Omnichain Tokenization - The Cycle Defining Narrative

TL;DR

• ◆Liquidity Tailwind: Falling rates, a dovish Fed, and global stimulus set up 6–9 months of strong risk-asset performance before the next refinancing wave.
• ◆Why It Matters: hundreds of chains and fragmented liquidity are broken models; LayerZero’s OFT standard offers compliance-ready, seamless interoperability across 140+ chains—already adopted by Tether, PayPal, Ondo, Ethena, and BitGo.
• ◆Investment Edge: With network effects compounding, 100% of Stargate revenues redirected into ZRO buybacks, and TradFi preparing to tokenize trillions, ZRO at ~$2.0B FDV offers one of the clearest asymmetric bets on the “Tokenization of Everything.”

Introduction

Liquidity cycles, not halvings, drive crypto’s price performance. In the supportive phase, capital rewards survival, revenues, and incremental progress. But when liquidity tips into excess, speculation flourishes and markets chase breakthrough innovations that capture imagination and capital at scale. That is when breakthrough innovation and cycle-defining narratives crystallize.

As of September 2025, the backdrop is turning. Rates are falling, bond volatility is easing, and fiscal stimulus is ramping across the U.S., China, and Japan. For the first time since 2021, global liquidity is shifting towards an excess phase — opening a 6–9 month window into mid-2026 where risk assets can run.

In past cycles, Ethereum defined programmability (2016), Solana proved scalability (2020). This time, the inevitable theme is omnichain tokenization — the seamless flow of stablecoins, real-world assets, and yield-bearing tokens across hundreds of chains. LayerZero sits at the center of this inevitability, with its OFT standard already powering the largest issuers and becoming the rails for the tokenization wave ahead.

Fragmentation

Despite rapid infrastructure growth, crypto remains deeply fragmented. More than 100 active (and soon-to-launch) L1s, L2s and appchains— from Bitcoin, Ethereum, and Solana to newer entrants like Plasma(USDT), Tempo(Stripe), and RobinhoodChain — all operate as isolated liquidity silos. Each new chain expands the surface area of crypto, but also splinters liquidity and user experience, leaving the system increasingly inefficient.

The stopgap has been wrapped assets: IOUs minted on one chain to represent collateral locked on another. But this model is brittle. Over $4B has been lost in bridge exploits (Wormhole, Nomad, Ronin), while liquidity fragments across multiple wrapped versions of the same token. Users are forced to juggle risks, and issuers must manage redundant pools of capital.

For institutions, the barriers are even higher. Every new chain requires new deployments, security audits, liquidity management, and compliance processes. Instead of one scalable system, institutions face a patchwork of fragile bridges and isolated silos — a structure that caps the adoption of stablecoins and RWAs.

LayerZero’s Omnichain Architecture

LayerZero has built the TCP/IP of crypto: immutable endpoints deployed across 140+ chains that enable generic messaging, token transfers, and state synchronization. At the heart of this system is the OFT (Omnichain Fungible Token) standard, which is rapidly becoming the industry default. It already powers Tether’s USD₮₀, Ethena’s USDe, Ondo’s USDY, BitGo’s WBTC, and dozens more.

The model keeps power in the hands of the issuer while giving users trust-minimized access everywhere. For businesses, this unlocks two key advantages:

1. ◆Regulatory alignment and compliance
   Asset issuers retain direct authority over how transfers are verified. They can embed whitelists, blacklists, or rate limits directly into contracts, ensuring alignment with frameworks like the Genius Act or MiCA without sacrificing functionality.
2. ◆Immutable rails with open verifiability
   Even though issuers control their security stack, the assets themselves move across immutable, permissionless LayerZero endpoints. Institutions get the compliance levers they need, while assets still enjoy the open, verifiable infrastructure of crypto.

In short, the LayerZero model offers the best of both worlds: issuers retain sovereignty and compliance control, while users avoid the risks of wrapped tokens, fragmented liquidity, or centralized custodians.

Stablecoins & RWAs – The White Whales

Stablecoins and real-world assets (RWAs) are not just holding steady — they are exploding in scale, cementing themselves as crypto’s foundational “killer apps” and paving the way for trillions in tokenized value.

