Berachain: Mechanism Design and Ecological Analysis of Innovative Decentralized Finance Public Chain

1. Project Overview

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

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

In November 2023, Berachain started internal testing. On January 11, 2024, the public testnet "Artio" will officially launch, with multiple native protocols and external projects planned for deployment. It is rumored that the Berachain mainnet will go live 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 core team remains anonymous, they possess extensive experience and resources in the cryptocurrency space.

2. Core Mechanism Design

Polaris EVM

Berachain is built on Polaris EVM, which is an EVM-based operating system for building on the Cosmos SDK. Polaris EVM has the following advantages:

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

PoL proof mechanism

The liquidity proof ( PoL ) mechanism is the core innovation of Berachain, aimed at solving on-chain liquidity issues:

1. Users provide liquidity to the native DEX to obtain BGT governance tokens.
2. Users delegate BGT to validators to participate in block production.
3. The clients and validators receive BERA and HONEY rewards.
4. Validators can vote on BGT inflation.
5. The validator distributes rewards to the delegator.

Compared to PoS, the PoL mechanism has the following advantages:

• Improve security while incentivizing liquidity
• Achieve a more decentralized inflation distribution
• Coordinate the relationship between asset issuance agreements and validators

three-token model

Berachain adopts a three-token model:

• BGT: Governance token, can only be obtained by providing liquidity.
• BERA: Gas token, obtained through one-way burning of BGT or verification rewards
• HONEY: Native over-collateralized stablecoin, serving as a medium for protocol revenue distribution.

The model systematically builds on-chain liquidity by separating governance rights from Gas fees and requiring the provision of diversified asset liquidity to obtain BGT.

3. Important Ecological Projects

the honey jar

As the entry point of the Berachain ecosystem, the honey jar is responsible for user education, project incubation, and collaboration matchmaking. The launched Honey Comb NFT gathers benefits from multiple projects.

Beradrome

The DEX and Restaking liquidity market on Berachain features mechanisms such as ve(3, 3) token economics. Its NFT series "Tour de Berance" is expected to receive future token airdrops.

Beradoge

The well-known Meme project on Berachain has two NFT series that may bring BDOGE token rewards to holders.

Sudoswap

The whole-chain NFT AMM liquidity market is planned to be deployed on the Berachain mainnet, expected to support blue-chip NFT cross-chain.

Beramonium

The blockchain game project of Berachain has released the "Gemhunters" game, where players can complete tasks and earn rewards through NFTs.

Redacted Cartel

Decentralized Finance yield protocols, involved in the bribery market and LSD liquid staking, plan to launch a new project on Berachain.

Summary

Berachain is expected to lead a new round of innovation in Decentralized Finance with its innovative three-token model and PoL mechanism, creating an ecosystem with high liquidity and high capital efficiency. As user growth and transaction fee revenue increase, Berachain has the potential to form a positive growth flywheel. However, the future development of the project, ecosystem expansion, and protocol security still require continuous attention.