longer the staking period, the greater the voting rights the staker obtains.
VII. Development Status and Competition Landscape
1. Trading volume
According to defillama’s statistics, in the current cross-chain bridge, the transaction volume in the last 24 hours reached 170 million US dollars, and Stargate’s full-chain transaction volume reached more than 72 million US dollars, accounting for nearly 50% of the cross-chain transaction volume, which is much higher than the transaction volume of other cross-chain protocols.
Moreover, among all cross-chain bridges of Polygon, Arbitrum, Avalanche, Fantom and BSC chains, Stargate's transaction volume ranks first, which shows Stargate's industry status.
2、TVL
Stargate's full-chain TVL exceeds $300 million, far higher than the TVL of other cross-chain bridges such as Hop.
Even among the entire DeFi protocol, Stargate's TVL ranking reached 30th.
3. Active users
According to data from tokenterminal, Stargate has 48,000 active users per day, which is almost 10 times the number of active users per day of other cross-chain bridges. From the trend chart, we can see that Stargate's active users have increased significantly since the end of March.
4、Fee
The fees generated by Stargate have been growing over the past year, with the fee increase reaching more than 400% in the past six months. It can be said that the growth rate is still relatively fast.
Compared with other cross-chain bridges, Stargate generates daily fees of more than 80,000 US dollars, which is much higher than the daily fees generated by other cross-chain bridges.
5. Financial Analysis
From Stargate's financial situation, we can see that the earnings in recent months have been growing continuously, with each month having a significant increase compared to the previous month, especially the earnings in July, which have reached more than 1 million US dollars.
The trading volume in recent months has also been increasing. The trading volume in March reached more than 900 million US dollars, and the trading volume in June reached 2.6 billion US dollars, almost three times that of March.
The number of active users every month is also growing.
From Stargate’s financial data, we can see that active users, transaction volume, and Earnings data are all growing continuously. These data to a certain extent show that Stargate is developing rapidly.
8. Future Potential
The native token of the Stargate platform is STG. The function of the token is similar to Curve. Users can lock up veSTG for voting, and the weight of veSTG is allocated according to the lock-up time.
The platform mainly makes profits by charging transfer fees. Every time a non-STG token transfer occurs, a 0.06% platform fee will be incurred.
In addition to the 0.06% fee charged for non-STG token cross-chain transactions, cross-chain transactions may also incur pool rebalancing fees, the specific fees depending on the degree of imbalance between the source and target chains relative to the pool balance weight.
From the previous analysis data, we can see that all indicators of Stargate are growing continuously.
Moreover, Stargate is a cross-chain bridge officially launched by LayerZero. With the official endorsement of LayerZero, it will greatly promote the development of Stargate. For example, it can bring a large number of users to Stargate. Stargate is a leader in multi-chain cross-chain protocols.
The future will inevitably be an era of multi-chain coexistence, and there will be more blockchains in different forms. LayerZero, valued at US$3 billion, will serve as a full-chain interoperability protocol that will connect more assets on different chains.
As LayerZero supports more and more chains, Stargate will also support more chains and more token cross-chains, which will continuously increase Stargate's transaction volume, user volume, TVL, etc., and promote the development of Stargate.
In addition, as a direct descendant of LayerZero, Stargate’s role is far more than just a cross-chain bridge. From Stargate’s documentation, it can be seen that Stargate’s goal is to serve as a technology provider for cross-chain assets, allowing more projects to easily use Stargate and thus realize cross-chain functions.
Therefore, in addition to 2C, Stargate's business also includes 2B. In fact, the 2B business model has much more room for imagination than 2C. Based on Stargate, more complex DApps can be built.
At present, STG's market value is only over 100 million US dollars, ranking 173rd in market value. STG still has a lot of room for growth in the future. Hot Air Balloon will continue to pay attention to the latest developments of Stargate and share them with everyone in a timely manner.