As of September 2025:

• ◆Stablecoins: ~$290B market cap (+120% YoY), with $27.6T in 2024 transaction volume — already eclipsing Visa and Mastercard combined.
• ◆RWAs: $29–30B tokenized (+340% YoY), led by treasuries and private credit. Private credit now dominates at 55% ($17B), treasuries at 29% ($7.5B), and gold/commodities at 7% ($2.5B).

This growth marks a structural shift. Stablecoins are moving beyond trading pairs into global infrastructure for payments, remittances, and B2B settlements. In Q1 2025 alone, stablecoin volumes surged 66% QoQ, annualizing to ~$7.5T, with emerging markets driving adoption. RWAs are following the same trajectory, with institutional inflows accelerating — especially into private credit and tokenized treasuries.

The message is clear: stablecoins and RWAs are crypto’s white whales — massive, sticky markets with compounding growth curves.

Why This Fuels LayerZero and ZRO

Fragmentation is the enemy of scale. Stablecoins and RWAs may be growing at record pace, but without interoperability their liquidity splinters across hundreds of chains. Issuers like Tether, Ethena, and Ondo cannot afford to rely on wrapped tokens or bridges they must build and maintain themselves.

LayerZero’s OFT standard solves this:

• ◆Seamless movement: assets flow natively across chains with no wrapped versions.
• ◆Issuer control: compliance, blacklisting, and risk parameters stay in the issuer’s hands.
• ◆Economic efficiency: costs fall, while DeFi yields rise as liquidity becomes unified.

Today, 488 OFTs are live, routing billions through LayerZero endpoints and Stargate. As stablecoins and RWAs expand, every new asset and chain compounds the flywheel. And with 100% of Stargate revenue funneled into ZRO buybacks, adoption directly translates into value capture.

The result: LayerZero is not just the interoperability layer — it is the structural tollbooth for the tokenization wave, with ZRO as the asset that captures its upside.

Short-Term Outlook: 6-9 Month 

The macro backdrop is lining up for risk assets. A dovish Fed, falling rates, and regulatory clarity (Crypto President, Genius Act) create a powerful liquidity tailwind that should persist into mid-2026.

• ◆Stablecoins: Market cap could expand even further to $350–400B (+20–38%), with annualized volumes of $35–40T. Weekend flows alone are already pushing $3–4B daily.
• ◆RWAs: Onchain totals could double to $50–60B, led by private credit and treasuries.

These numbers may seem modest — but they represent fundamentals. Like P/E ratios in traditional finance, they matter most during supportive phases. As liquidity turns abundant, markets stop rewarding incremental revenue and instead chase the defining story that can scale into trillions.

The parallel is late 2020: Solana was dismissed as “unused” — right before its scalability breakthrough became the defining theme of the cycle. In this cycle, omnichain tokenization is that breakthrough, and LayerZero is positioned at its core.

Long-Term Horizon: 2028–2030 and Beyond

LayerZero has the ingredients to become a cycle-defining story. Unlike protocols tied to a single chain, it underpins the biggest markets with infrastructure that works across all users, assets, and chains.

Stablecoins
Stablecoins are on track to become the backbone of digital payments. Today they settle more than $10T annually, already rivaling traditional card networks. Looking forward:

• ◆2028: Market cap could expand to $1–1.5T, with $30–45T in settlement volumes — roughly 5–8% of global payments
• ◆2030: Adoption could reach $2–3T in market cap, processing $60–80T annually — around 10–15% of global payments.
  • ◆Growth drivers:
    • ◆Remittances (~$200B)
    • ◆B2B settlements (~$1.5T)
    • ◆Corporate treasuries (~$1T+)

Even at these levels, stablecoins would still represent a fraction of the $500T+ global payments market, leaving long-term room for 20–30% penetration.

Tokenization of Real-World Assets (RWAs)
RWAs are on a similar adoption curve to stablecoins, but with even larger long-term potential. The global stock of financial assets — bonds, equities, real estate, and private credit — is estimated at $300–400T. Tokenization is still in its infancy, but early signals are clear: more than $2.5B of tokenized gold,7B in US Treasuries and 17B in private credit are already on-chain.

Looking ahead:

• ◆2027: Tokenization could reach ~1% of financial assets (~$3–4T), led by U.S. Treasuries and private credit.
• ◆2030: Adoption expands to 3–5% (~$9–20T), with more institutional participation.
• ◆2033–34:~10% penetration (~$30–40T), marking RWAs as a mainstream funding and investment channel.

Even at 3–5% adoption, tokenization would already rival entire global markets (e.g., private equity today is ~$10T).

The ZRO Flywheel

Even under conservative assumptions, value accrual to ZRO compounds quickly:

• ◆2028: If ~1% of global assets (~$3–4T) are tokenized — 1x turnover, and just 5% of those flows move cross-chain, LayerZero could be routing ~$150–200B annually. At 0.25–0.5% effective take rates, that equates to $400M–$1B available for buybacks.
• ◆2030: With 3–5% tokenization (~$9-20T) — 1x turnover, and a rising cross-chain share (7–10%), routed volumes could exceed $1T annually. Even at compressed fees (0.2–0.4%), this still supports $1,3–8B in buybacks.
• ◆2033–34: At ~10% adoption (~$30–40T) — 1x turnover, and 10–15% cross-chain activity, routed flows could exceed $3–6T annually. At a modest 0.2–0.3% take rate, that translates to $6–18B in annual buybacks, compounding into tens of billions over time.

The mechanics are simple: as RWAs and stablecoins expand, fragmentation across chains forces value through LayerZero. Each additional flow strengthens the flywheel — more usage, more revenue, more buybacks, and stronger incentives for adoption.

Fragmentation Creates the Tollbooth
The RWA and stablecoin ecosystems will not consolidate into a few global chains. Instead, they will fragment into hundreds of specialized networks — optimized for different use cases (payments, credit, settlement), asset classes (treasuries, real estate), and regulatory regimes (jurisdiction-specific compliance).
This structural fragmentation makes interoperability indispensable — and positions LayerZero as the tollbooth for cross-chain value flows.

• ◆Today: Value capture is intentionally limited. (in 6 months) Stargate revenues fund 100% ZRO buybacks, while core protocol fees remain near zero to maximize adoption. Effective take rates are well below Visa’s 2–3%.
• ◆2028–2034: Even at only basis-point level fees (0.01–0.05%) on 10–15% of cross-chain stablecoin and RWA flows, LayerZero could already direct $.2B–3B annually into buybacks.
• ◆Longer term: If adoption matures and LayerZero captures 0.2–0.5% tolls on 10–20% of flows, the economics approach Visa-scale toll:
  • ◆Conservative ceiling: $15–30B annually
    • ◆Example inputs: 10% routed share, 0.2% take ⇒ requires $75–150T in total cross-chain flows.
  • ◆High-end ceiling: $60–100B annually
    • ◆Example inputs: 20% routed share, 0.5% take ⇒ requires $60–100T in total cross-chain flows.

The logic is simple: the more fragmented the ecosystem, the greater the reliance on interoperability. LayerZero scales with the fragmentation it enables.

Network Effects First, Value Capture Later
The projections above reflect only the base toll model, tied to existing payment and asset flows. They exclude additional monetization layers — such as Hydra routing, OVaults, and institution-specific services — that can unlock further upside as the ecosystem matures.

Just as important: they also exclude the new markets enabled by cheaper, faster, programmable settlement. Historically, whenever infrastructure achieves a 10x improvement, activity doesn’t just migrate — it multiplies. Credit cards enabled e-commerce, cloud infrastructure enabled SaaS, and mobile networks enabled ride-hailing.

• ◆With stablecoins and tokenized assets, the same dynamic applies.
• ◆Micropayments, streaming payments, and machine-to-machine transfers will emerge on top of LayerZero rails.
• ◆Entirely new categories of economic activity will be unlocked — flows that don’t exist in today’s system.

For now, the strategy remains clear:

• ◆Maximize adoption first. Keep take rates minimal to cement LayerZero as the default interoperability layer.
• ◆Monetize later. Once network effects are entrenched, incremental services and selective fee switches can scale revenues without slowing growth.

In networks, value capture always follows adoption. By prioritizing reach and fragmentation today, LayerZero maximizes not just the tollbooth on existing markets — but the creation of entirely new ones.

