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Key Takeaways
Berachain makes liquidity the core of its ecosystem. Its Proof of Liquidity (PoL) mechanism allows users to stake and provide liquidity simultaneously for rewards.
Berachain’s decentralized model, which offers governance, transactions, and stablecoin features, is powered by the three-token combination of BERA, BGT, and HONEY.
Berachain’s execution layer is EVM-identical. This allows it to work seamlessly with Ethereum, unlocking a variety of tools and use cases.
What Is Berachain (BERA)?
Imagine a blockchain where liquidity isn’t just a byproduct of trading but the foundation of the entire network. Berachain is one such blockchain built on a Proof of Liquidity (PoL) consensus mechanism, with BERA serving as the native gas token.
Unlike traditional staking models that lock assets away, PoL allows users to stake and provide liquidity simultaneously. This may increase security and accessibility while providing opportunities to grow holdings, benefiting traders, especially those with smaller capital.
How Berachain Works
Multiple key components work together to make Berachian work and enable its blockchain ecosystem:
Proof of Liquidity (PoL)
The Proof of Liquidity (PoL) consensus model secures the Berachain network while simultaneously incentivizing liquidity providers. Integrating liquidity provision directly into its validation mechanism attracts both new users and potential validators.
If you would like to become a validator, you first need to obtain the network's non-transferable governance token, the Berachain Governance Token (BGT). This is done by locking capital into reward vaults and thus supplying liquidity into the ecosystem.
This is the primary mechanism for earning BGT. Once you have BGT, you can either delegate it to a validator or burn it in exchange for BERA, the blockchain’s gas token. As the token name suggests, validators with the most BGT will have the most governance power.
EVM-identical
Berachain's execution layer is EVM-identical (Ethereum Virtual Machine), which is distinct from being EVM-compatible. While EVM-compatible blockchains can vary in their degree of integration with Ethereum, EVM-identical layers, like Berachain, are fully aligned with Ethereum’s ecosystem.
In simpler terms, this means Berachain can work smoothly with Ethereum, essentially giving it access to everything Ethereum offers. Having all these features of Ethereum available on Berachain makes it easier to use and connect with the broader Ethereum ecosystem.
For Berachain, this translates into multiple advantages. Any updates to Ethereum can be immediately implemented on Berachain without delay. It also relies on Ethereum’s execution clients like Nethermind, Erigon, and Geth, enabling the seamless execution of smart contracts and full compatibility with Ethereum-specific tools.
BeaconKit framework
Berachain has built its own framework called BeaconKit. This framework includes a system called CometBFT. This system ensures that even if some parts of the network fail, the blockchain still keeps running smoothly and securely. You can think of it as a backup system for a computer network.
What's interesting about this is that Berachain can easily connect to any Ethereum setup, thanks to the Engine API. That means it’s fully in sync with Ethereum's ecosystem, so you can use all of its tools and features.
This modular setup gives Berachain a lot of flexibility. It can easily add different building blocks, such as custom block creators, rollups, or even data storage solutions.
Berachain Tokenomics
Berachain operates using a three-token model, each serving a unique purpose.
BERA: This is the native token used to pay gas fees that power transactions. It can also be staked by validators, helping secure the network.
BGT: This token plays a major role in governance. Unlike other tokens, BGT is non-transferable. In simple terms, it cannot be bought or traded. However, it can be delegated to a validator. This is distinct from buying or selling, as delegating doesn’t transfer ownership of assets.
HONEY: This is Berachain’s native stablecoin. Pegged at 1 USD, HONEY is designed to provide a stable and reliable means of exchange. HONEY can be minted by depositing whitelisted collateral into a vault via the HoneySwap DApp, with minting rates set by BGT governance.
Berachain’s Ecosystem
While Berachain may be EVM-identical, it still has some native DApps:
BEX
BEX is Berachain’s decentralized exchange, where you can swap crypto and provide liquidity. Users who provide liquidity to certain liquidity pools can get rewards as an incentive, reinforcing Berachain’s PoL mechanism. The community decides which pools are eligible for these rewards. Once you connect your wallet and have sufficient BERA to cover transaction costs, you can begin swapping on BEX.
BEND
BEND is Berachain’s lending and borrowing platform, where you can lend stablecoins for fees or borrow them by depositing crypto as collateral. It uses Berachain’s stablecoin, HONEY, as the main borrowing asset and lets participants earn rewards in BGT.
You can begin lending and borrowing once you connect your wallet and have sufficient BERA for transaction fees. To borrow, you will need to provide collateral assets. Your account health will reflect your ability to repay a loan based on the value of your collateral.
BERPS
BERPS is a leveraged trading platform where you can trade futures with HONEY with up to 100x leverage. By providing liquidity to BERPS, you can earn BGT rewards. After connecting your wallet, you need sufficient BERA to cover transaction costs before trading. HONEY is then used as collateral if you want to open a position.
BERA on the Binance HODLer Airdrop
Binance announced BERA as the seventh project in its HODLer Airdrops program. This program rewards BNB holders with token airdrops based on historical snapshots of their balances.
Users who previously subscribed to Binance's Simple Earn products during the designated eligibility periods qualified for BERA rewards. Ten million BERA tokens, equivalent to 2% of the genesis total supply, have been allocated for distribution.
Following the airdrop, BERA was listed on Binance with the Seed Tag, allowing trading against BTC, USDT, USDC, BNB, FDUSD, and TRY pairs.
Closing Thoughts
By placing liquidity at the core of its ecosystem through the Proof of Liquidity (PoL) mechanism, Berachain challenges traditional models, offering users a way to stake, provide liquidity, and earn rewards simultaneously.
Its ability to work seamlessly with Ethereum and its three-token model creates a dynamic and secure environment for governance, transactions, and stablecoin use. Its mechanisms could possibly influence how future Layer-1 blockchains approach liquidity, governance, and ecosystem integration.
Further Reading
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