Berachain: An Analysis of the Innovative Decentralized Finance Public Chain

Introduction

Berachain is an EVM-compatible L1 public chain focused on Decentralized Finance, built on top of the Cosmos SDK, and utilizes a Proof of Liquidity (PoL) consensus mechanism. The project originated from the Bong Bears NFT series launched in August 2021, which later spawned multiple related NFT collections.

The Berachain team, after experiencing the ups and downs of the crypto market, recognized the importance of liquidity for Decentralized Finance. They decided to design an L1 public chain that integrates the advantages of successful DeFi projects and innovatively proposed a liquidity proof mechanism, laying the foundation for its three-token model.

In November 2023, Berachain began its internal testing. On January 11, 2024, its public testnet "Artio" will officially launch. It is reported that more than 30 native protocols are currently under development, and several well-known projects also plan to deploy on Berachain. The Berachain mainnet is expected to go live in the second quarter of 2024.

Financing Situation

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

Team Background

Berachain was founded by an anonymous team, with core members including Smokey the Bera, Papa Bear, Homme Bera, and Dev Bear among others. Most team members are early participants in the crypto space, having entered around 2015, and they have a deep understanding of Decentralized Finance and public chain development. Although the team remains anonymous, their successful fundraising indicates that they possess rich connections and resources in the crypto field.

Mechanism Interpretation

Polaris EVM

Berachain is built on the Polaris EVM, which is a foundational operating system for building EVM on top of the Cosmos SDK. Polaris connects the EVM and Cosmos SDK through messaging, separating the construction, processing, and storage of blocks from execution. This architecture provides developers with the tools to create more efficient and powerful smart contracts.

The main advantages of using Polaris EVM include:

1. Developer-friendly for Ethereum, making it easy to attract developers from other EVM chains.
2. Achieve powerful cross-chain interoperability through IBC support.

PoL proof mechanism

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

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

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

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

three-token model

Berachain uses three tokens:

• BGT: Governance token, non-transferable, obtained only by providing liquidity on BEX.
• BERA: Gas Token, obtained through a 1:1 one-way burn of BGT or as a validation reward.
• HONEY: Native over-collateralized dollar stablecoin, serving as a medium for protocol income distribution.

This model effectively stimulates on-chain liquidity by separating governance tokens and Gas tokens, linking the acquisition of BGT to providing liquidity. Meanwhile, the model draws on the experiences of several successful Decentralized Finance projects, such as Curve's decentralized governance and Terra's native stablecoin concept.

Important Ecological Projects

the honey jar

As the entry point of the Berachain ecosystem, the honey jar is responsible for user education, project incubation, and collaboration matchmaking. It has launched the Honey Comb NFT, which provides benefits from multiple ecosystem projects for its holders.

Beradrome

Beradrome is the DEX and Restaking liquidity market on Berachain, utilizing ve(3,3) token economics. Its Tour de Berance NFT series offers multiple potential benefits to holders.

Beradoge

Beradoge (BDOGE) is a well-known Meme project on Berachain, featuring two NFT series. The project team promises substantial rewards for NFT holders.

Sudoswap

As a full-chain NFT AMM liquidity market, Sudoswap plans to deploy its protocol after the launch of the Berachain mainnet, aiming to support the bridging of blue-chip NFTs.

Beramonium

Beramonium is the chain game project of Berachain, which has launched a idle role-playing game called Gemhunters. Players can obtain NFTs from other Berachain projects through the game.

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 initiatives on Berachain.

Summary

Berachain is committed to maximizing on-chain liquidity through its innovative three-token economic model and PoL mechanism. This design is expected to lead DeFi innovation, creating an ecosystem with high liquidity and high capital efficiency. As the user base grows and fee income increases, Berachain may attract more users and projects, forming a positive development flywheel.

However, the future development of Berachain still needs to focus on multiple aspects, including the progress of the project itself, the growth of the ecosystem, and the security of the protocol. Investors and users should maintain a rational attitude and continuously pay attention to the project's actual performance.