Berachain (BERA): A complete presentation of a DeFi-oriented blockchain

Key Information

• The story of Berachain originated from a community on OlympusDAO, a DeFi protocol that once gained significant popularity and created its own NFTs depicting smoking bears.
• Berachain is a blockchain with a unique consensus mechanism called Proof of Liquidity, designed to foster collaboration among validators, users, and protocols.
• Berachain uses a three-token system: BERA, BGT, and HONEY.
• The Berachain ecosystem is already highly dynamic, with numerous projects launched on the testnet or on other blockchains.

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The Fat Bera Thesis of Berachain

In 2016, Joel Monegro wrote an article titled Fat Protocols, which presents what he considers a paradigm shift from Web2 to Web3. According to him, in the traditional Internet model, most value is captured by applications like Google or Meta, while underlying protocols (such as TCP/IP or HTTP) capture little to no value. In other words, the protocols are thin, while the applications are fat.

Conversely, it’s the opposite with blockchain. Most revenue is captured by first- and second-layer networks (L1 and L2), while applications grow more slowly and recover less revenue. This time, applications are thin, and protocols are fat.

The Fat Bera Thesis extends this idea, proposing a blockchain where applications are brought to the forefront and capture most of the revenue, but with a mechanism for redistributing this value, allowing users and validators to benefit so that applications and the protocol grow in parallel. This mechanism is called Proof of Liquidity (PoL).

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The Story of Berachain

Origins

The story of Berachain began in the summer of 2021, when OlympusDAO was among the most popular decentralized finance (DeFi) projects. A large community had formed around OlympusDAO, and some members came together to create their own NFT collections. This trend was highly popular then, and each new launch achieved significant success in just a few days.

Two members of the community, Smokey The Bera and Papa Bear, decided to launch their own collection. It consisted of 107 NFTs representing bears smoking bongs, hence the name Bong Bears. The initial price per NFT was set at 0.069420 ETH (approximately $200 at the time).

In the months that followed, a community began to form around these bear images, to the point where the price of the NFTs rose, reaching 1 Ether (ETH) by the end of September 2021, and then 3 ETH shortly after.

It was at this time that the founders, Smokey and Papa Bear, announced Bong Bera Pro. The idea was that each Bong Bear holder would receive an NFT from a new collection called Bond Bears, consisting of 126 NFTs paying homage to the famous spy. At the same time, the community discovered that the Bond Bears were only the first of six rebases, each rebase representing a new collection with an increasing number of NFTs.

The concept of rebase is directly inspired by OlympusDAO’s functioning. The project developed and popularized a mechanism in which the native token, OHM, could be staked to earn even more OHM tokens. The idea was that at intervals of 8 hours, the number of tokens in circulation would be adjusted to automatically increase the number of OHM in all holders' wallets.

Thus, Smokey and Papa Bear drew inspiration from this system to create the first NFT collection that generates others. Around this time, the team expanded, turning the duo into a trio with the arrival of Dev Bera.

At the end of 2021, the community continued to strengthen, with gatherings such as poker nights, and two new rebases appeared: Boo Bears and Baby Bears. Meanwhile, rumors were growing about a secret project called "bera chain."

The Announcement of Berachain

The community received confirmation in March 2022 when Dev Bera posted a proposal on OlympusDAO’s governance forum. Simply put, the idea was to raise $500,000 in OHM for the development of Berachain, a blockchain based on a new consensus model, Proof of Liquidity.

The proposal was accepted with 78% voting “Yes,” and thus, the development of Berachain began. From this point, the community experienced rapid growth. Numerous articles were written, and many podcasts were recorded. This was also the period when the first community projects emerged, and the Berachain culture began to take shape with its slogans and expressions, such as “Berachain fixes this” or “Henlo.”

In the following months, development continued with the launch of the fourth rebase (Band Bears) in the spring of 2022, followed by the fifth (Bit Bears) at the end of summer. However, the bear market was increasingly felt, and although the team and community projects continued to build, activity naturally slowed, and Berachain entered a period of hibernation.

