Berachain (BERA): Is the hate justified? An update six months after launch

A refresher on Berachain

Berachain is a blockchain designed for DeFi and built around a novel model: Proof of Liquidity (PoL). Unlike traditional Proof of Stake, where validators capture chain emissions, PoL aims to align validators, protocols, and liquidity providers.

Practically speaking, when a validator proposes a block, they don’t keep all the rewards: a portion is distributed as BGT via smart contracts called Reward Vaults. These vaults directly reward users who supply liquidity to ecosystem projects.

This system has two major effects: it incentivizes validators to collaborate with DeFi protocols to attract deposits, and it creates a virtuous circle that drives liquidity toward the most robust projects. Validators, in turn, are encouraged to distribute their rewards strategically, since a surplus of delegated BGT allows them to generate even more rewards when validating.

Berachain’s design also relies on a clearly separated three-token system:

• BERA: the main token, used for gas fees and validator staking;
• BGT (Berachain Governance Token): the core of the PoL model. It is a non-transferable token earned by providing liquidity. Holders can either burn it to obtain BERA or delegate it to a validator to influence governance and reward flows;
• HONEY: the native stablecoin, backed by reserves in USDC, USDT, and pyUSD.

BGT’s originality lies in its hybrid role: both a lever for governance and an economic incentive tool. Unlike typical blockchains where governance tokens are freely tradable, here they do not circulate on the open market. That limits direct speculation but strengthens the incentive to participate in network activity.

Berachain’s distinctiveness thus rests on its unique Proof of Liquidity model, which seeks to create a new incentive framework for DeFi. One of the most important levers in this system is BGT, which both incentivizes liquidity providers and influences how rewards are distributed. That makes it a valuable asset, one that cannot be directly traded on markets.

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Where Berachain stumbled

Roughly seven months after launch, the BERA token had lost nearly 85% of its value, and Berachain’s TVL fell by a similar factor. It’s hard to argue that any single mistake is the only explanation for Berachain’s struggles, but several factors help explain what happened.

A lukewarm airdrop

The BERA airdrop, meant to unite the community and reward early adopters, ultimately left a bitter taste. Yes, 15.8% of the supply was distributed, but the allocation drew heavy criticism. Almost 45% went to holders of the Bong Bears NFT collections and their rebases, concentrating a large share of tokens in relatively few hands.

A bit more than a quarter of the tokens were distributed to BNB holders as well as the Boyco program, corresponding to over $2 billion in pre-deposits. Conversely, only 13% of the airdrop went to active testnet users and engaged community members. This imbalance gave the impression that the airdrop primarily favored a handful of insiders rather than fair distribution.

Meanwhile, investors and the team saw their allocations locked for one year, which helped contain immediate inflation in BERA, but the tokenomics reinforced the perception of yet another token largely controlled by the team and investors. They account for 51.1% of the 500 million BERA tokens slated for distribution through 2028.

A tricky positioning

Berachain’s strategic positioning is far from simple. Today’s market is seeing exponential growth in Layer 2s built atop Ethereum, some of which are capturing meaningful market share. On the other hand, some projects choose to launch their own Layer 1, differentiating via technology (higher TPS, use-case specialization, Move language, etc.).

Berachain’s specificity (Proof of Liquidity) forces it to deploy its own Layer 1, since that mechanism must be implemented at the consensus level, which would be impossible for a Layer 2.

Still, Berachain wants to stay close to the Ethereum ecosystem by offering full EVM compatibility. This is a double-edged sword: on one side, it eases developer onboarding from Ethereum; on the other, it puts Berachain in direct competition with the entire Ethereum ecosystem, an already crowded field.

Berachain is not trying to dethrone Ethereum, but the necessity of running its own Layer 1 puts it in a difficult spot.

Limited token utility

Of the three-token structure underpinning Berachain’s economy (BERA, BGT, and HONEY), only BGT truly stands out. Non-transferable yet central to PoL, it packs multiple utilities and has become the most coveted asset in the ecosystem.

By contrast, BERA’s role looks much more limited. It’s used for gas and staking-indispensable functions, but not especially attractive for investors. It invites comparison to ETH, but Ethereum benefits from a unique standing, a rich network, and long-standing credibility that Berachain cannot yet claim.

To appeal beyond its core community, BERA would have needed concrete, differentiated use cases. This weakness is partially addressed in PoL v2 (covered later in this piece).

The same goes for HONEY, the native stablecoin, which doesn’t clearly differentiate itself from competitors and plays no special role in PoL. Designing it as a yield-bearing stablecoin (e.g., backed by T-bills or instruments like USDe) could have generated native yield and made it a stronger magnet for ecosystem adoption.

This isn’t exactly a mistake, more a missed opportunity that could have moved the needle.

Token inflation

Even though no additional emissions were allocated to the team or investors, BERA’s supply did not remain flat. BGT rewards, once converted, led to continuous creation of new tokens. In a bit over eight months, circulating supply rose from roughly 109 million to 128.2 million BERA: an increase of 17.6%. On an annualized basis, that’s close to 27% inflation.

On top of that, 21.5 million BGT are currently in circulation. These tokens can be converted to BERA instantly. Even if it’s unlikely they all will be, it still represents potential inflation that could hit at any time. The effect could be especially negative if BERA’s price rebounds, since some holders might seize the opportunity for immediate gains rather than long-term BGT rewards.

