Berachain: A New Paradigm for DeFi Innovation and Liquidity

Berachain is an EVM-compatible L1 public chain focused on Decentralized Finance, built on top of the Cosmos SDK, utilizing an innovative Liquidity Proof (PoL) consensus mechanism. The project originated in late 2021 and aims to address on-chain liquidity issues.

Project Background

The origin of Berachain can be traced back to the Bong Bears NFT series launched in August 2021. The project team has experienced the ups and downs of the crypto market and has a deep understanding of the importance of Liquidity to the DeFi ecosystem. They decided to design a new L1 public chain that draws on the advantages of successful DeFi projects while avoiding their shortcomings.

In November 2023, Berachain began internal testing. On January 11, 2024, the public testnet "Artio" was officially launched, attracting the deployment of multiple native protocols and cross-chain projects. It is rumored that Berachain may launch its mainnet in the second quarter of 2024.

Financing and Team

In April 2023, Berachain raised $42 million in funding, led by Polychain, with a valuation of $420 million. Participating institutions include Hack VC and OKX Ventures.

Although Berachain was founded by an anonymous team, most of its members are early participants in the crypto space, having been involved since around 2015, and have a deep understanding of DeFi and public chain ecosystems. The team's ability to secure such a large amount of funding indicates that they possess a wealth of connections and resources in the crypto industry.

Technical Architecture

Berachain is built on Polaris EVM, which is an EVM-based operating system running on top of the Cosmos SDK. Polaris connects EVM and Cosmos SDK through messaging, separating the construction, processing, and storage of blocks from execution. This architecture provides developers with the ability to create more efficient and powerful smart contracts.

The advantages of Polaris EVM include:

1. Friendly to Ethereum developers, easy to attract developers from the EVM ecosystem.
2. Achieve powerful cross-chain interoperability through the IBC protocol

PoL Consensus Mechanism

The Liquidity Proof (PoL) mechanism is Berachain's core innovation, aimed at introducing liquidity for mainstream assets. It operates as follows:

1. Users provide liquidity to the native DEX BEX and receive governance token BGT.
2. Users delegate BGT to validators, and validators generate blocks based on the delegation weight.
3. The client and the validator receive BERA and HONEY rewards from the chain.
4. Validators can vote on the BGT inflation situation.
5. The validator distributes rewards to the delegator.

Compared to traditional PoS, the PoL mechanism has the following advantages:

• Incentivize Liquidity provision while enhancing network security
• Achieve a more decentralized inflation distribution
• Coordinate the relationship between asset issuance agreements and validators.

Three Token Model

Berachain adopts a unique three-token model:

• BGT: Governance token, obtained only by providing Liquidity, non-transferable.
• BERA: Gas token, which can be obtained through 1:1 burning of BGT or verification rewards.
• HONEY: Native over-collateralized stablecoin, serving as a medium for protocol revenue distribution.

This model design aims to build a more systematic liquidity ecosystem:

• Separate governance rights from Gas tokens
• Incentivize liquidity provision through diversified staking assets

Ecosystem Overview

The Berachain ecosystem is thriving, with major projects including:

1. the honey jar: ecological entrance and community center responsible for user education and project incubation
2. Beradrome: DEX and Restaking Liquidity Market
3. Beradoge: A highly regarded Meme token project
4. Sudoswap: Full-chain NFT AMM Liquidity Market
5. Beramonium: Blockchain Game Project
6. Redacted Cartel: DeFi Yield Protocol

These projects cover multiple fields such as Decentralized Finance, NFT, and GameFi, showcasing the diversity and potential of the Berachain ecosystem.

Outlook

Berachain is committed to maximizing liquidity release through an innovative three-token economic model and PoL mechanism, while balancing the rights of active users. This design is expected to lead DeFi innovation and create a protocol ecosystem with high liquidity and high capital efficiency.

As the user base grows and fee income increases, Berachain may attract more users and projects, creating a positive growth flywheel. However, the long-term success of the project also requires attention to multiple aspects such as its future development, ecosystem expansion, and protocol security.