This lasted until April 2023, when an unexpected $42 million funding round was announced. There was no denying it now—Berachain was real. Slowly, the community began to wake up, and many community projects gained momentum, such as The Honey Jar, which we’ll discuss later.

In March 2024, the Berachain team officially announced a second funding round, totaling $100 million. This was also an opportunity to announce the testnet launch, finally providing the community with concrete elements of the project. This first testnet version was followed by a second in June 2024.

For now, the story of Berachain ends here, but the mainnet launch is coming soon.

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Architecture and Technology

An EVM-Compatible Network

Berachain is a blockchain specifically designed for decentralized finance (DeFi), so the team chose to make it compatible with the Ethereum Virtual Machine (EVM). This means that smart contracts created for Ethereum can be used identically on Berachain, making adoption easier for developers. This compatibility also allows Berachain to benefit from technological innovations implemented on Ethereum.

The architecture of Berachain is based on a two-part block validation mechanism, allowing it to use its own consensus while benefiting from Ethereum’s latest advancements:

• Validators run BeaconKit, a consensus model based on CometBFT, a derivative of Tendermint Core (used by the Cosmos ecosystem). This ensures enhanced security and optimized performance for processing blocks.
• Validators execute Berachain transactions via Geth or Reth, the same clients used by Ethereum, ensuring full compatibility with EVM applications.

A Three-Token System

Berachain operates with a three-token system, each with a distinct role in the ecosystem.

• BERA: This is the primary token of Berachain. It’s used to pay gas fees on the network and also by validators to participate in transaction validation and chain security.
• BGT (Berachain Governance Token): It serves as a governance token and can be delegated to validators to participate in chain governance, particularly by influencing BGT emission distributions. It’s earned by participating in the Proof of Liquidity mechanism and is not transferable but can be burned to obtain an equivalent amount in BERA.
• HONEY: This is Berachain’s native stablecoin, backed by reserves in USDC and in pyUSD (Paypal's stablecoin). It’s used to provide liquidity in Berachain’s native protocols.

Proof of Liquidity (PoL)

The Berachain team’s thesis is based on the observation that Proof of Stake (PoS) does not facilitate cohesion among ecosystem participants. DeFi protocols generate activity and revenue that only validators benefit from, while protocols rarely allocate any of their tokens to validators who secure the infrastructure they rely on.

To address this, the core of Berachain’s unique proposal is Proof of Liquidity (PoL). This consensus mechanism aims to align the interests of validators, DeFi projects, and liquidity providers by enabling a more equitable distribution of rewards among these participants.

Proof of Liquidity combines elements of Proof of Stake and Delegated Proof of Stake (DPoS). In this system, the security of the chain depends on a limited number of validators (up to 128), who block between 250,000 and 10,000,000 BERA tokens. They are drawn at random to validate the next block according to the number of BERA they hold in staking.

Each time a validator is chosen to propose a block, they receive two rewards:

1. Transaction fees related to the proposed block.
2. The right to distribute BGT tokens to Reward Vaults.

This second point is crucial to understanding the unique value of Proof of Liquidity in Berachain. Unlike most blockchains where validators retain all block rewards, on Berachain, they distribute these rewards to Reward Vaults.

Reward Vaults and BGT Distribution

Reward Vaults are smart contracts that allow validators to collaborate with protocols to incentivize liquidity. Users deposit tokens in Reward Vaults to show that they’ve provided liquidity in DeFi protocols. Validators then choose the Reward Vaults they want to reward, and these users receive BGT rewards.

To understand how this works, let’s look at an example. An investor can deposit liquidity in a decentralized exchange in a HONEY/BERA liquidity pool. In return, they receive a token that proves their deposit, which they can then place in a Reward Vault. On the other side, each validator selects the Reward Vaults to which they want to distribute their BGT. The BGT will then be distributed to liquidity providers. A validator with more BGT delegates will be able to issue more if it is drawn to create a block. The issuing curve follows a logarithmic function (the boost increases less and less as the number of delegated BGTs increases).

