Issue coin is imminent, discussing the characteristics of the Berachain ecosystem and core projects

Berachain is a Layer 1 network characterized by the PoL (Proof of Liquidity) consensus mechanism, aligning the interests of validators, liquidity providers, and the protocol. The second testnet "bArtio Testnet" is currently underway to address the issues found in the first testnet.

As of January 2, a total of 234 agreements have participated in the bArtio Testnet, with the cumulative number of wallets participating in testing the PoL mechanism exceeding 2.38 million, indicating a high level of market interest in Berachain and its ecosystem.

Berachain founder Smokey The Bera recently hinted that "Q5 will happen before April," indicating that the mainnet is about to launch. This has attracted both new and old users to join the ecosystem.

However, participating in the Berachain ecosystem requires an understanding of its PoL mechanism. Before the mainnet launch, the protocol introduced complex financial products designed to gain an advantage in the PoL mechanism, creating a significant entry barrier for new users.

This article aims to explore various fields of the Berachain ecosystem, lower the participation threshold for users, discuss projects that stand out in each field, and elaborate on how each protocol utilizes the PoL mechanism.

DEX

Berachain has a native DEX called BEX, which will be launched on the mainnet as BeraSwap, supporting smooth liquidity trading within the ecosystem and ensuring the effective operation of the PoL mechanism. Other DEXs preparing to launch on Berachain are getting ready with various convenient and efficient services and strategies to attract users and liquidity.

2.1 Kodiak

Kodiak is a DEX that has emerged from the Berachain incubated project "Build a Bera". In addition to supporting BEX's Uniswap v2-style features, it also offers CLAMM features similar to Uniswap v3, allowing liquidity providers to set and concentrate liquidity within a specific range.

Users can provide liquidity in a narrow range through the CLAMM pool to farm $BGT more effectively. Kodiak also offers the Island feature, which helps users automatically reset and balance the CLAMM range, reducing the hassle of managing liquidity supply positions. This feature utilizes BEX to rebalance liquidity, establishing a complementary rather than competitive relationship.

Kodiak standardizes CLAMM liquidity positions through the Island feature, allowing LP tokens to be used in other protocols, promoting more flexible and diverse ecological gameplay.

Kodiak has partnered with multiple projects in the Berachain ecosystem to establish a core infrastructure position. They also operate their own validation nodes and, as of January 3rd, have received the second highest BGT authorization in the bArtio Testnet.

2.2 Honeypot Finance

Honeypot Finance is a protocol that supports all aspects of the token lifecycle, consisting of the following sub-protocols:

• Henlo DEX: A DEX specifically designed to protect users from MEV attacks, offering limit orders and Batch-A2MM functionality.
• Dreampad: A Launchpad protocol that provides incubation and financing opportunities for projects preparing to launch on Berachain.
• Pot2Pump: A meme coin issuance platform that provides a safer environment for meme coin issuance and trading.

Honeypot Finance plans to operate verification nodes after the mainnet launch, providing $HPOT as delegation rewards. It utilizes accumulated $BGT to release into the $HPOT liquidity pool, enhancing $HPOT liquidity. The protocol also plans to use node operation income to buy and burn $HPOT to increase token value.

In addition to Kodiak and Honeypot Finance, there are other protocols advocating for efficient and convenient trading functions that are preparing for the Berachain mainnet, such as BurrBear, OogaBooga, and Shogun.

Liquidity Staking

The structure of Berachain is such that when liquidity providers deposit the liquidity tokens obtained from ecological protocols, they receive network rewards and liquidity provision interest calculated in $BGT. Therefore, Berachain has essentially built liquidity staking into the network protocol.

However, existing protocols can only provide rewards and gain voting rights by collaborating with validators or by operating nodes themselves to establish a self-sustaining flywheel model.

In this context, Berachain's liquid staking protocol will provide $BGT redemption functionality. This makes it easier for ecological protocols to adopt a structure that closely integrates the PoL mechanism.

3.1 Infrared

Infrared is a liquidity staking protocol incubated in collaboration with Kodiak through Berachain's "Build a Bera" program.

The Infrared-operated vault accepts LP tokens from the liquidity pool, generating $BGT interest rates while running network nodes. When users deposit LP tokens, Infrared uses these tokens to generate $BGT, and users can receive $iBGT proportional to the amount of LP tokens deposited.

Users can utilize $iBGT in the following ways:

• Stake in Infrared to receive rewards generated by the node.
• Use in other DeFi protocols
• Sell profit

Infrared concentrates the rewards generated by the PoL mechanism by converting $BGT into a liquid token, distributing them to fewer $iBGT stakers, while also helping other protocols incorporate $iBGT into their protocols to offer higher returns to users.

The Infrared project will launch new features that allow them to receive and settle the $BERA required for node operation while running nodes and distributing profits.

The best example of effectively utilizing the Infrared feature is Kodiak's Island Pool. After the mainnet launch, Infrared plans to launch Kodiak's Island Pool, allowing users to use Kodiak's CLAMM for more efficient $iBGT farming, and to re-stake the received $iBGT in Infrared, or deposit it into Kodiak's $iBGT/$BERA Island Pool for further $iBGT farming.

