Berachain: An Interpretation of the Innovative Decentralized Finance Public Chain

Introduction

Berachain is an EVM-compatible Layer 1 public chain focused on Decentralized Finance, launched at the end of 2021. The project is built on the Cosmos SDK and uses the liquidity proof ( PoL ) consensus mechanism.

Development History

Berachain originated from the Bong Bears NFT series launched in August 2021. Subsequently, this NFT gave rise to new series such as Boo Bears, Baby Bears, Band Bears, and Bit Bears.

The core members of the Berachain team, after experiencing the bull and bear cycles of the crypto market, have a deep understanding of the importance of liquidity to Decentralized Finance. They believe that compared to factors such as decentralization, scalability, security, and interoperability, liquidity is the fundamental basis. Therefore, the team decided to design a new L1 public chain, drawing on the advantages of successful DeFi projects while avoiding their shortcomings, ultimately giving birth to Berachain.

On November 28, 2023, Berachain will launch its internal testing.

On January 11, 2024, the Berachain public testnet "Artio" officially launched. It is reported that more than 30 native protocols are being developed, and several well-known protocols from other networks also plan to be deployed on the Berachain testnet and mainnet.

It is rumored that Berachain plans to launch its mainnet in the second quarter of 2024.

Financing Status

On April 20, 2023, Berachain secured $42 million in funding led by Polychain, with a valuation of $420 million. Participating institutions include Hack VC, OKX Ventures, and others.

Team Background

Berachain was founded by an anonymous team, with co-founders including Smokey the Bera, Papa Bear, Homme Bera, and Dev Bear. The recently joined Vice President of Engineering, Baloo the Bera, previously served as the Engineering Director at Mysten Labs. Information about other team members has not been disclosed.

Most of the team members are early participants who have been involved in and invested in cryptocurrency since around 2015, with a deep understanding and research into Decentralized Finance and public chain development. Although the team is anonymous, securing $42 million in funding indicates that they have extensive connections and resources in the cryptocurrency field.

Mechanism Interpretation

The original intention of Berachain's design is to solve the on-chain liquidity problem. The team believes that if a chain loses liquidity, it will quickly become a "ghost town." This is the conclusion they reached after experiencing DeFi Summer.

Polaris EVM

Berachain is built on Polaris EVM, which is an EVM-based operating system designed to be built on top of the Cosmos SDK. It uses messaging to connect EVM and Cosmos SDK, separating block construction, processing, and storage from execution. Polaris EVM also provides developers with the ability to create state precompiles and custom modules.

Advantages of using the Polaris EVM framework:

1. Ethereum Developer Friendly: Compatible with EVM, making it easier to attract developers from other EVM chains.

2. Powerful cross-chain interoperability: As a Cosmos subchain supporting the IBC protocol, it eliminates barriers for liquidity from other networks flowing into Berachain.

PoL Proof Mechanism

The PoL mechanism aims to bring mainstream asset liquidity into Berachain. Its operation process is as follows:

1. Users provide liquidity to the BEX( Berachain native DEX) pool to obtain BGT governance tokens.

2. Users delegate BGT to validators, and validators generate blocks based on the weighted ratio of the delegated BGT.

3. The delegators and validators receive BERA and HONEY rewards from the chain.

4. Validators can vote on the inflation situation of BGT in any liquidity pool.

5. Validators distribute part of the rewards to delegators as additional incentives.

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

1. Incentivize liquidity and enhance security: The only way to obtain BGT is to provide liquidity, and not all tokens can be staked.

2. Inflation is more decentralized: new tokens are distributed not only to single token holders but also to liquidity providers of various assets.

3. Coordinate asset issuance agreements and validator relationships: incentivize both parties to cooperate for mutual benefit.

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 LP on BEX.

BERA: Gas token, obtained through a 1:1 one-way burn of BGT or distributed as a verification reward.

HONEY: Native over-collateralized USD stablecoin, serving as a medium for the distribution of protocol revenue.

Operating mode:

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

This three-token model systematically builds liquidity, with the main features:

1. The governance token (BGT) is separated from the Gas token (BERA).
2. The only way to obtain BGT is to provide liquidity to BEX.

This means that Berachain's staking supports a more diverse range of assets, further stimulating liquidity.

The model draws on the experiences of multiple DeFi projects, such as Curve's governance decentralization and Terra's native stablecoin concept.

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 collaboration matchmaking. Its web design mimics a computer desktop, with various related information placed in different "software".

The project has launched the Honey Comb NFT. Although no specific empowerment has been promised, as a core community NFT, holders may receive benefits such as airdrops, whitelist access, APY increases, and free NFT minting from multiple partnership agreements.

Beradrome

Beradrome is the DEX and Restaking liquidity market on Berachain, utilizing ve(3,3) tokenomics, built-in bribing, and voting mechanisms. The team previously launched the "Tour de Berance" NFT series, where holders will enjoy rebase rights upon Berachain's launch and may receive airdrops of BERO or hiBERO tokens.

Beradoge

Beradoge(BDOGE) is a highly anticipated Meme project on Berachain. It has two NFT series: "Beradoge Gen 1" and "Mibidiots". The project team states that these NFT holders will receive "a bunch of useless stuff" or "a bunch of BDOGE". It is rumored that BDOGE may also be airdropped to NFT holders of other Berachain projects.

Sudoswap

Sudoswap is a cross-chain NFT AMM liquidity market that has previously raised $12.5 million in private funding. Its focus on liquidity innovation aligns with the Berachain concept, and it announced early on that it would deploy its protocol on the Berachain mainnet. After Berachain goes live, Sudoswap is expected to support blue-chip NFT bridging and provide incentives.

Beramonium

Beramonium is a chain game project of Berachain that has released an idle role-playing game called "Gemhunters." Players can have Beramium Genesis beras complete tasks to obtain gems, which can be exchanged for NFTs from other well-known Berachain projects. The minting price for the NFT is 0.045 ETH.

Redacted Cartel

Redacted Cartel is a DeFi yield protocol incubated by the New Order team, covering the bribery market trading and LSD liquidity staking field. The project has announced that it will deploy a new project on Berachain, but specific details have not yet been disclosed. Due to the built-in voting bribery mechanism in Berachain, DeFi bribery yield projects like Redacted Cartel are expected to thrive on this chain.

Summary

Berachain's innovative three-token economic model separates gas and governance, maximizing liquidity release while protecting the rights of active users, resolving the conflict between staking participation in governance and liquidity. This is expected to lead to innovations in Decentralized Finance and create protocols with high liquidity and capital efficiency.

With the growth of user numbers and an increase in fee income, Berachain may attract more users and projects, and coupled with its governance reward mechanism, it creates a positive feedback loop.

However, whether Berachain can develop as expected still requires attention to the project's future progress, including aspects such as the project's own development, ecological expansion, and protocol security.