What Is Berachain?

BeginnerJan 30, 2023
Berachain is a new DeFi protocol built on Cosmos-SDK with a unique tri-token system and a Proof of Liquidity consensus mechanism.
What Is Berachain?

The crypto community is getting a lot of attention nowadays, with a new world growing around a digital community powered by blockchain technology. To tap into this revolutionary movement, enthusiasts and fans worldwide have come together to create several platforms that enhance the industry’s growth.

Berachain is a new platform developed to be a part of this ever-growing community. In this article, we are going to take a look at what Berachain is, its features, how it works, and the secret behind its recent popularity.

What Is Berachain?

Berachain is a blockchain that originated from an idea by the Bonng Bears NFT community. It is an EVM-compatible blockchain that uses a novel consensus mechanism, Proof-of-liquidity, that enables users to stake layer-1 stablecoin assets and bluechip DeFi (household tokens with strong financial backing and steady returns on investment) with the chain’s validators.

It is a new DeFi protocol developed on the CosmosSDK. It makes use of Tedermint, which is its native consensus machine. The name of the chain comes from the developing team creating an NFT project community called Bong Bears.

Berachain distinguishes itself from popular meme coins by planning to create a new level of capital efficiency in the De-Fi world. On Berachain, users will be able to perform everyday transactions they can carry out on other De-Fi platforms but with some added features and benefits.

Berachain is more than a meme chain. It brings more to the table by planning to create new levels of capital efficiency for DeFi. This is due to its developers successfully creating a blockchain with a new three-token system. It also sets itself apart by claiming to solve major liquidity issues faced by other blockchains.

Who Created Berachain?

Berachain’s roots trace down to the creators of Bong Bears NFTs. Berachain was originally an NFT project that is now morphing into an independent protocol. Berachain began with the Bong Bears NFT collection, which was launched around August 2021. The NFTs collection project went through numerous phases before it announced the next phase of its plan.

The platform featured projects like Bond Bears, Baby Bears, Band Bears, Boo Bears, and Bit Bears. After the release of these different projects in April 2022, the Bong Bear team released an article on Medium revealing their plans to create a native protocol.

Currently, Berachain is displaying the same attribute as popular meme coins Dogecoin and Shiba Inu, which made use of the popularity of meme tokens to build a much bigger community to support it.

What Is Behind the Recent Berachain Hype?

Berachain has recently sparked the interest of Olympus. The DAO platform plans to join the seed round of Berachain and work closely with the Berachain foundation as a strategic partner. The minds behind Olympus want to use around $500k from its treasury to invest in Berachain.

The investment would grant Olympus 1% of the network. That, paired with the added 1% they would get for their partnership with Berachain, would lead to them possessing 2% of the network.

How Does Berachain Work?

Berachain currently makes use of Cosmos-SDK, a framework for building blockchains. It also uses the native consensus mechanism called Tendermint. Tendermint is one of the market’s most trusted and high-performing consensus frameworks.

The combination of Tendermint, Cosmos-SDK, and Berachain’s Proof of Liquidity Sybil resistance mechanism, allows Berachain to carry out transactions quickly, at low costs, and with deterministic finality. All these factors work together while building a simple, interoperable layer between different information systems.

This new layer is tasked with maintaining the consensus collateralized chain-native stablecoin, making staked capital more efficient, and, most importantly, making the blockchain less likely to be hacked than a blockchain built on the traditional proof of stake system.

What Makes Berachain Unique?

Berachain is an upcoming DeFi protocol, but it claims to be more than what the community is used to. So far, it has in its arsenal the backing of a community gathered through previous projects launched on its NFTs platform, but now it has set up certain features that set it apart from the everyday DeFi protocol we see in the ecosystem.

One major attraction to Berachain is its innovative approach to solving the fractionalized liquidity issue. Fractionized liquidity occurs when liquidity is fragmented into several assets; the liquidity pool dries up and becomes liquidity debt. Berachain’s approach to this is very peculiar. Rather than adopting the normal approach other blockchains use, Berachain went with a new system consisting of two fundamental parts:

  • Tri-Token System
  • Proof of Liquidity

Berachain’s Tri-Token System

Berachain took an alternative approach to their native tokens, unlike popular chains like Ethereum and Terra. Instead, they adopted a Tri-Token System, which means Berachain has three different native tokens.

The tokens are split into three, and each one has a specific role:

1.$BERA: BERA possesses attributes similar to that of a typical Layer 1 native token. Its primary function is to be used as gas fees as well as block rewards. Once collected, the BERA tokens are burnt.

BERA’s most noticeable feature is how it is staked to earn BGT, which according to the developers, is the only way to earn BGT. There are two options for staking Bera; the first is to stake BERA alone, while the second option is to stake BERA earned from stalking other tokens.

