🧞 Berachain: what's inside?

Berachain for dummies

Feb 10, 2025

Gm and happy Monday frens🖖

Probably every post you have seen on X has been about Berachain to some degree. It's no wonder, as on the 6th of February they launched their mainnet and assigned an airdrop. Some called it a scam (as usual), but we're not here for that...

The Berachain blockchain has some interesting innovations under the hood, and today we're going to dissect them.

So strap down and prepare to see the BERA dissected:

🩰 The only events you should care about
🧸 Overview of Berachain
🧵 100M$ fraud, UAE and Web3 security
📰 News

📅 What you should do this month

We've got 4 events this month!

Telegram Builders Day (Feb 17th, Hong Kong) with speakers from Blum, Animoca Brands, Terminal Station, Storm Trade, Fintopio, TON Foundation and others!

And in Denver we'll be hosting 3 events:

🥩 Restaking & DeFAI Day (Feb 25th) - Joined by EigenLayer, EtherFi, Symbiotic, Mode, Hyle, Giza, and Kern.

🧩 Modular & L2 Day (Feb 26th) - right now, the lineup includes Starkware, Linea, Taiko, Giza, =nil;, Veridise, Fluent, Pharos, Redstone, Brevis, Gateway.fm, Hylé, and of course, more to come.

👾 Agents Day – AI x Web3 (Feb 25th) - the event is cohosted by cyber.Fund. We already have Giza, Zircuit, Assisterr, Subsquid, Gud.Tech, CoinFund, Outlier, and Valory/Olas on board.

🛠️ Deep-dive: Berachain for dummies

> BERAchain
> Takes look inside
> No bears
> :(

Proof-of-Liquidity (PoL) consensus mechanism

Traditional blockchains like Ethereum and Solana, rely on Proof-of-Stake consensus mechanisms, where validators stake native tokens to secure the network. Berachain, however, uses a PoL model that integrates liquidity provision directly into network security.

In this system, participants stake assets into liquidity pools, and these staked assets contribute to network security while also facilitating decentralized trading and lending activities. This dual functionality enhances security while ensuring that liquidity remains active within the ecosystem, fostering a more efficient and dynamic financial environment.

Unlike Ethereum’s model, where transaction fees are burned or allocated in ways that may not directly benefit active participants, Berachain's PoL ensures that liquidity providers, validators, and users are all economically incentivized to engage actively.

The primary goal of PoL is to allow security and liquidity to scale together. In traditional PoS blockchains, a substantial amount of capital is locked to ensure network security, leaving it idle and not contributing to the ecosystem's liquidity. Berachain eliminates this trade-off by directly incentivizing DeFi activity through sustainable staking revenues.

Unlike conventional consensus mechanisms such as PoW or PoS, Berachain’s PoL system rewards users for providing liquidity, granting them governance tokens in return. Validators produce blocks based on the liquidity they control, enhancing liquidity and distributing network control among participants.

Tri-Token system

Berachain’s tokenomics revolves around three distinct tokens:

BGT (Berachain Governance Token): A non-transferable governance token used for staking and securing the chain. It is earned through emissions when users provide liquidity to selected pools and determines how new token emissions are allocated to liquidity pools.
BERA (Berachain Gas Token): Used for transaction fees within the network and created by irreversibly burning an equivalent amount of BGT, ensuring a deflationary mechanism tied to network usage.
HONEY (Berachain Stablecoin): Pegged to USDC and used as the primary borrowing asset in Berachain’s Bend lending protocol. It is minted via a swap from USDC, generating fees collected by the blockchain.

Validators propose blocks based on their $BERA stake and distribute emissions of $BGT, which can be allocated to Reward Vaults. The amount of emissions they distribute depends on their $BGT stake. Users providing DeFi liquidity can stake their receipt tokens in these reward vaults to be eligible for $BGT rewards.

Ecosystem

Berachain is developing a ecosystem focused on DeFi, AI, NFTs, and more. This is driven by the “Fat Bera Thesis,” which suggests that dApps capture more value as they achieve product-market fit. Berachain positions itself as a dApp-centric chain, attracting top-tier applications in both DeFi and consumer sectors.

BEX: The Berachain Exchange – a native decentralized exchange featuring House Pools and Metapools to enhance liquidity efficiency. Liquidity providers earn trading fees and accumulate $BGT, which can be staked with validators to influence governance and optimize emissions.
Bends: Native Lending Markets – bends allows users to borrow $HONEY against collateral such as ETH, BTC, and USDC. By interacting with Bends, users enhance liquidity while simultaneously earning $BGT emissions, creating a dual-incentive model for sustainable lending.
Berps: Perpetual Futures Trading – berps is Berachain’s perpetual futures exchange, offering high-performance derivatives trading with deep liquidity and efficient capital deployment.

Additional ecosystem components include:

BeraHub: The central platform for managing BGT and accessing Berachain liquidity through BeraSwap.
BeraSwap: A decentralized exchange enabling the trading of arbitrary crypto asset pairs via liquidity pools.
Honey Swap: A platform for trading approved stables/assets for $HONEY.
BeraScan: Berachain’s native block explorer.

Built on BeaconKit

BeaconKit is a framework for Ethereum-based blockchains, serving as a modular consensus layer that brings CometBFT to EVM environments. It offers several advantages:

EVM identical compatibility – ensures seamless smart contract deployment without modifications.
Single slot finality – reducing block confirmation times and improving transaction throughput.
Optimistic payload building – enhances efficiency by executing block proposals in parallel with voting, reducing block times by up to 40%.
Full EIP compatibility – conforms to Ethereum’s evolving standards while maintaining modularity.

BeaconKit’s modularity allows it to be extended with custom block builders, rollup layers, and additional features, making it suitable for both Layer 1 and Layer 2 solutions. By integrating these innovations, Berachain significantly improves blockchain efficiency, scalability, and user experience, pushing the boundaries of decentralized technology.