Introduction

With a massive and grueling series of campaigns, Berachain is always hyped and with the chain not live yet it could be either the best or the worst chain launch of the last few years…if it really happens.

While we’ve all been waiting for Berachain’s mainnet deployment, I think it’s time to review it and see if there are really any opportunities that could be leveraged on this long-awaited Layer1.

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In this report I will cover:

• The bases of Berachain’s tech;
• Its tokens $BERA, $BGT and $HONEY;
• The ecosystem, highlighting the most interesting opportunities;
• Speculations and expectations on the future of the chain. </aside>

What is Berachain and how it works

We could define Berachain as “…a high-performance EVM-Identical Layer 1 (L1) blockchain utilizing Proof-of-Liquidity (PoL) as a consensus mechanism, and built on top of a modular evm-focused consensus client framework named BeaconKit.”, as said in their docs.

Let’s clarify now all these terms:

• EVM-Identical means that Berachain has an execution layer that mimics Ethereum’s, by adopting all the clients available on the chain such as Geth, Nethermind ecc… in order to perform all the computations needed by the L1.

• There’s a relevant but overlooked problem in Proof-of-Stake (PoS) chains: their validators’ stakes are useless in the economy of the network, since these tokens are locked just for governance and block/fees rewards. That’s why Berachain’s team designed the Proof-of-Liquidity (PoL) mechanism to create a symbiotic relationship between validators and protocols.

  

  Tokens and actions flows in Proof-of-Liquidity - Source: Berachain docs

  That’s how it works:

  • A Prospective Validator bonds a certain amount of $BERA gas tokens to secure the network and be eligible to produce blocks;
  • One of the P.V. is chosen randomly as Active validator and proposes a new block in exchange for governance tokens ($BGT) that can distribute to Reward Vaults;
  • In the meantime, liquidity providers can deposit token pairs (eg. HONEY/BERA) in the liquidity pools, receiving a receipt token based on their contribution;
  • LPs can stake this receipt in Reward Vaults in order to be eligible to receive $BGT;
  • LPs who receive $BGT can then delegate them to an Active Validator, making the latter a “Boosted Validator”, and increases the rewards a validator is allotted to distribute when they propose a block.

  This mechanism creates shared rewards across all the different stakeholders in the ecosystem, reinforcing at the same time the relationship between validators and protocols.

  https://x.com/berachain/status/1825927271393185819

• BeaconKit introduces an innovative framework that utilizes the Cosmos-SDK to create a flexible, customizable consensus layer tailored for Ethereum-based blockchains and the integration with execution clients makes it supportive of any EVM execution without modifications. This system can also adapt to a modular ecosystem, allowing the creation of different layers and scalability solutions.

The PoL system is supported by a CometBFT consensus mechanism, an improved version of the Tendermint consensus used in most of the modern delegated Proof-of-Stake (dPoS) blockchains.

Berachain technical architecture - Source: DAIC Capital

Participants

There are different entities that participate to the network and its economy:

• Validators stake $BERA and coordinate to reach consensus, their stake gets slashed if they misbehave and they earn through:

  • Gas and priority fees;
  • Incentive provided by protocols in need of $BGT rewards for their Vaults;
  • A commission taken on the total $BGT earned from building a block.

• $BGT farmers seeks the best pools to deposit liquidity in order to farm as much $BGT from Reward Vaults, to then delegate them to validators, especially if they’re redirecting incentives to the pool farmed by the user.

  

  Farming $BGT using Reward Vaults - Source: Berachain docs

• The Bera Foundation plays a crucial role in operating default dApps (Bex, Bend, Berps) which produce fees that are distributed to $BGT holders.

• Protocols outside of the ones run by the Bera Foundation can still participate in Berachain’s economy by operating their own Reward Vaults, that can be created permissionlessly but need to go through a whitelisting process. They offer incentives to both validators and delegates to deposit their funds and allocate $BGT tokens, with the goal of bootstrapping liquidity on their platform.

  

  How incentives work in Berachain’s economy - Source: Berachain docs

Tokens

Till now we named all of the three tokens built by Berachain’s team and now let’s see their features: