A Layer 1 Built for Maximum Profitability and Stability with Proof of Liquidity Consensus
by Russian DeFi
Berachain, a layer 1 built on Cosmos, is designed to solve the common challenge faced by most Layer 1s using the Proof of Stake (PoS) mechanism.
The issue is how to maximize profits, effectively use capital, and maintain a stable economy for the ecosystem from staked assets, considering that investors typically have to wait for a long time to receive rewards or power in the ecosystem.
After the last bull market, the founders of Berachain recognized that creating a strong and sustainable Layer 1, rather than just copying and pasting the Ethereum Virtual Machine (EVM), would benefit the community both in the short and long term.
To address these challenges, Berachain was built with the Proof of Liquidity Consensus (POLC) mechanism.
This mechanism provides integrated liquidity for the system while retaining the benefits of PoS, such as fast transaction speed and low cost. The aim of the POLC mechanism is to create a robust and sustainable Layer 1 that meets the needs of the community.
Berachain, Cosmos-SDK, Tendermint, and Byzantine Fault Tolerant (BFT) correlation
An SDK is a toolkit for devs to use to build an application. Cosmos-SDK is an open-source tool for building application-specific blockchains. Devs can fork Cosmos to develop their desired chains using the same framework as Cosmos, hence an EVMOS fork.
Berachain utilizes Tendermint software to replicate and launch blockchain applications securely and consistently. It is a reliable, fast, and secure implementation of Byzantine Fault Tolerant (BFT) consensus. Tendermint-based chains currently secure over $150 billion in assets, making it one of the market’s most battle-tested and production-ready consensus frameworks.
Tendermint offers its tools in the Cosmos-SDK consensus layer. Tendermint comprises two technical components: Application BlockChain Interface (ABCI) and Tendermint core. The consensus engine is the Tendermint core, while ABCI enables machines to process transactions written in any programming language.
Because of BFT, machines fail arbitrarily, and malicious transactions are tolerated in a chain. BFT is decades-old technology that has become extremely useful as a result of the success of blockchain technology. BFT is similar to blockchain technology because it gets its name from hatched blocks containing cryptographic hashes of previous blocks. In conclusion, BFT optimizes blockchain.
Developers can use Tendermint to replicate BFT state machines of applications written in whatever programming language and development environment they prefer.
Proof of Liquidity
Berachain’s Proof of Liquidity is a novel Sybil resistance mechanism that uses “consensus” vaults to calculate validator vote weights, distribute block rewards, and incentivize capital velocity and liquidity depth.
Proof of liquidity is a term coined by Berachain that allows users to stake various L1 tokens (wBTC, wAVAX, wETH, wADA, and so on) and stable coins (USDC, DAI etc.) to a specific validator to earn block rewards.
The consensus vault measures and distributes voting weights and block rewards. This mechanism is used as proof of liquidity to incentivize liquidity in the blockchain.
Users stake different tokens and are rewarded with tokens proportional to their staked funds. These staked assets help provide liquidity to Berachain’s vAMM synthetic liquidity, which allows traders to buy and sell native perpetual futures exchange and lending markets.
Berachain tokenomics will follow the tri-token model:
Berachain uses a novel “Tri-Token System,” which means that, unlike Ethereum, which has a single native token (ETH), or Terra, which has two (LUNA, UST/SDT), Berachain has three native tokens:
- BERA: the gas token of Berachain
- BGT: the governance token of Berachain
- HONEY: the native consensus collateralized stablecoin
The explanation for this system stems is that every decentralized economy has three main components that must function for Berachain to maximise their whole operation:
- In smart contract execution, a medium for pricing and performing a unit of work – $BERA
- A democratic medium for organizing, reaching consensus, and making decisions about the network’s future – $BGT
- A medium for transacting using a common stable denomination – $HONEY
Borrowing – How Does it Work?
Users can borrow $HONEY using their staked assets as collateral. $HONEY is pegged to the US dollar and generally over-collateralized by at least 150%, though this ratio varies by the asset. Users can use $HONEY to make a spot or leveraged trades or go even further by “leverage staking” and purchasing more collateral to stake and mint more $HONEY. Berachain investors have a liquid position while earning staking rewards, so they have fewer incentives to unstake compared to investors on other networks.
