Berachain ecosystem: The idea of centralizing liquidity
Berachain is one of the Layer 1 projects with a unique design recently launched. Although the mainnet is not yet official, the project has received the community's attention after a capital call of 100 million USD.
Overview of Berachain
Berachain is a Layer 1 project built on the Cosmos SDK toolkit, connected to other blockchains of the other Cosmos network via the IBC bridge, and compatible with EVM via the Polaris EVM design.
The path from the NFT project to Berachain.
Originating from the team behind the NFT Bong Bears project, Berachain is a Layer 1 Blockchain project with many unique creative ideas. Aiming to solve the problems of liquidity fragmentation in DeFi, the project introduces a combination of a Proof-of-Liquidity consensus mechanism model combined with a special tokenomics design.
With a new model, a different market approach, operating under a fun meme culture plus a capital raising amount of 100 million USD, Berachain will be a notable ecosystem in the near future.
Highlights
Meme culture
Berachain was developed from the team that built the Bong Bears NFT collection released on Ethereum from the end of 2021. The collection takes images of bears, has no specific information about the roadmap, and posts created images. It feels more fun and joking than a professional financial project.
BST then received support from the OlympusDAO community, increasing the NFT price. Bong Bear NFT holders then airdropped 1 NFT from the new collections, a total of 7 new collections were released, bringing the total number of NFTs to over 9,000.
Not only supporting NFTs, OlympusDAO has invested 500k USD in the Berachain project at a valuation of 50 million USD FDV. Currently, Berachain's style is still quite similar to Bong Bears before when posting parody images of bears. In addition, Berachain's website design is quite creative starting from the bottom up, users can only scroll up or "up only".
Proof of Liquidity
Despite the meme culture, Berachain is a project with real products. Among them, the Proof of Liquidity sybil prevention mechanism is one of the most differentiating points.
In a traditional Proof Stake (PoS) network, validators participate in securing the network by staking tokens, which locks the tokens and cannot be used for on-chain liquidity.
The Proof of Liquidity mechanism offers a solution to this problem by allowing users to stake other Layer 1 platform coins/tokens such as wETH, wSOL, wBTC... and other types of stablecoins, DeFi tokens... to participate in activities. dynamically validates the network and can also contribute liquidity to dApps.
According to the original design, assets from the L1 Blockchain will be given priority with a weight of 80%, stablecoins will account for 15%, and the rest will be reserved for DeFi tokens. This rate may be changed when Berachain officially launches.
This mechanism is expected to bring benefits to many parties at the same time:
· Projects on Berachain have abundant liquidity from many sources
· The project itself does not have to trade off between liquidity and security
· Users holding tokens have more benefits
· Promoting the race for liquidity similar to the previous Curve War
To combine the benefits of many parties including validators, users, projects (protocols), Berachain's three-token (tri-token) model plays a key role.
Tokenomics
Berachain uses a more complex token system than usual with 3 different tokens: BGT, BERA and HONEY. In there:
· BGT: Berachain's governance token, which is non-transferable and can be obtained by providing liquidity to the native DEX, BEX. Used to determine pool rewards similar to Curve's veToken. BGT can also exchange 1:1 to BERA for transaction fees but not vice versa.
· BERA: Pays network transaction fees and rewards to validators. The token has an estimated inflation rate of 10% a year and all gas fee tokens will be burned.
· HONEY: Stablecoin is assigned USD value, can be minted through mortgaging 150% of asset value or swapping directly on BEX. HONEY will be used for liquidity pairing on BEX.
In summary, based on the PoL and tri-token mechanism, the Berachain network will operate in the following order:
· first.Users provide liquidity to BEX pools, receive BGT rewards, and use it to participate in delegation according to the PoL mechanism.
· 2.Users delegate BGT to validators.
· 3.Validator produces blocks and receives rewards according to the corresponding BGT rate.
· 4.Validator participates in voting BGT reward rates on DEX liquidity pools.
· 5.Rewards from Bribes are redistributed to authorized participants.
This mechanism separates the functions of tokens for staking activities and tokens for on-chain activities, and will allow users who contribute liquidity to receive additional network governance rights.
Polaris EVM
In addition to the difference in mechanism, although Berachain is a Layer 1 of the Cosmos ecosystem, the project is still compatible with Ethereum through Polaris EVM. Polaris EVM was developed with the purpose of connecting applications on Cosmos and Ethereum, increasing developer experience and transaction throughput.
Ecosystem
Due to the different token system and mechanism, Berachain has a group of projects developed by the team to serve these mechanisms. Currently, the new Berachain ecosystem is in the testnet phase and there may be many changes.
In-house projects
Below are some in-house projects, built by Berachain.
BEX (Berachain Exchange)
BEX is the most important pillar in the current ecosystem. This is a DEX project with a similar operating model to Balancer when focusing on providing liquidity. A pool on BEX can also include many different types of tokens at different rates.
Users who provide liquidity on BEX receive BGT, then use BGT to participate in the PoL voting mechanism. Users who stake BGT on BEX also receive corresponding rewards from transaction fees.
Bend (Berachain Lending)
Bend is a decentralized lending marketplace that operates similar to MakerDAO. Users can deposit collateral to borrow stablecoin HONEY, providing liquidity and holding HONEY also helps users receive more BGT rewards.
Berps (Berachain Perpetuals)
Once they have HONEY, users can use HONEY as collateral or provide liquidity on Berps - a decentralized derivatives exchange. This protocol uses spot trading prices via an oracle service, allowing users to trade with x100 leverage. The transaction fees collected from Berps will be retained by the team.
BGT Station
Users holding BGT can use BGT Station to stake as well as delegate validators and vote governance decisions.
Other projects
In addition to grassroots projects, Berachain also attracts multi-chain projects and a few other projects built by the community. The ecosystem is in the testnet phase so there may be many changes. Below are some notable projects:
· Crocswap: Decentralized exchange, using interval liquidity provision mechanism like Uniswap V3
· OrangeFinance: Liquidity management on AMM protocols
· ShogunFi: Cross-chain trading platform, supported by Binance Labs
· BeratoneGame: Life simulation video game similar to The Sims series
· Exponents Finance: Leverage trading with most asset types on Berachain
· Infared Finance: Liquid staking project, unlocking liquidity for BGT through iBGT.
Berachain is only in the testnet phase and there are relatively few development projects left. We will update the full ecosystem when Berachain goes into mainnet.
summary
Berachain is a prominent Layer 1 project with a capital call of more than 100 million USD. With creativity in operating mechanism and tokenomics, it is likely that when launched, it will attract a large number of TVL right after the mainnet. In addition, Berachain also has a full ecosystem of products serving this innovative mechanism