Based on the interoperability of the protocol and effective ecological gameplay, Infrared has gained the attention of many users, currently receiving the most $BGT delegation in the bArtio Testnet. Many ecological projects have collaborated with Infrared, planning to launch various derivative products, indicating that Infrared will become the most important infrastructure after the mainnet launch.

At the same time, the specific details of how Infrared will use the delegated $BGT to choose the Emission of $BGT have not been made public. It will be important to closely monitor whether Infrared will implement these processes in a decentralized manner and to whom the voting rights of its held $BGT will be granted.

3.2 BeraPaw

BeraPaw is also a liquid staking protocol, but it does not run its own nodes; instead, it operates a treasury between different nodes and registered liquidity pools, issuing $LBGT as the $BGT settlement token.

The governance token of BeraPaw is $PAW. Users can use the $BGT they hold in BeraPaw to vote on which liquidity pools should receive $BGT. Node operators distribute the rewards generated from staking $BGT to $LBGT holders through this method.

The structure adopted by BeraPaw divides the use of the $BGT token into two types of tokens: $LBGT and $PAW. 1) receives rewards and 2) votes for the $BGT emission pool. Through this structure, users and protocols using the $PAW token for $BGT Emission voting can exercise more voting power with less capital. Therefore, protocols seeking initial liquidity in the Berachain ecosystem are expected to actively utilize $PAW to generate $BGT rewards for their liquidity pools.

Lending

Berachain has a native lending protocol BEND, which offers the following features:

• Use $WBTC, $WETH as collateral to borrow $HONEY
• Deposit $HONEY

Unlike typical lending agreements, BEND has two notable features:

1. $HONEY cannot be used as collateral
2. $WBTC and $WETH deposits do not earn interest, but will generate $BGT rewards when borrowing $HONEY.

Through this structure, BEND strengthens Berachain's triple token economy structure, generating basic interest for $HONEY while increasing lending demand through $BGT, enriching ecological liquidity. Users can also execute $BGT leveraged Farming by repeatedly exchanging borrowed $HONEY back to $WETH, $WBTC and depositing into BEND.

4.1 BeraBorrow

BeraBorrow is an over-collateralized stablecoin issuance protocol that allows users to mint $NECT stablecoins. It permits ordinary assets like $BERA and $HONEY, as well as BEX and Berps LP tokens, and Infrared's $iBGT as collateral assets. The $NECT minted against collateral assets can be deposited into BeraBorrow's liquidity stability pool, where depositors can collect borrowing fees and liquidation fees from $NECT borrowers, establishing a structure that supports the fundamental needs of $NECT.

In addition to $NECT, BeraBorrow also has a governance token $POLLEN, which can serve as an incentive token in the following aspects:

• Used to reward liquidity pools that obtain $BGT Emission
• Encourage collateral deposits to the liquidity pool for up to $NECT debt.
• Distributed as rewards to depositors in the liquidity stability pool

Depositing LP coins into BeraBorrow will automatically deposit into Infrared to generate $iBGT rewards and will automatically re-deposit into Infrared for compound interest. Users can borrow $NECT to provide liquidity in other protocols, and re-deposit the received LP coins into BeraBorrow to establish leveraged positions.

BeraBorrow also plans to allocate $BGT to the DEX liquidity pool for $NECT and $iBGT trading, strengthening the demand for $NECT and market liquidity, while providing high deposit returns for liquidity providers.

With the support of various forms of demand, $NECT is expected to become a core native stablecoin in the Berachain ecosystem alongside $HONEY.

4.2 Gummi

Gummi is a lending protocol incubated through "Build a Bera" that operates without oracles and allows anyone to create lending pools without restrictions. Utilizing this architecture, Gummi plans to leverage any asset on Berachain to provide users with the ability to create 100x leveraged positions.

Before the mainnet launch, Gummi has partnered with key infrastructure providers such as Infrared and Kodiak, and plans to support leveraged farming positions for various LP tokens of $iBGT and Kodiak.

As can be seen, unlike lending protocols in other networks that are mainly used for leveraged and hedged positions for specific assets, Berachain's lending protocol can amplify the $BGT Emission of the PoL mechanism. Therefore, as more protocols are launched on Berachain and the ecosystem diversifies, the utility and demand for lending protocols are also expected to increase, making them an important component of the ecosystem.

Derivative Protocol

Currently, various derivative protocols utilizing the PoL mechanism in different ways are also preparing to launch when Berachain goes live. The basic infrastructure includes Berps, which is the native Perp DEX that the Berachain team will launch alongside BEX and BEND.

In Berps, users can use $HONEY to establish 100x leveraged positions for various assets, or deposit $HONEY to provide the liquidity needed for traders' positions, and receive trading fees, funding fees, and $BGT as returns.

Through this structure, Berps gives $HONEY a clear use case as the underlying asset of Berachain's native Perp DEX, while also providing a simple yet effective entry point for $BGT Farming, allowing new users who find the PoL mechanism daunting to mine $BGT rewards by depositing a single token, $HONEY. Therefore, this protocol is expected to become the most critical protocol supporting Berachain's triple token economy.

5.1 SMILEE

SMILEE is an options protocol that allows for the creation of hedge positions to provide liquidity for DEX. The options created in SMILEE have a unique structure that can generate more profit during significant price fluctuations, creating an effect that is completely opposite to the impermanent loss (IL).

Users must pay the option premium.