Berachain: Analyzing the Mechanism of Innovative Decentralized Finance Public Chain

Introduction

Berachain is an EVM-compatible L1 public blockchain focused on Decentralized Finance, built on top of the Cosmos SDK, using a liquidity proof (PoL) consensus mechanism. The project originated from the Bong Bears NFT series launched in August 2021, which subsequently led to the emergence of several related NFT collections.

The Berachain team, after experiencing the ups and downs of the crypto market, deeply understands the importance of liquidity to Decentralized Finance and believes that liquidity is the foundation of characteristics such as decentralization, scalability, security, and interoperability. Therefore, they decided to design an L1 public chain that draws on the experiences of excellent DeFi projects while avoiding their shortcomings, and creatively proposed the liquidity proof ( PoL ) verification mechanism.

In November 2023, Berachain launched its internal testing. On January 11, 2024, the public testnet "Artio" will officially go live, while more than 30 native protocols are under development, and several well-known protocols from other networks are also planning to be deployed on Berachain. It is rumored that the Berachain mainnet is expected to go live in the second quarter of 2024.

Financing Situation

In April 2023, Berachain secured $42 million in funding led by Polychain, with participation from institutions including Hack VC and OKX Ventures, achieving a valuation of $420 million.

Team Background

Berachain was founded by an anonymous team, with core members including co-founders Smokey the Bera, Papa Bear, Homme Bera, and Dev Bear, as well as the recently joined Vice President of Engineering, Baloo the Bera(, former Engineering Director at Mysten Labs). Most team members are early participants who got involved in and invested in cryptocurrencies around 2015, possessing a deep understanding and research of Decentralized Finance and public chain development. Despite being an anonymous team, their ability to secure substantial funding shows that they have rich connections and resources in the cryptocurrency field.

Mechanism Interpretation

Polaris EVM

Berachain is built on Polaris EVM, which is its EVM-based operating system constructed on top of the Cosmos SDK. Polaris connects EVM and Cosmos SDK through messaging, separating block construction, processing, and storage from execution. Polaris EVM also provides developers with state pre-compilation and custom module creation capabilities, enabling them to develop more efficient and powerful smart contracts.

Advantages of using the Polaris EVM framework:

1. Developer-friendly for Ethereum, making it easier to attract developers from other EVM chains.
2. Powerful cross-chain interoperability, eliminating barriers for liquidity from other networks into Berachain through the IBC protocol.

PoL proof mechanism

The PoL mechanism aims to bring the liquidity of mainstream assets into Berachain. Its operation is as follows:

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

Advantages of the PoL mechanism compared to PoS:

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

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 specific assets as LP on BEX. BERA: Gas Token can be obtained through a 1:1 one-way burn of BGT, or as a validation reward. HONEY: Native over-collateralized US dollar stablecoin, is the distribution medium for protocol revenues.

Operating mechanism:

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

The model stimulates the liquidity of the ecosystem further by separating governance tokens from Gas tokens and limiting the acquisition of BGT, incentivizing users to provide diversified liquidity.

Important Ecological Projects

the honey jar

the honey jar is the entry point of the Berachain ecosystem, responsible for user education, project incubation promotion, and cooperation matchmaking. The launched Honey Comb NFT gathers benefits from multiple projects, including airdrops, whitelists, APY enhancements, and more.

Beradrome

Beradrome is the DEX and Restaking liquidity market on Berachain, utilizing ve(3,3) token economics. Holders of its "Tour de Berance" NFT series are expected to receive future token airdrops.

Beradoge

Beradoge(BDOGE) is a well-known Meme project on Berachain, featuring two NFT series. Holders may receive BDOGE token airdrops.

Sudoswap

Sudoswap is a full-chain NFT AMM liquidity market, planning to deploy the protocol after launching on the Berachain mainnet, and is expected to support cross-chain blue-chip NFTs.

Beramonium

Beramonium is the chain game project of Berachain, which has released an idle role-playing game called "Gemhunters."

Redacted Cartel

Redacted Cartel is a Decentralized Finance yield protocol, involving bribery market trading and LSD liquid staking, planning to deploy a new project on Berachain.

Summary

Berachain aims to lead DeFi innovation through an innovative three-token economic model and PoL mechanism, creating a DeFi ecosystem with high liquidity and high capital efficiency. As the user base grows and fee revenue increases, Berachain may attract more users and projects, forming a positive development flywheel.

However, the future development of Berachain still needs to be closely monitored, including the progress of the project itself, the expansion of the ecosystem, and the security of the protocol.