The AMMs base liquidity layer is $HONEY, allowing users to freely trade all assets for $HONEY while generating deep, viscous liquidity for Beras. If a token can be staked on Berachain, it will automatically benefit from high liquidity when paired with $HONEY.
The chain helps streamline liquidations. Instead of collateral auctions, the collateral is transferred to network reserves, and the position debt is significantly reduced.
Projects launching on Berachain
All the projects are building exciting stuff and have already begun partnerships even before the launch of testnet;
These are some of the numerous projects on Berachain:
Native Berachain Projects:
- Grizzli finance – A stablecoin swap DEX, coming later, according to their Twitter account – @Grizzli_Finance.
- Honeypot finance – A DEX, coming soon to Berachain.
- BeraCreek finance – A money market on Bera.
- Apiarist finance – A money market and liquid staking solution on Bera.
NFTs and Gaming:
- Beramonium – is developing a single-player browser-based RPG game. The in-game marketplace, where players can trade the loot, includes a player-driven economy. E-Street Digital created the in-game graphics. Beramonium will provide all demo and alpha versions of the game soon!
- Bera Bets – a decentralized betting marketplace that will allow users to bet with any tradable asset on Berachain and be the house or bet in non-traditional ways.
- BabyBera – is building an ecosystem in 3 parts/phases:
- NFT launch > $BBBERA launch /Yield farm > Memecoin
- NFT will be launched first on ETH, followed by a bridge/migration to Bera. Phase 2 will be the only way to obtain the token at first (no presale or WL).
- Gumball Protocol – is a liquid NFT marketplace and launchpad with a novel design utilizing ERC20 tokens and a bonding curve.
There is a potential partnership with Beradrome and Beramonium – In-game assets bought on Beramonium, minted on Gumball bonding curve, and then staked on Beradrome.
The development team
An anonymous developer with the Twitter account @itsdevbear came in first; however, this Twitter is followed by some influential figures in the crypto market, which lends credence to its legitimacy.
Berachain arose from an NFT collection known as Bong Bears, which launched on Ethereum near the end of 2021.
The Goal of Berachain
The team was primarily motivated by their own L1 rotation experience, and then they reflected on problems that plagued other chains to improve on top of them.
Berachain’s design focuses on free-flowing liquidity, scalability, and improved UX for both protocols and regular users. Finally, the goal is to align network incentives to create a tight-knitted alliance between Berachain and its ecosystem.
Berachain already has a rapidly growing ecosystem, with several projects announcing plans to launch on the network.
CrocSwap is the engine that drives the native integrated DEX. Outside of Cosmos, Synapse will provide top-tier bridge infrastructure for incoming Beras. By staking on Berachain, DeFi protocols such as lending markets or other yield aggregators with idle assets can easily bridge and have many strategies at their disposal.
Berachain is built with the Cosmos-SDK and will support IBC at launch. This means Berachain is connected to the broader Cosmos ecosystem, and the rapid developments with Cosmos interchain accounts open an avenue for many partnership opportunities in the future.
Community – bear as the main character to build a “culture.”
In general, one of the essential aspects of memes and crypto projects is building a long-term supportive community, such as Shiba Inu and Dogecoin, which has many members under the theme of “dog”.
Berachain is seriously building a layer 1 with a new mechanism. However, this project is still similar to the current meme community, which uses the image of a bear as the main character to build a “culture.”
Compared to meme projects like Dogechain or Shibarium, the Bera community’s membership and activity frequency on Twitter and Discord platforms are high.
According to the developer, the mainnet will officially launch in the next 3 months and is currently in the devnet stage.
Conclusion – Why Berachain?
BeraChain is a truly DeFi native L1, built from the ground up to align incentives between investors, builders, and network users.
Gone are the days when a new L1 with shoddy infrastructure, a broken bridge, and a uni fork drew 3 weeks of investor attention. At the same time, rotators stacked the fee token before a PVP knife fight to drain the limited liquidity ensued.
This project has great potential – large community, experienced and active team, token value-added tokenomic, and innovation with the Tri-Token mechanism. Despite sticking to the Meme culture, Berachain presents itself as a reliable project. It is still in development, but anyone can join the project discord to increase their chances of owning a collection of NFTs and receiving an airdrop later.