What is Berachain ($BGT)? All you need to know

Berachain, one of the most anticipated blockchain projects, is set to unveil its mainnet in 2024. Its distinctive features have already drawn over 200 decentralized applications (dApps) and more than eight million unique wallets to its testnet. As a layer one (L1) blockchain, Berachain employs a unique consensus mechanism called proof-of-liquidity (PoL) to incentivize liquidity provision within its ecosystem.

Compatible with Ethereum Virtual Machine (EVM), Berachain can support existing dApps from Ethereum (ETH). It is developed using the Cosmos software development kit (SDK), which allows for modular blockchain design. This modularity enables Berachain developers to integrate with external blockchain infrastructure for various functions, including execution, data availability, settlement, and consensus.

“Modular architectures are increasingly preferred for their ability to adapt and upgrade as technology evolves,” noted Knower Bera of Berachain in a blog post. Berachain introduced its public testnet in January 2024.

Understanding Berachain’s Proof-of-Liquidity

Berachain’s innovative Proof-of-Liquidity (PoL) consensus mechanism distinguishes it from other layer one (L1) blockchains. 

PoL operates on a flywheel model where validators, decentralized applications (dApps), and users collaborate to enhance user retention and liquidity. Users contribute cryptocurrencies to liquidity pools, known as vaults or gauges on Berachain, and in return, they receive $BGT, Berachain’s governance token.

Typically, users will add liquidity to vaults that offer the highest $BGT rewards. These rewards are provided by network validators, who, like in proof-of-stake (PoS) systems, receive $BGT for proposing new blocks. Validators then redistribute their $BGT tokens to the vaults of their choice.

dApps on Berachain incentivize validators by offering dApp tokens in exchange for directing liquidity providers to their specific vaults. Additionally, liquidity providers can delegate their $BGT tokens to validators to earn dApp token incentives.

Validators aim to maximize the amount of $BGT delegated to them, as their rewards for proposing new blocks are tied to the amount of governance tokens they receive.

“Unlike other ecosystems where the interactions between users, validators, and applications are often disjointed, Proof-of-Liquidity streamlines this relationship. It helps dApps attract users and liquidity while offering validators unique revenue opportunities through their collaboration with these protocols,” explained Camila Ramos of Berachain in a blog post.

The three tokens of Berachain

The Berachain ecosystem operates with three distinct tokens:

• Bera Governance Token (BGT): BGT is a non-transferable token obtained through providing liquidity under the Proof-of-Liquidity (PoL) mechanism on Berachain. It is used for voting on ecosystem decisions and governance proposals. Holders of BGT can delegate their tokens to validators to earn incentives from decentralized applications (dApps). Additionally, BGT is utilized to burn the BERA token.
• BERA: BERA is the native token of the Berachain blockchain. It serves multiple purposes, including paying for gas fees and staking to activate validator nodes.
• HONEY: HONEY is a fully collateralized stablecoin pegged to the US dollar, providing a stable value within the Berachain ecosystem.

The Berachain team

Berachain began as an NFT collection named Bong Bears in August 2021. The project evolved into a layer one (L1) blockchain in 2022 with the help of its development team. The project is spearheaded by three co-founders known by their pseudonyms:

• Smokey the Bera
• Homme Bera
• Dev Bear

Smokey the Bera transitioned to the crypto industry from a career in biotech and healthcare around 2015-2016, according to Revelo Intel. 

In April 2023, Berachain secured $42 million in seed funding from notable investors such as Polychain Capital, Hack VC, Shima Capital, Robot Ventures, and Goldentree Asset Management. By April 2024, the project had successfully raised $100 million in a Series B funding round, led by Brevan Howard Digital and Framework Ventures, marking one of the largest crypto investment deals of the year.

Analyst & expert views on Berachain

Framework Ventures, a Canada-based crypto investment firm, commented on Berachain's innovative approach after co-leading a $100 million Series B funding round in April 2024:

“They’ve essentially created a blockchain that allows users to directly incentivize specific applications and industries to develop on their platform, presenting a novel model for ecosystem growth. The fact that over 200 apps are committed to building on Berachain is a testament to this unique approach.

“Since its launch two months ago, Berachain’s testnet has achieved unprecedented usage in blockchain history, with over 300,000 users and approximately 1 million transactions processed within the first 48 hours. Currently, the testnet boasts over 8 million unique wallets and 100 million transactions processed.”

Revelo Intel, a crypto research firm, shared its perspective in an email newsletter:

“Proof of Liquidity effectively transforms liquidity into security, offering stakeholders economic incentives and governance over the ecosystem. This promotes sustainable growth and usage of the network.

“Berachain’s focus on ecosystem growth involves empowering developers through Proof of Liquidity, reducing friction, and enhancing the overall developer experience.”

The crypto community is buzzing with anticipation for the upcoming mainnet launch of Berachain. For those interested in exploring what Berachain has to offer, you can join the growing number of over 635,000 active wallets (as of August 1, 2024) participating in Berachain’s Artio Testnet. This testnet features a range of essential components including a decentralized exchange (DEX), a native stablecoin, a lending platform, and a governance station, providing a comprehensive preview of the ecosystem's capabilities and functionalities.