Adoption Case Studies

These aren’t experiments; these are systemically important assets and protocols betting their future on LayerZero its protocol.

• ◆Tether (USD₮₀): The world’s largest stablecoin as an omnichain token via LayerZero, with USD₮₀ unified across chains (best known for plasma’s native stablecoin).
• ◆Ethena (USDe): $13.5B market cap stable, live on 10+ chains, scaling via OFT, and recently expanded to 0Vaults. LayerZero newest product.
• ◆PayPal (PYUSD): Using LayerZero to unify across Ethereum & Solana. Also adding PYUSD₀ soon.
• ◆Bitgo (WBTC): WBTC, one of DeFi’s largest tokenized assets, adopted the OFT standard.
• ◆Ondo (USDY): Institutional-grade US Treasuries tokenized and composable across chains. Also Ondo global markets launched 100 OFT’s last month. Planning to add 1000 more before the end of this year.
• ◆Pendle Finance: $7B TVL yield protocol running omnichain through LayerZero.
• ◆Arbitrum Nitro: LayerZero’s OFT Standard is Natively Supported. (Robinhood Chain will be build on Arbitrum Nitro)
• ◆Fireblocks: Launched its tokenization engine. Clients can now create OFT-enabled stablecoins in just a few clicks, all while benefiting from Fireblocks' industry-leading security, governance, and controls.

Together, these integrations demonstrate LayerZero’s dual strength: institutional credibility (PayPal, Tether, BitGo, Fireblocks) and DeFi-native adoption (Ethena, Ondo, Pendle). Each new integration compounds the network effect, drawing in more issuers, liquidity, and users.

Tokenomics & Monetization

LayerZero has two distinct monetization levers:

1. ◆The Fee Switch
   Voted on every six months by governance.
   • ◆If activated, the protocol can charge up to 200% of DVN + Executor costs per message, with all proceeds used to buy back and burn ZRO.
   • ◆This makes usage directly deflationary for ZRO supply.
   • ◆However, in a growth environment, raising costs risks slowing adoption — which is why governance has kept it off for now.
2. ◆Stargate Acquisition
   • ◆LayerZero’s acquisition of Stargate creates a parallel revenue stream without raising protocol-level costs.
   • ◆Stargate has already processed $70B+ in transfers, and after a six-month transition period, 100% of its revenues will be redirected into ZRO buybacks.
   • ◆This allows the protocol to remain free at the core (maximizing adoption) while still accruing tangible value to ZRO holders.
     

Stargate is also evolving beyond a canonical bridge into a universal liquidity interface — powering swaps, deposits, and vaults as natural fee-generating primitives. With Hydra positioned as a potential liquidity blackhole and OVaults targeting the $110B+ DeFi and $3T+ TradFi vault market, Stargate extends LayerZero’s monetization options well beyond simple transfers.

Bottom line: Tokenomics are structured for growth first, monetization later. Stargate provides structural buybacks today, while the fee switch and emerging liquidity primitives remain levers for future cycles.

Network Effects & Moat

Protocols live or die by network effects. Each new token, application, or chain integrated into LayerZero compounds the value of the entire ecosystem:

• ◆Tokens: Every new OFT expands the base of fungible assets that can move seamlessly across chains. Today, 488 OFTs are live (~$90B supply), with Ondo Global Markets announcing each stock will launch as an OFT — 100 already live, 1,000 more planned this year.

• ◆Applications: Protocols like Pendle, Ethena, and Ondo bring liquidity and users, which immediately benefit all other applications in the omnichain ecosystem.

• ◆Chains: Each new integration (Base, Arbitrum Orbit, TON) expands distribution, making LayerZero’s rails increasingly indispensable. Currently, 140+ active chains are live.

The flywheel is simple:

1. ◆Issuers want to be where the users are.
2. ◆Users want assets that work everywhere.
3. ◆Developers want the broadest distribution.

LayerZero sits in the middle, compounding value with each integration. With ~$90B in OFT supply and $70B+ in Stargate transfers already flowing through the system, ZRO is positioned to capture 1–5% of stablecoin and RWA flows. 

