Gate Institute: Berachain and its consensus mechanism -- who is still paying for the public chain narrative

The latest release from Gate Research, "Berachain and Its Consensus Mechanism - Who Still Believes in the Public Blockchain Narrative", systematically analyzes the rise of the innovative public chain Berachain. The report focuses on the PoL (Proof of Liquidity) consensus mechanism, breaking down how Berachain reshapes its security model and governance logic through incentivizing liquidity providers from multiple dimensions, including technical architecture, token economics, TVL growth, ecological applications, and on-chain data. The report also reveals the structural contradictions and potential risks in its rapid expansion and conducts an in-depth assessment of its ability to build a sustainable economic flywheel and move towards a new generation of public chain paradigms.

Key Points Summary

• Market Background: Since 2020, the crypto market has experienced several rounds of bull and bear cycles, with TVL and on-chain innovation becoming the core focus of the new cycle. At the beginning of 2025, the Berachain mainnet went live, rapidly rising with its innovative consensus mechanism and strong capital attraction, and within just a month, it entered the top six public chains by TVL, attracting widespread attention from the market.
• Technology Evolution: Berachain is built on the Cosmos SDK and adopts the modular architecture BeaconKit and Polaris EVM to achieve full compatibility with the Ethereum toolchain, and supports custom modules to interact with Cosmos modules, opening up multi-chain development paths and improving DeFi composability and flexibility.
• Consensus Mechanism Innovation: The PoL (Proof of Liquidity) mechanism links on-chain security with liquidity providers, differing from the traditional PoS's "staking means locking up assets," and encourages active assets to participate in network construction. By using soul-bound governance token $BGT, it incentivizes LPs and validators to form cooperative relationships, addressing the liquidity locking and centralization issues of PoS.
• Token Economic Design: The tri-token system ($BERA, $BGT, $HONEY) has clear functions and mutual checks to avoid the concentration of governance power. $BGT can only be obtained by providing liquidity and cannot be purchased. The voting mechanism is embedded in the incentive loop, forming a DeFi incentive flywheel.
• Ecological Explosiveness: In the early stages of launch, the TVL quickly surpassed $3 billion, with native protocols such as BEX, Bend, Berps, and Infrared dominating fund accumulation. Protocols like Kodiak, Gummi, and Beradrome offer diversified functionalities, enhancing ecological depth and stickiness.
• Centralization Risk: TVL is highly concentrated in a few protocols (Top 3 account for over 60%), the early ecosystem shows a pattern of "whale dominance + low protocol density", and the PoL incentive mechanism may reinforce the oligopoly advantage, forming a potential cartel.
• Inflation Concerns: $BGT's daily emission is stable but the destruction ratio is relatively low, with an annual inflation rate of about 8.6%. If ecological growth fails to cover emissions, it may fall into a subsidy spiral, affecting the stability of governance token value and long-term user stickiness.
• Future Outlook: If Berachain can transform liquidity accumulation into real demand and achieve the prosperity of the dApps ecosystem, it is expected to define a new "liquidity-driven" public chain paradigm. Otherwise, it may fall into a short-term bubble due to uncontrolled inflation, lack of innovation, and other factors. Ecological expansion, optimization of incentive mechanisms, and decentralization of governance will be key battlegrounds in the future.

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