Berachain: A New Generation Public Chain Focused on Decentralized Finance

Berachain was launched at the end of 2021 and is an EVM-compatible L1 public chain focused on Decentralized Finance. It is built on top of the Cosmos SDK and employs an innovative Proof of Liquidity (PoL) consensus mechanism.

Origin and Development of the Project

Berachain originally stemmed from a smoking bear NFT project, traceable to the Bong Bears series of NFTs launched in August 2021. Subsequently, the series gave rise to new collections such as Boo Bears, Baby Bears, Band Bears, and Bit Bears.

Having experienced the ups and downs of the crypto market, the Berachain team has come to deeply understand the importance of liquidity in Decentralized Finance. They believe that liquidity is the foundation of the DeFi ecosystem, more so than factors such as decentralization, scalability, security, and interoperability. Based on this philosophy, the team decided to design a brand new L1 public chain, drawing on the experiences of past successful DeFi projects while avoiding their shortcomings. This is the reason for the birth of Berachain.

The team subsequently innovatively proposed the Proof of Liquidity mechanism, laying the foundation for Berachain's three-token model. In November 2023, Berachain began internal testing. On January 11, 2024, the day when the spot Bitcoin ETF was approved, Berachain's public testnet "Artio" officially launched. It is reported that more than 30 native protocols are currently in development, and other well-known projects such as Pendle, Redacted, Sudoswap, and Abracadabra also plan to deploy on the Berachain testnet and mainnet.

Industry news suggests that Berachain is expected to launch its mainnet in the second quarter of 2024.

Financing Status

In April 2023, Berachain completed a $42 million financing round, led by Polychain, with participation from institutions such as Hack VC and OKX Ventures, reaching a valuation of $420 million.

Team Background

Berachain was founded by an anonymous team. The co-founders include Smokey the Bera, Papa Bear, Homme Bera, and Dev Bear. The recently joined Vice President of Engineering, Baloo the Bera, was previously the Engineering Director at Mysten Labs. The identities of other team members have not been disclosed.

The team members are mostly early participants in the crypto industry who entered around 2015, with a deep understanding of Decentralized Finance and public chain development. Although the team remains anonymous, the ability to secure $42 million in funding indicates that they possess rich connections and resources in the crypto space.

Core Mechanism Analysis

Polaris EVM

Berachain is built on Polaris EVM, which is an EVM-based operating system designed for building on top of the Cosmos SDK. Polaris connects the EVM and Cosmos SDK through messaging, separating block construction, processing, and storage from execution. Polaris EVM also provides developers with state precompilation and the ability to create custom modules, enabling them to build more efficient and powerful smart contracts.

Advantages of Polaris EVM:

1. Friendly to Ethereum developers, making it easier to attract developers from other EVM chains.
2. Powerful cross-chain interoperability eliminates barriers for other networks' liquidity to enter Berachain through the IBC protocol.

PoL proof mechanism

The Proof of Liquidity (PoL) mechanism is at the core of Berachain's solution to on-chain liquidity issues. Its operation is as follows:

1. Users provide liquidity to BEX (Berachain native DEX) and receive BGT governance tokens.
2. Users delegate BGT to validators, and validators generate blocks based on the proportion of delegated BGT.
3. The delegator 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 delegators.

Advantages of PoL compared to traditional PoS mechanisms:

1. Incentivize liquidity while enhancing security.
2. The distribution of inflation is more decentralized.
3. Coordinated the relationship between the asset issuance agreement and the validators.

three-token model

Berachain adopts a three-token model:

• BGT: Governance token, non-transferable, can only be obtained by providing LP on BEX.
• BERA: Gas token, can be obtained through 1:1 one-way burn of BGT or as a validation reward.
• HONEY: Native over-collateralized USD stablecoin, serving as a medium for distributing protocol revenue.

How the model operates:

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

This design systematically builds liquidity by separating governance tokens from on-chain Gas tokens and further stimulating liquidity through diversified staking assets.

Ecosystem Project Overview

the honey jar

the honey jar is the entry point of the Berachain ecosystem, responsible for user education, ecological project incubation promotion, and project cooperation matchmaking. The Honey Comb NFT launched provides holders with benefits from multiple ecological projects, including airdrops, whitelists, APY increases, and free NFT minting.

Beradrome

Beradrome is the DEX and Restaking liquidity market on Berachain, utilizing ve(3,3) token economics. Its "Tour de Berance" NFT series will enjoy future rebase rights and potential token airdrops.

Beradoge

Beradoge (BDOGE) is a popular Meme project on Berachain, featuring two NFT series: "Beradoge Gen 1" and "Mibidiots". The project team promises that NFT holders will receive "a bunch of useless stuff" or "a bunch of BDOGE".

Sudoswap

Sudoswap is a cross-chain NFT AMM liquidity market that plans to deploy its protocol after launching on the Berachain mainnet. It is expected to support blue-chip NFT cross-chain bridging, bringing more NFT liquidity to Berachain.

Beramonium

Beramonium is the blockchain game project of Berachain, which has launched the "Gemhunters" idle role-playing game. Players can obtain gems through the game and exchange them for NFTs from other Berachain projects.

Redacted Cartel

Redacted Cartel is a Decentralized Finance yield protocol that covers bribery market trading and LSD liquid staking. The project plans to deploy new products on Berachain, aiming to leverage Berachain's built-in voting bribery mechanism.

Summary

Berachain aims to maximize on-chain liquidity through an innovative three-token economic model and PoL mechanism. This design is expected to lead DeFi innovation by creating a protocol ecosystem with high liquidity and high capital efficiency.

With the growth of user numbers and an increase in fee income, Berachain is expected to attract more users and projects, forming a positive growth flywheel. However, the long-term development of the project, the expansion of the ecosystem, and the security of the protocol still require ongoing attention.