Author | Heimi, Bai Ze Research Institute
Recently, the new public chain Berachain completed a financing of US$42 million, led by Polychain Capital, with participation from Hack VC, dao5, Tribe Capital, Shima Capital, Robot Ventures, Goldentree Asset Management, and OKX Ventures.
Before this, there was no information about its financing, and it has not yet launched a public testnet (expected to be launched in the next few weeks). What made Berachain valued at $420 million right from the start?
The answer may be “Next Generation of Liquidity”.
Smokey, the founder of Berachain, once said:
“Proof of Liquidity consensus is the first original alignment of incentives between protocol-level liquidity and security. Berachain has a unique opportunity to become the protocol with the largest total accessible liquidity of any chain in existence — attracting capital across the EVM and Cosmos ecosystem, and facilitating a range of transactional activity while contributing to network security. If executed correctly, we will build a protocol with the capital depth and speed of an off-chain solution and the transparency and customizability of an on-chain ecosystem.”
Liquidity is on-chain gold and the lifeblood of DeFi. Curve wars are rising and vampire attacks are rampant because of it. People will inevitably move liquidity to the most exciting/profitable avenues.
You may have heard of consensus mechanisms such as PoW, PoS, and PoH. Now, let’s take a look at this innovative L1 that uses “liquidity consensus proof” and aims to become the “DeFi native chain”.
What will the new public chain Berachain do?
One of the common problems with current L1s is liquidity, and the liquidity that flows into them is often short-lived because there is no compelling incentive to retain them. The development team discovered this and Berachain was born.
Berachain is an EVM Layer-1 blockchain built with Cosmos SDK and is compatible with EVM. By combining Cosmos' native consensus mechanism Tendermint with its own Proof of Liquidity consensus, it can provide faster transaction speeds, lower transaction costs, and instant finality.
What is Berachain’s Proof of Liquidity Consensus?
It can be simply understood as incentivizing validators to stake whitelisted assets such as BTC, ETH, and stablecoins on the validator vault. Similar to dPoS, users can delegate their deposits to specific validators, provide liquidity for on-chain protocols, and receive a portion of DeFi protocol revenue and $BERA in return. The more deposits, the more rewards. This can bring rich liquidity to DeFi on Berachain.
Whitelisted assets list:
L1 tokens: wETH, wstETH, wBTC, wAVAX, wFTM, ATOM, wBNB, $BERA
Stablecoins: USDC, USDT, DAI, FRAX, BUSD
DeFi governance tokens: To be launched
Currently, the reward distribution weights for stakers are determined by the team, but will be determined by governance when Berachain goes live:
L1 Tokens - 80% (of which $BERA gets 33%)
Stablecoins - 15%
DeFi Governance Tokens - 5%
At the same time, Liquidity Consensus Proof is also a Sybil Resistance Mechanism:
Users may experience intermittent losses. In short, it is possible to deposit 10 tokens of A and only have 9 tokens of A when withdrawing.
However, users will receive a portion of the protocol revenue and block rewards.
Using a three-token economic model
Berachain abandons the single native token economic model commonly used in traditional public chains. Its team believes that every decentralized economy should have three main parts that are critical to its operation:
The first is the medium for pricing and execution (Gas), which is used to price work units and execute work with smart contracts; the second is the medium for consensus and decision-making (governance), which is used to organize democratic functions and reach consensus and make decisions; the third is the medium for transactions through common stable denominations (stability).
Therefore, Berachain uses the corresponding three-token economic model:
1. $BERA: Berachain's Gas token. Issued at a 10% inflation rate, which means the supply of $BERA will increase over time. By staking assets, you can get $BERA block rewards and part of the protocol's revenue.
2. $BGT: Berachain’s governance token that can be used to vote on new whitelisted assets. $BGT is non-transferable and can only be obtained by staking $BERA, which ensures long-term consistency for users.
3. $HONEY: Berachain’s native overcollateralized USD stablecoin. $HONEY is the Money of the Berachain ecosystem and is the payment method by which protocol revenue is paid to stakers. It will be overcollateralized by at least 150% to ensure a peg to the USD.
This economic model, which the development team calls “Tri-Token,” assigns unique roles to each token to encourage long-term usage and maintain consistent on-chain liquidity.
