Berachain: Mechanism Analysis and Ecological Outlook of the New Star in Decentralized Finance Public Chains

Berachain is an EVM-compatible L1 public chain focused on Decentralized Finance, built on top of the Cosmos SDK, utilizing an innovative liquidity proof (PoL) consensus mechanism. The project originated from the Bong Bears NFT series launched in August 2021 and later derived multiple related NFT collections.

The Berachain team, after experiencing the ups and downs of the crypto market, deeply understands the importance of liquidity in Decentralized Finance, and thus decided to design a new L1 public chain that absorbs the advantages of successful DeFi projects while avoiding their flaws. They creatively proposed the (Proof of Liquidity) mechanism, laying the foundation for Berachain's three-token model.

In November 2023, Berachain started its internal testing. On January 11, 2024, the public testnet "Artio" officially launched, attracting over 30 native protocols and the deployment of some well-known projects. It is rumored that Berachain plans to launch its mainnet in the second quarter of 2024.

In April 2023, Berachain secured $42 million in funding led by Polychain, with a valuation of $420 million. Although the team members remain anonymous, they clearly have extensive connections and resources in the crypto space.

Core Mechanism Analysis

Polaris EVM

Berachain is built on the Polaris EVM, which is an EVM-based operating system designed for building on top of the Cosmos SDK. Polaris uses messaging to connect the EVM and the Cosmos SDK, separating block construction, processing, and storage from execution. This architecture provides developers with a more efficient and powerful smart contract development environment.

The main advantages of using Polaris EVM:

1. Developer-friendly for Ethereum, easy to attract developers from the EVM ecosystem.
2. Achieve powerful cross-chain interoperability through IBC

PoL( Liquidity Proof ) Mechanism

The PoL mechanism aims to bring liquidity of mainstream assets into the Berachain ecosystem:

1. Users provide liquidity to BEX( Berachain native DEX) and receive governance token BGT.
2. Users delegate BGT to validators, and validators generate blocks based on the delegation weight.
3. The client and the validator receive on-chain rewards (BERA and HONEY).
4. Validators can vote on BGT inflation.
5. The validator distributes rewards to the delegator.

Advantages of PoL mechanism compared to PoS:

• Incentivize liquidity while enhancing security
• More decentralized inflation distribution
• Coordinate the relationship between asset issuance protocols and validators

three-token model

Berachain uses three tokens:

• BGT: Governance token, non-transferable, obtained only by providing liquidity.
• BERA: Gas token, obtained through burning BGT or verification rewards.
• HONEY: Native over-collateralized stablecoin, protocol revenue distribution medium

The model further stimulates the liquidity of the ecosystem by separating governance rights from Gas tokens and diversifying staking assets.

Important Ecological Projects

1. the honey jar: Berachain ecosystem entry, responsible for user education, project incubation, and collaboration matchmaking

2. Beradrome: DEX and Restaking liquidity market, with ve(3, 3) token economics.

3. Beradoge: A highly anticipated Meme project with two NFT series.

4. Sudoswap: A full-chain NFT AMM liquidity market, planned to be deployed on Berachain.

5. Beramonium: A blockchain game project that has released the "Gemhunters" idle role-playing game.

6. Redacted Cartel: Decentralized Finance yield protocol, involving bribery market trading and LSD liquidity staking

Summary

Berachain is expected to lead DeFi innovation through its innovative three-token economic model and PoL mechanism, creating an ecosystem with high liquidity and capital efficiency. With the growth of user numbers and the increase in fee revenue, Berachain may attract more users and projects, forming a virtuous cycle.

However, the actual performance of Berachain still needs further observation, including various aspects such as the development of the project itself, the expansion of the ecosystem, and the security of the protocol.