Omnichain Is Inevitable

Thousands of chains, millions of assets, billions of users — fragmentation makes interoperability not optional, but inevitable. The OFT standard has already emerged as the canonical solution, unifying stablecoins, RWAs, and native crypto assets under one framework.

For users, the logic is straightforward: everyone wants access to all apps and assets, but nobody wants the friction of juggling multiple wallets. For builders, the economics are equally clear: L1s and L2s no longer need to spend millions on audits and duplicate deployments to expand across hundreds of chains, while smaller appchains don’t have to sacrifice a large share of their token supply on liquidity incentives. LayerZero makes that expansion seamless, lowering costs while amplifying reach.

OFTs therefore act as the universal foundation — a single standard through which bonds, stocks, stablecoins, and crypto assets can all move natively across chains. Institutions keep compliance levers, issuers retain sovereignty, users stay in their preferred wallet environment, and liquidity remains unified.

Investment Thesis

LayerZero (ZRO) is a bet on the fastest shipping team in – omnichain tokenization — the meta-narrative of this cycle. With its isolated security model, incumbents like PayPal, Tether, and BitGo alongside breakout protocols such as Ethena, Ondo, and Pendle have already standardized on LayerZero, cementing it as the multichain winner.

But its positioning goes beyond capturing just the tokenization theme. Because every narrative ultimately needs to transact across chains, LayerZero also becomes the backbone for memes, games, AI, DePIN, consumer apps, and future sectors not yet on the radar. Stablecoins and RWAs may be the white whales, but LayerZero touches almost every other story in crypto — making ZRO both the purest play on the meta-narrative and a diversified bet across the long tail of emerging narratives.

The key for undervaluation:
The reason LayerZero has often been overlooked is both timing and its unconventional model. In the supportive liquidity phase, investors went defensive — prioritizing revenues, buybacks, and safety. Bold infrastructure bets optimizing for growth were too risky for that environment.

But as we now get closer to an excess-liquidity phase, market psychology flips. Investors begin searching for the biggest, boldest models — the ones that can scale into trillions. Solana is a useful parallel: dismissed because its model was considered too centralized, and because liquidity wasn’t abundant enough to support risk. Then, at the end of 2020, the mix of innovation and abundant liquidity conditions turned Solana from contrarian bet to cycle-defining theme.

LayerZero is in the same position today. What was once dismissed as a controversial security model is now exactly what institutions demand. With the market flipping risk-on, the only thing left to catch up is valuation.

Catalysts & Drivers

• ◆SEC & US government fully committed to bring all of finance onchain
• ◆Accelerating adoption of stablecoins and RWAs on OFT. 
• ◆Stargate consolidation: 100% of revenues directed into ZRO buybacks.
• ◆Institutional integrations: traditional finance institutions are on the cusp of tokenizing their infrastructure, and LayerZero offers the strongest model.
• ◆Expansion to 1,000+ chains as new L1, L2s, appchains, and fintech issuers proliferate. Now that launching your chain is just a few clicks away.
• ◆In the late-stage of a cycle, value comes from potential growth rather than current revenue.
• ◆With alts like Conflux, Astar, Grass, Story, Mantle, and Litentry already launching DATs — and many more in the making — I would be surprised if we don’t see one or more for LayerZero.
• ◆Upcoming chain launches: MegaEth, Plasma, Monad all integrating LayerZero. 

Conclusion
Overweight LayerZero for a 6-9 month window.

ZRO stands at the center of the excess-liquidity phase — the last but defining stage of this institution-led cycle: LayerZero’s isolated security model scales across 140+ chains and meets users in their own trusted wallet environment. The flywheel is simple — issuers want to be where users are, users want assets that work everywhere, and developers want the broadest distribution. LayerZero is the only protocol delivering all three, making ZRO the asymmetric bet on tradfi’s tokenization wave.

Disclaimer

This analysis is for informational and educational purposes only. It does not constitute financial, investment, legal, or tax advice. Any views expressed are personal opinions,  subject to change at any time without notice and should not be relied upon for making investment decisions. Always do your own research (DYOR) and consult a licensed financial advisor before investing. Cryptocurrencies and digital assets are highly volatile and carry significant risk, including the potential loss of all capital.