Once users receive their BGT rewards, they have two options:

1. Burn BGT to obtain BERA, which can be used on the markets;
2. Delegate these BGT to a validator of their choice to receive a portion of the rewards.

The BGT Cycle

While the BGT cycle may seem unusual at first, it’s actually designed with a specific goal: an incentive distribution that aligns all network participants. This is precisely the core of Berachain’s thesis and Proof of Liquidity.

Because BGT tokens confer governance power in the Berachain ecosystem, validators have an incentive to distribute their BGT rewards to the Reward Vaults of partner protocols. But this isn’t the only reason—they also receive additional economic incentives for doing so.

In fact, DeFi protocols offer extra rewards to validators to encourage them to deposit BGT in their Reward Vaults. These incentives can take the form of various assets, like USDC or other Berachain ecosystem tokens. The idea is that these DeFi protocols have a vested interest in attracting validators to their Reward Vaults to ensure a steady distribution of BGT, essential to the growth of their own protocol.

For liquidity providers, they receive BGT, which they can then delegate to the validators of their choice or burn in exchange for BERA tokens. If they choose to delegate the BGT, they benefit from doing so with validators that distribute BGT to the Reward Vaults where they’ve deposited liquidity, as a validator with more delegated BGT can emit proportionally more if selected to create a block.

Unlike other blockchains that only reward validators, Berachain creates an incentive system that directs liquidity to the strongest protocols and naturally encourages network participants to collaborate to acquire BGT.

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The Berachain Ecosystem

Berachain has three native protocols, along with an information centralization tool for users, all developed directly by the project team. Each protocol will have its own Reward Vaults from the mainnet launch, allowing liquidity providers to earn BGT rewards. Additionally, numerous independent protocols are growing around the Berachain ecosystem.

BEX

BEX is Berachain’s native decentralized exchange (DEX), inspired by Uniswap v2, designed to allow users to trade tokens. Each trading pair is represented by a smart contract where liquidity providers can deposit their assets. In return, they earn a share of the fees generated by transactions within these token pairs.

BEX pools can also be enhanced through Reward Vaults, allowing liquidity providers to access BGT emissions. Thus, BEX combines the standard DEX model with the unique benefits of Proof of Liquidity.

For more information, check out the BEX documentation.

Berps

Berps is a perpetual trading protocol that enables trading on various pairs with leverage. Based on a model similar to GMX, traders are countered by liquidity providers who deposit HONEY stablecoin and receive bHONEY in return, an asset that can be deposited into Reward Vaults.

The HONEY in the liquidity pool is then “borrowed” by traders (since leverage involves borrowing). If traders incur losses, these are distributed to liquidity providers, and vice versa.

In summary, the Berps protocol operates on the principle that traders tend to lose money in the long term. To secure liquidity providers’ advantage, traders pay fees when opening, maintaining, and closing trades.

For further details, see the Berps documentation.

Bend

Bend is a decentralized lending and borrowing protocol inspired by Aave, allowing users to borrow the HONEY stablecoin against “blue chip” assets such as Bitcoin (BTC).

On one side, lenders deposit HONEY stablecoin and receive aHONEY in return, which appreciates as the protocol earns interest. On the other side, borrowers’ interest payments are applied through gradual increases in the debt they need to repay. If the debt surpasses the collateral’s value, the loan may be liquidated, and the collateral sold as repayment. Borrowers also receive a token called vdHONEY, representing their position.

The Proof of Liquidity mechanism works slightly differently in Bend, as liquidity providers and borrowers can earn BGT rewards by staking aHONEY and vdHONEY in Reward Vaults, promoting protocol use.

For more details, see the Bend documentation.

BeraHub (ex-BGT Station)

The BeraHub (ex-BGT Station) is the management hub for everything BGT-related on Berachain. This centralized tool allows users to:

• View active Reward Vaults;
• Track all validators;
• Delegate or withdraw their BGT with validators;
• Convert their BGT into BERA;
• Claim accumulated BGT rewards.

