Berachain: An Innovative Decentralized Finance Public Chain Solution

Berachain is an EVM-compatible L1 public blockchain focused on Decentralized Finance, launched at the end of 2021. It is built on the Cosmos SDK and uses a liquidity proof (PoL) consensus mechanism.

Development History

Berachain originated from the Bong Bears NFT series launched in August 2021. Subsequently, the NFT gave rise to new series such as Boo Bears, Baby Bears, Band Bears, and Bit Bears.

The core members of the Berachain team, after experiencing both bull and bear markets, deeply understand the importance of liquidity in Decentralized Finance. They decided to design an L1 public chain, drawing from the advantages of successful DeFi projects while avoiding their shortcomings. The team developed a liquidity proof (Proof of Liquity) verification mechanism, laying the foundation for Berachain's three-token model.

On November 28, 2023, Berachain will start its internal testing.

On January 11, 2024, the Berachain public testnet "Artio" officially launched. It is reported that over 30 native protocols are under development, and protocols from other networks such as Pendle, Redacted, Sudoswap, Abracadabra, etc. also plan to be deployed on the Berachain testnet and mainnet.

It is rumored that Berachain will launch its mainnet in Q2 2024.

Financing Situation

On April 20, 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 established by an anonymous team, with co-founders including Smokey the Bera, Papa Bear, Homme Bera, and Dev Bear. The recently joined Vice President of Engineering, Baloo the Bera, was formerly the engineering director at Mysten Labs. Most team members are early adopters of cryptocurrency who got involved and invested around 2015, possessing in-depth understanding of Decentralized Finance and public chain development. Although it is an anonymous team, it has raised $42 million in funding, demonstrating its rich connections and resources in the crypto space.

Mechanism Design

Polaris EVM

Berachain is built on Polaris EVM, which is its EVM-based operating system for building on top of the Cosmos SDK. Polaris uses messaging to connect the EVM and the Cosmos SDK, separating block construction, processing, and storage from execution. The Polaris EVM also provides developers with the ability to create state precompiles and custom modules.

Advantages of using the Polaris EVM framework:

1. Ethereum Developer Friendly: Compatible with EVM, easy to attract other EVM chain developers.

2. Powerful cross-chain interoperability: As a Cosmos sub-chain supporting IBC, it eliminates barriers to liquidity influx from other networks.

PoL proof mechanism

The PoL mechanism introduces liquidity of mainstream assets into Berachain to address the liquidity issue. Its operation is as follows:

1. Users provide liquidity to the BEX( Berachain native DEX) pool to earn BGT governance tokens.
2. Users delegate BGT to validators, and validators generate blocks based on the weighted ratio of the delegated BGT.
3. The client and the validator receive BERA and HONEY rewards from the chain.
4. Validators can vote on the inflation situation of BGT in any liquidity pool.
5. The validator distributes bribes to the delegator.

The advantages of PoL compared to PoS:

1. Incentivize liquidity and enhance security: The only way to obtain BGT is to provide liquidity to BEX, which enhances security while incentivizing liquidity.

2. Inflation is more decentralized: BGT is allocated to liquidity providers of certain assets, rather than to a single token holder, addressing the issue of stake centralization in PoS.

3. Coordinate asset issuance agreements and validator relationships: incentivize agreements and validator cooperation, allowing validators to control the flow of BGT, and the protocol helps validators gain more governance rights.

three-token model

Berachain adopts a three-token model: BGT( governance token ), BERA( Gas Token ), and HONEY( stablecoin ).

• BGT: Governance token, non-transferable, can only be obtained by providing a portion of assets as LP on BEX.
• BERA: Gas Token, obtained by 1:1 unilateral burning of BGT or as a validation reward.
• HONEY: The native over-collateralized USD stablecoin, serves as the distribution medium for protocol revenue.

Operating mode:

• Users provide liquidity on Berachain with ( BERA, HONEY, or other trading pairs ) to earn BGT rewards.
• Delegate BGT to the validating nodes to earn BERA + HONEY.

The model constructs liquidity more systematically, separating governance tokens from Gas tokens. The only way to acquire BGT is to provide liquidity to BEX, which diversifies the assets supported by staking and further stimulates liquidity.

Important Ecological Projects

the honey jar

As the entry point of the Berachain ecosystem, it is responsible for user education, project incubation promotion, and partnership matchmaking. The Honey Comb NFT has been launched, and holders can enjoy benefits from multiple projects.

Beradrome

The DEX and Restaking liquidity market on Berachain adopts ve(3,3) token economics. The "Tour de Berance" NFT series has been launched, and holders will enjoy future benefits.

Beradoge

The Meme projects on Berachain have two NFT series, "Beradoge Gen 1" and "Mibidiots". Holders may receive BDOGE airdrops.

Sudoswap

The full-chain NFT AMM liquidity market will deploy the protocol after launching on the Berachain mainnet. It is expected to support bridging blue-chip NFTs to Berachain.

Beramonium

Berachain's blockchain game has released "Gemhunters," a idle role-playing game. Players can obtain NFTs from other Berachain projects through the game.

Redacted Cartel

Decentralized Finance收益协议,涵盖贿赂市场交易与LSD流动性质押领域,计划在Berachain上部署新项目。

Summary

Berachain's tri-token economic model separates gas and governance, maximizing liquidity release and addressing the contradiction between the activity of staking participants in governance and liquidity. It is expected that Berachain will lead DeFi innovation, creating DeFi protocols with high liquidity and high capital efficiency.

As the number of users grows and fee income increases, Berachain is expected to attract more users and ecosystem projects, forming a positive feedback loop. However, attention still needs to be paid to the project's future development, including ecosystem expansion and protocol security.