Berachain: Interpreting the Innovative Mechanism Design of DeFi Public Chains

Introduction

Berachain is an EVM-compatible L1 public chain focused on Decentralized Finance, built on top of the Cosmos SDK, utilizing the liquidity proof (PoL) consensus mechanism. The project originated from the Bong Bears NFT series launched in August 2021 and subsequently derived multiple bear-themed NFT collections.

The Berachain team, after experiencing the ups and downs of the crypto market, recognized the importance of liquidity for Decentralized Finance and decided to design a new L1 public chain that absorbs the advantages of successful DeFi projects while avoiding their shortcomings. The team innovatively proposed the Liquidity Proof ( PoL ) mechanism, laying the foundation for a three-token model.

In November 2023, Berachain began internal testing. On January 11, 2024, the public testnet "Artio" officially launched, attracting over 30 native protocols and deployment plans from several well-known projects. It is rumored that the Berachain mainnet will go live in Q2 2024.

Financing Situation

In April 2023, Berachain secured $42 million in funding, led by Polychain, with participation from Hack VC, OKX Ventures, and others, valuing the company at $420 million.

Team Background

Berachain was founded by an anonymous team, with core members including Smokey the Bera, Papa Bear, Homme Bera, and Dev Bear. The team recently hired Baloo the Bera, former engineering lead at Mysten Labs, as Vice President of Engineering. Most team members are early participants in the crypto space, having entered around 2015, and have a deep understanding of Decentralized Finance and public chains.

Mechanism Interpretation

Polaris EVM

Berachain is built on Polaris EVM, which is an EVM-based operating system on top of the Cosmos SDK. Polaris EVM has the following advantages:

1. Friendly to Ethereum developers, making it easy to attract developers.
2. Achieve powerful cross-chain interoperability through IBC

PoL proof mechanism

The workflow of the Proof of Liquidity ( PoL ) mechanism:

1. Users provide liquidity to BEX( Berachain's native DEX) to obtain BGT governance tokens.
2. Users delegate BGT to validators, and validators generate blocks based on weight.
3. The delegator and the validator receive BERA and HONEY rewards
4. Validators can vote on BGT inflation.
5. The validator distributes bribes to the delegators.

Advantages of PoL compared to PoS:

1. Incentivize liquidity provision, enhance security
2. Inflation distribution is more decentralized.
3. Coordinate asset issuance agreements with validator relationships

three-token model

Berachain adopts a three-token model:

• BGT: Governance token, non-transferable, obtained only by providing LP.
• BERA: Gas token, obtained by burning BGT 1:1 or verification rewards.
• HONEY: Native over-collateralized stablecoin, protocol revenue distribution medium

The model has established a systematic liquidity incentive mechanism, allowing staking to support diversified assets, further stimulating liquidity.

Important Ecological Projects

the honey jar

As the entry point of the Berachain ecosystem, responsible for user education, project incubation, and partnership matchmaking. Launched the Honey Comb NFT, gathering benefits from multiple projects.

Beradrome

The DEX and Restaking liquidity market on Berachain features ve(3,3) token economics. The "Tour de Berance" NFT series has been launched, promising future airdrop rights.

Beradoge

Popular Meme projects on Berachain, featuring two NFT series. Promises that NFT holders will receive BDOGE tokens.

Sudoswap

The 全链 NFT AMM liquidity market is planned to be deployed after launching on the Berachain mainnet, and is expected to support blue-chip NFT bridging.

Beramonium

The chain game project of Berachain has released "Gemhunters", an idle role-playing game. Players can obtain NFTs from other Berachain projects through the game.

Redacted Cartel

Decentralized Finance yield protocol, covering the bribery market trading and LSD liquid staking domain, plans to deploy a new project on Berachain.

Summary

Berachain maximizes liquidity release through an innovative three-token economic model and PoL mechanism, solving the contradiction between staking participation and liquidity. This is expected to lead DeFi innovation and create protocols with high liquidity and high capital efficiency. As the user base grows and fee income increases, Berachain may attract more users and projects, forming a positive feedback loop.

However, the future development of Berachain still requires close attention, including the progress of the project itself, the growth of the ecosystem, and the security of the protocol.