Exploring Berachain: What Are the PoL Mechanism and the Tri-Token Model?

In today's constantly evolving public blockchain technology, Berachain has rapidly demonstrated its strong market appeal as an emerging Layer 1 blockchain. Since the launch of its testnet 'Artio' on January 11, Berachain has shown impressive growth. According to Routescan data, in February alone, Berachain's active addresses reached an astonishing 17.3 million. This not only proves Berachain's efficient technical framework and excellent user experience, but also reflects its wide attention and high activity level in the crypto community.

Such a start undoubtedly lays a solid foundation for Berachain's future development and signals its immense potential and influence in the blockchain landscape. As more details and project progress are revealed, Berachain's ecosystem, technological innovations, and contributions to the cryptocurrency market will become a focal point of industry attention.

Berachain, built on the Cosmos SDK and focusing on DeFi, is an EVM-compatible Layer 1 blockchain that introduces an innovative Proof of Liquidity (PoL) consensus mechanism. This mechanism is designed to address liquidity issues by allowing users to stake tokens while providing liquidity to DeFi protocols. Berachain employs a triple token system, including BERA (the native gas token), HONEY (the native stablecoin), and BGT (a non-transferable Bera governance token), aiming to enhance network security and liquidity through this structure.

On its journey, Berachain successfully raised $42 million in a Series A funding round. Led by Polychain Capital, the round saw participation from notable investment firms such as OKX Ventures, Hack VC, Dao5, Tribe Capital, Shima Capital, and Robot Ventures. This reflects the industry's recognition and support for Berachain's innovation in blockchain technology and the DeFi space.

Furthermore, Berachain's technology is based on Polaris, a high-performance blockchain framework designed for building EVM-compatible chains on top of the CometBFT consensus engine. Through this technological infrastructure, Berachain aims to provide a safer, more efficient, and user-friendly platform for the DeFi ecosystem. Its unique PoL consensus mechanism is intended to create an incentive system for continuous liquidity provision, propelling the development of the entire crypto economy.

Origin: From Playful Beginnings to a Grand Vision for Liquidity

Originating from a playful beginning to a grand vision of liquidity, Berachain's story began in 2021 with four anonymous co-founders. Drawing inspiration from projects like OlympusDAO and Terra, they initially ventured into the crypto space by launching Bong Bears NFTs and its derivatives, gradually evolving into Berachain, a Layer 1 blockchain focused on solving liquidity issues.

Berachain's design philosophy combines liquidity and security to form a unique ecosystem. The team's early exploration in the crypto space included deep involvement with DeFi projects, witnessing the rise and fall of various chains and ecosystems. They recognized that regardless of a blockchain's decentralization, scalability, or security, it would ultimately become a "ghost town" without sustained liquidity support. Hence, Berachain is dedicated to creating a system that not only contributes to network security through the Proof of Liquidity consensus mechanism but also serves as a source of liquidity. It has launched the built-in DeFi primitives—spot AMM (BEX), perpetual futures markets (Berps), and lending protocols (Bend), creating a DeFi Lego set.

Berachain's development signifies a major shift from NFTs to a public blockchain, showcasing the team's deep understanding of liquidity and pursuit of innovative solutions. By closely collaborating with the community and incorporating feedback, Berachain aims to address some of the most pressing issues facing DeFi and the broader blockchain realm, including systematically building liquidity, incentivizing protocols and validators to participate in chain infrastructure, redefining the cost of bribes, and tackling stake centralization.

Innovation: Proof of Liquidity (PoL) + Triple Token Model, a New Beginning for Liquidity

Berachain introduces a unique Proof of Liquidity (PoL) consensus mechanism, an evolution of Proof of Stake (PoS), functioning as follows: users provide liquidity to the BEX liquidity pools to earn BGT, the Bera governance token, which they can delegate in the PoL system. Users delegate their BGT to validators; validators then generate blocks proportional to the amount of BGT delegated to them. Both delegators and validators, in turn, earn rewards from the network. Moreover, validators vote on the future BGT inflation for any number of liquidity pools, with bribes distributed to their delegators. This mechanism not only enhances security by increasing liquidity but also addresses the centralization issue in staking within PoS systems, making token inflation distribution more equitable compared to traditional PoS networks.

Additionally, Berachain's PoL mechanism allows for the staking of multiple assets, including ETH and BTC, reducing reliance on a single asset and enhancing network health and stability through this diversified staking approach. Moreover, PoL harmonizes the relationship between validators and liquidity providers, incentivizing specific LP pools and assisting validators in accumulating BGT stakes through bribes, thus increasing liquidity.

In summary, the PoL consensus mechanism encourages users to contribute liquidity to pools and earn BGT, which they delegate to validators to partake in the network's security efforts. This not only promotes the provision of liquidity but also, by integrating liquidity with governance, enhances the overall liquidity and governance efficiency of the network.

Berachain’s Triple Token Model: BERA, BGT (Governance Token), and HONEY (Stablecoin), each plays a unique and complementary role, aiming to build a balanced and sustainable ecosystem.

1. BGT (Bera Governance Token): BGT is dedicated to governance and staking on Berachain, featuring a soulbound mechanism that makes it non-transferable. Users can earn BGT by depositing liquidity in the native DEX—BEX, or by performing specific actions within authorized dApps. These actions include providing liquidity for LP pairs on BEX, borrowing HONEY on Bend, and supplying HONEY in Berps’ bHONEY vaults. BGT can also be permanently converted to BERA at a 1:1 ratio, though this action is irreversible.

2. BERA: Serving as the gas token on Berachain, BERA is used to pay for transaction fees, underpinning the network’s operations. Its main function is to support on-chain transactions and activities, ensuring smooth network performance.

3. HONEY Stablecoin: HONEY, the native stablecoin within the Berachain ecosystem, aims to closely peg to the USDC. It can be minted through the HONEY dApp or by staking collateral on Bend. As the internal stablecoin, HONEY provides a stable medium for transactions within dApps, enhancing platform usability and appeal.

Berachain’s triple token model, by offering tokens with distinct roles and functions, aims to foster a balanced growth and sustainability within the ecosystem, while encouraging active user participation and contribution.