BERA tokens value is expected to be issued an annual 10% inflation rate over the coming years after its release.

2.$BGT: Berachain’s governance token is a nontransferrable NFT given to users that have been with the platform for a while. The only way to earn $BGT is by staking your $BERA. This gives the owners a role in the decision-making process of the chain.

BERA is the gas fee token, while BGT is the governing token, and it has a simple task: determine the block reward for every staking asset and decide which tokens can be added for staking.

By splitting up the gas token and the governance token, BERA is able to solve the issue of proof of liquidity problem.

3.$HONEY: Berachain’s native consensus collateralized stablecoin. You get $HONEY from DeFi-related activity-related fees when you wager $BGT. Users are able to mint HONEY with other assets staked o as collateral on the Berachain platform.

HONEY is Berachain’s key currency because it is usually paired with other assets staked by users and is also used as liquidity. It is also used to settle funding fees in the platform’s perp exchange.

HONEY has certain measures in place so it does not lose its peg. Firstly, HONEY has a steady demand since it is used to settle funding fees in perp exchange. Also, when minting HONEY with other staked assets, the interest rate for minting can be changed mid-process.

The Tri-Token system is fueled by the belief that every decentralized economy is made up of three major pieces that are critical to the success of the chain. The first piece is the need for A way to price a unit of work and do that work through smart contract execution. The second piece is a tool for democratically organizing, reaching a consensus, and making decisions regarding the network’s future. The third piece is a way to carry out transactions through a general stablecoin.

The developers of Berachain found that the most active users who make the most transactions in a system with a token serving as both the fee and governance token end up losing their voting power over time. A solution to this issue was to separate the fee and governance tokens and to allow for a fair and different way for users to gain governance tokens by the different tokens using the network and giving value to Berachain’s proof of liquidity system.

Berachain’s Proof of Liquidity System

Proof of liquidity is a new system created by the developers of Berachain. This system allows users to stake different assets like ETH, TC, and other stablecoins to a validator. Berachain’s proof of liquidity is a new Sybil resistance mechanism that uses consensus vaults to compute validator vote weights and distribute block rewards.

The system allows users and validator operators to deposit various assets into the consensus vault system. These users or validators are later rewarded with tokenized shares, a sign of their deposit. Under normal circumstances, staking is done in a protocol’s native token. Berachain’s adoption of Cosmos makes it easier to create a communications hub that allows tokens from different chains to carry out transactions amongst each other.

Berachain’s unique system allows users to stake tokens from the numerous tokens out there and allows them to assign those stakes to validators to take part in the DPoS. Essentially, Berachain does not require you to stake any of its native coins (BERA, HONEY, BGT); you only need to prove you have liquidity.

Berachain’s Governance Model

With a tri-token system in place, one would expect a different style to the Governing and staking system of the platform. Although it is not entirely the same, Berachain did try to follow the traditional system. Amongst the tri-token system is the chain’s Governance token BGT, which is a non-transferable NFT.

BGT, which stands for Bera Governance Token, is used to decide the block reward for every staked asset and to decide which other asset would be made available on the platform for staking. BGT holders will earn from the fees produced by the Bera native protocols and will be rewarded with the native token $HONEY.

This means staking $BERA would be lucrative since you earn both $BERA & $BGT and eventually $HONEY.

Berachain Ecosystem

With its launch set for several months from now, Berachain already has a budding ecosystem featuring partnerships with projects that intend to launch on the network.

One such partnership has been formed with Crocswap. Crocswap plans to integrate a native decentralized exchange (DEX) on Berachain. The proposed DEX has unique features, such as a single smart contract foundation and a dual liquidity model. Crocswap’s DEX is set to become the next generation of AMM.

Another project set to launch on Berachain is the Synapse Protocol which will provide cross-chain infrastructure between Cosmos and other chains. With Synapse protocol, Layer 1 DeFi protocols can bridge to Berachain to access the various staking strategies on Berachain.

With extensive use cases, other projects set to launch on the mainnet at release include Gumball, Abacus, and Decentralized Autonomous Organizations like Temple DAO and Olympus DAO.

Berachain Launch and Roadmap

The Berachain project is still under development. As such, the news surrounding the launch of the mainnet is yet to become public information. The platform announced the release of a developer package on August 29th. The announcement also promised a continuous rollout of additional features for the network.

According to one of the developers, the mainnet for the network is set to launch within the next three to four months from September 23rd.

Conclusion

The setup for Berachain shows a strong and efficient system supported by a strong and determined community. All these are backed up by the innovative technology (tri-token system and proof-of-liquidity) behind the workings of the chain. It is impossible how much of the chain’s plans will be fully functional or operational. What’s certain is the developers’ dedication to ensuring the project’s success.

Author: Tamilore
Translator: binyu
Reviewer(s): Hugo、Ashely
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