This dashboard simplifies user management of all activities, particularly regarding BGT tokens. It ensures direct access to interactions with validators and Reward Vaults, enhancing the transparency and efficiency of the governance and staking process.

To access BeraHub, visit the website BeraHub.

The Rest of the Ecosystem

Following the official announcement of Berachain on OlympusDAO’s forum in March 2022, Dev Bear shared critical information about the project’s future, including the workings of Proof of Liquidity (PoL) and the three-token system.

In the months that followed, these announcements spurred the emergence of the first projects on Berachain, even before the initial testnet launch. Today, hundreds of projects are preparing to launch on the mainnet. Here’s a non-exhaustive list of some of the most significant ones.

The Honey Jar

The Honey Jar is a project incubator created by a prominent community member, Jani, known for amassing a large number of Bong Bears NFTs and rebase collections.

The Honey Jar’s goal is to create an NFT collection and form partnerships with numerous other projects to offer various benefits, such as tokens, to the collection’s holders. This collection, called Honey Comb, includes 16,418 NFTs, each granting access to fifty-nine planned rewards provided by Honey Jar’s partners, which include token distributions and fee reductions.

The Honey Jar also has its own rebase system with six collections called Honey Jar (numbered from 1 to 6). Each collection allows holders to participate in a lottery with rewards amounting to tens of thousands of dollars, including Bong Bears. Four of the six rebases are currently available, with the remaining two expected to launch soon.

Owning a Honey Comb and each of the Honey Jar collections (a total of seven NFTs) will, upon Berachain’s launch, secure a place in The Honey Jar DAO and provide additional benefits, such as a share of the profits generated by The Honey Jar’s validator.

The Honey Jar can be seen as a type of automated investment fund, providing direct exposure to the Berachain ecosystem.

Infrared

Infrared is a liquid staking protocol that enables users to earn staking and delegation yields while retaining a liquid token usable in DeFi. In other words, it can be compared to the Lido Finance of Berachain.

Infrared’s first product is iBERA, which represents BERA token staking within the validator and allows users to earn a share of the fees generated from staking.

The second product is iBGT, a liquid version of BGT. Infrared deploys its own contracts over Reward Vaults. When users deposit liquidity with Infrared, the protocol receives the BGT and delegates them to Infrared’s validator to maximize its influence. In return, liquidity providers receive iBGT, which they can sell on the market or stake to receive validator rewards.

Since iBGT tokens are not all staked simultaneously, the yield provided to iBGT stakers is higher than that offered by standard delegation, making it attractive for investors seeking to maximize returns.

Kodiak

PoL is a powerful mechanism for creating liquidity incentives, but it has one significant drawback: it requires fungible receipt tokens.

This is typically the case for most pools, where the token received after a deposit is exchangeable with any other from the same pool. However, with more recent protocols like Uniswap v3, this system presents a challenge, as not all positions are identical, making it difficult to implement PoL incentives on concentrated liquidity.

Kodiak addresses this issue with its Island product. These are pools where liquidity is managed automatically by an algorithm, preventing liquidity providers from manually positioning their liquidity. However, this allows them to benefit from concentrated liquidity’s advantages while leveraging PoL since the receipt tokens for Kodiak’s Islands are fungible.

The Honey Jar, Infrared, and Kodiak represent just a sample of the projects in development. Currently, Berachain has over two hundred projects in its ecosystem, which can be found on the Berachain Ecosystem page and in the infographic below. Alternatively, an independent community member created this database.

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The Culture of Berachain

The story behind Berachain’s creation is unique, and its community’s strength is built upon a strong culture that verges on the cult-like. While this may seem intimidating, this core group is essential in attracting a broader audience—less fanatical but still interested in this unique and dynamic ecosystem.

To truly understand Berachain, it’s important to explore the key elements of its culture. Here’s a brief overview.

NFTs

NFTs are central to Berachain. The project was born during the 2021 bull run when the NFT hype was at its peak, and Berachain is one of the few projects from that era still active today.