Where do your pledged assets go and where do the profits come from?
The staked assets are stored in the validator vault. Based on the coordination of the governance system, the assets are paired with $HONEY to provide liquidity for the official vAMM, DEX, and lending protocols on Berachain.
At this time, you will get the corresponding block reward $BERA based on the amount of your staked assets.
In addition to using $BERA as a gas token, you can also stake it to obtain the governance token $BGT.
By holding $BGT, you can not only participate in governance voting, but also receive part of the revenue from the above official protocols.
Although your assets are pledged and locked, they can be used as collateral to borrow $HONEY. Users can use $HONEY for spot or leveraged trading, and can even borrow $HONEY to buy more assets and pledge them again through "leveraged pledge".
From this perspective, Berachain stakers have such a high level of asset efficiency while receiving staking rewards that they have a greater incentive to stake on Berachain compared to other networks.
In summary, Berachain aims to be a DeFi native chain, and the development team has designed from scratch a sustainable consensus mechanism focused on coordinating investors, builders, and users.
Under the operation of liquidity consensus proof, Berachain's liquidity grows in sync with its utilization and market value; every protocol built on Berachain will have a vested interest in the future of the network, and TVL will increase simultaneously; and users can not only obtain governance rights but also more token rewards by staking, which once again improves network security and anti-Wizard capabilities.
Grasp the trends of Berachain ecological projects in advance
Although Berachain has not yet launched its testnet, the popularity is gradually increasing, and many native projects have emerged in the Berachain ecosystem recently.
1. OR
CrocSwap：
A native AMM DEX integrated with Berachain.
Goldilocks：
An AMM and NFT lending platform that offers multiple yield strategies.
Beradrome：
AMM focused on capital efficiency. A fork of Velodrome, a star project on Optimism.
2. Borrowing
Stacking Salmon：
A loan agreement that provides a leveraged return to the borrower.
BeraCreek Finance：
A lending protocol with segregated pools.
3. Revenue Aggregator
Hiberanation：
An autocompounder similar to Beefy Finance that works on a yield maximization strategy.
4. NFT Market
GumBall：
An NFT marketplace focused on NFT liquidity.
BeraMarket：
NFTFi + NFT lending.
5. GameFi
Honey Pool：
The Savings + Bonus Agreement allows users to deposit USDC to participate in daily draws. The bonus is the interest generated by all deposited USDC. Even if they do not win the prize, users can withdraw USDC at any time.
ChainBet：
On-chain gambling platform.
Beramonium:
A single-player role-playing game. Includes an in-game marketplace where players can trade loot, and a player-driven in-game economy.
6. Option Agreement
B2 Option：
A native on-chain options protocol.
7. Meme Project
Baby Bear：
A meme project with NFT and DeFi yield farming.
Cheat YOU：
A meme project.
8. NFT Series
Without Bone Bear, there would be no Berachain (the chain is built by the Bone Bear team). Bond Bears was launched in August 2021 and is a successful NFT series. The series has undergone 5 rebases to form new series, such as: Bond Bears, Boo Bears, Baby Bears, Band Bears, Bit Bears.
Bong Bear NFT offers several advantages to holders.
- These NFTs may be associated with $BGT (NFTs may also become whitelisted assets that can be staked in the network by users)
- Obtain airdrops from Berachain ecosystem projects
- Get a new rebase
Other NFT collections on Berachain include The Honey Jar, Bera Chill, Yokai Studio, and Bera Colletive.
9. Projects
Redacted Finance：
A DeFi ecosystem that provides on-chain liquidity and governance for DeFi protocols.
Protectorate：
A protocol designed to bring deep and sustainable liquidity to NFTs and the NFTFi protocol.
OlympusDAO：
OlympusDAO invested $500,000 in Berachain and, in addition to receiving $BERA, also participated in the network as a strategic partner. In addition, OlympusDAO will deploy Olympus Pro on Berachain.
dAMM Finance：
An unsecured lending platform.
Synapse Finance：
A cross-chain DEX.
risk warning:
According to the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" issued by the Central Bank and other departments, the content of this article is for information sharing only and does not promote or endorse any business or investment activities. Readers are requested to strictly abide by the laws and regulations in their area and not participate in any illegal financial activities.