Although the excitement around NFTs has somewhat waned, they remain at the heart of the project. Owning a Bong Bear or one of the five rebase NFTs conveys a certain prestige, enhanced by their rarity—only 4,713 NFTs across Bong Bears and the five rebases combined—and their high price, with the lowest-priced Bit Bears at a minimum of 3.3 ETH.

In addition to the prestige associated with these NFTs, they are perceived as “founder passes” within the ecosystem, and many projects plan to distribute a significant portion of their tokens to Bong Bear and rebase holders.

NFTs thus play a crucial role in the ecosystem, so much so that other projects have also launched their own NFT collections for fundraising instead of issuing tokens. However, while Bong Bears and their rebases have unique prestige with numerous rewards, this is not the case for most other collections. It’s essential to carefully assess the benefits of each project and its partnerships before investing.

Vocabulary

In community-driven crypto projects, it’s common to see the emergence of unique terms for greetings or references to specific project challenges.

In Berachain, the community’s deep involvement has taken this practice to an uncommon level, with a distinctive vocabulary, expressions, and even style of language. Most of these practices emerged in early 2022, shortly after Berachain’s official announcement on OlympusDAO’s forums.

Common greetings include “henlo” or “bm.” For a slightly more formal tone, there’s also the phrase: “Henlo, and furthermore, Ooga Booga.”

The famous “Ooga Booga” is a polysemous expression: it’s both a polite salutation, similar to “Regards,” and a rallying cry often chanted at community events. The first time I attended a space on X (Twitter) with Berachain members, participants chanted this phrase for nearly a minute. It was both impressive and slightly daunting, but it also revealed the strong sense of community binding this group to Berachain.

Other expressions also emerged during the project’s more challenging periods, like “Berachain is not real” or “Fake chain.”

Finally, Berachain has developed a unique writing style. In articles written by community members, it’s common to see words intentionally altered to include a “B” in reference to “Bera.” Some articles are also written in deliberately complex language, making them more challenging for newcomers to understand.

Lore

The culture of Berachain is vast and could fill many pages, but in essence, it’s a unique blend of seriousness and eccentricity. Whether discussing Berachain itself or community projects, you’ll always find a mix of well-thought-out ideas with carefully designed aesthetics, accompanied by a healthy dose of humor and offbeat language.

As you explore Berachain, you’ll quickly notice that most projects don’t just create functional products; they build their own micro-ecosystems with unique memes and references.

Here are a few examples of projects that showcase this culture. Feel free to explore the links to see for yourself:

• Plug.sucks: a bold design project aimed at accumulating Honey Comb NFTs from The Honey Jar.
• Berabaddie: a community reserved for female bears.
• Puffpaw: the Bong Bears are now into vaping.
• An NFT artist with a penchant for whips.

In summary, Berachain is a community that often flirts with eccentricity. This commitment may seem strange at first, but when you dig a little deeper, you’ll realize that this uniqueness is the true strength of Berachain and a promise of its longevity.

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Mainnet and BERA Airdrop: What’s Next?

Initially planned for the first half of 2024, Berachain’s mainnet launch has been postponed, and no official date has been announced. However, while nothing is confirmed, the community expects a token airdrop during the mainnet launch.

As you’ve gathered from reading this, it’s widely assumed that Bong Bear NFT holders and the other rebase collection holders will receive a portion of the airdrop. Naturally, a small part may also be reserved for testnet users.

Finally, the last question concerns the token to be distributed in the airdrop. If eligible users receive BGT, they would gain a significant advantage in participating in Proof of Liquidity. If they receive BERA, this advantage would be less pronounced. From the outset, it will be crucial to monitor token flows and see which projects and validators stand out.

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Conclusion

Berachain is a unique ecosystem, distinguished by both its technology, particularly the Proof of Liquidity mechanism that incentivizes validators, protocols, and users to collaborate, and by its one-of-a-kind community with a deeply rooted culture.