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On-chain metrics review

As noted earlier, BERA and Berachain’s TVL are down 85% since the February launch-but what about other on-chain data? Is it really all that bad?

One key detail visible in the chart is that the main TVL drop began in May, about two months after launch. That coincides with the unlocking of assets from the Boyco program.

This program secured at least $2.2 billion in deposits for Berachain before the chain even launched, in exchange for 2%of total supply, or about 12.5% of the airdrop. When May’s unlock hit, at least $1.5 billion was pulled from the chain very quickly.

Having already been heavily sold, BERA fell again to current price levels. As BERA’s price declined, rewards shrank, which naturally pushed more capital out-reducing Berachain’s TVL by an additional $600 million over the following 30 days.

This drop in activity is also visible in the curve of cumulative addresses created on Berachain. Growth clearly slowed from early July, which coincides precisely with the end of the TVL downtrend.

The trend is also evident in daily transaction counts, which have been steadily declining since launch; though activity appears to be ticking up slightly since July.

The sharp drop in early September stems from an update introducing a minimum fee, which significantly reduced on-chain spam and bots. That skews the data somewhat, but it’s possible Berachain’s activity is slowly recovering. Thisremains to be confirmed.

Overall, the on-chain data seem to point to two primary causes of Berachain’s setback:

• Excessive token inflation, which attracted large amounts of mercenary liquidity-pushing the price down, reducing rewards, and accelerating capital flight;
• Limited utility for BERA, which gave holders little reason to keep it.

In the end, Berachain’s two main strengths were significantly weakened:

• Many users jumped ship after the token price fell;
• Some native projects are now expanding to other chains.

In hindsight, Berachain probably would have benefited from a more gradual strategy. Launching with less generous but better-calibrated rewards might have helped consolidate a loyal, truly engaged user base first. BERA’s price could then have evolved more steadily, supported by organic TVL growth from longer-term investors, rather than attracting a flood of opportunistic capital that left as quickly as it arrived.

It’s important to emphasize that Berachain is still a young project. Other chains, like Solana, BNB Chain, Arbitrum, also experienced rocky starts before becoming major players. Moreover, Berachain still has an active team building the project.

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What’s next for Berachain

Despite underwhelming stats, the Berachain team is moving forward with several important updates, some shipped, others coming soon. Let’s go through them in chronological order.

PoL v2

In the original PoL design, emissions incentives were primarily redistributed to staked BGT. That made holding BGT attractive, but offered little to BERA, which mainly paid gas and captured modest transaction fees via staking.

The problem is that BGT can be converted to BERA, but not the other way around. BGT, an interesting asset, thus had its intrinsic value tied to BERA, which was far less attractive. In PoL v2, this one-way convertibility doesn’t change, but about one-third of the rewards formerly allocated to BGT now accrue to BERA.

To receive these rewards, users must participate in a new module (sWBERA) where BERA can be deposited. The unlock period is seven days to limit mercenary liquidity.

Non-BERA incentives are swapped automatically into BERA, which also introduces a buyback mechanism, supporting BERA’s value and, by extension, BGT’s. In three months, sWBERA received $4.3 million worth of BERA. At that pace, $20.3 million in BERA would be distributed annually via this program, implying a current yield of 62%.

At present, 12 million BERA tokens have been deposited into this module, a drop in the bucket compared to the 213 million BERA staked via validators. The Berachain team says sWBERA was designed to enable liquid staking and expects solutions to emerge that let BERA holders combine the on-chain fees already implemented in PoL v1 with PoL v2’s new incentives.

BERA staking has already been integrated on Binance, Bitget, and Gate.

BRIPs (1 to 4)

In August 2025, Berachain activated a hard fork including four major BRIPs (Berachain Improvement Proposals) that modify several protocol fundamentals:

• BRIP-0001: execution client adjustments improving compatibility and stability with the EVM environment;
• BRIP-0002: gas price stabilization, alignment with Ethereum levels, and introduction of a minimum gas price to limit spam;
• BRIP-0003: block time is now fixed at 2 seconds, improving predictability and reducing transaction latency;
• BRIP-0004: each block now automatically includes a transaction to generate rewards for the previous block.

While these changes are relatively invisible to end users, they lay the groundwork for what’s next. By strengthening protocol stability and integrating PoL at the consensus level, the update facilitates more effective staking solutions and paves the way for future ecosystem developments.

The C.R.I.M.E. program

Berachain is preparing to launch a new incentive framework: Community Rewards and Incentives for Meaningful Engagement (C.R.I.M.E.).

The idea is to structure community and builder rewards around measurable, durable criteria. Rather than distributing resources scattershot, incentives will be based on concrete indicators such as on-chain activity, trading volume, TVL, and BERA usage across the ecosystem.

More qualitative criteria (cultural impact, community strength) will still be tracked, but won’t weigh as heavily as hard data. Finally, rewards will be spread over time to foster accountability and discourage short-termism.

Build-A-Bera: the in-house incubator

Build-A-Bera has already spawned several flagship ecosystem projects. The team now wants to make it an even more visible pillar of strategy. Concretely, Build-A-Bera will raise the bar to focus on strong teams capable of shipping quality products quickly. Upcoming batches will be smaller, but composed of profiles deemed “S-tier.”

In parallel, Berachain plans a fast-grant channel for developers or small, very early-stage teams, particularly in emerging regions. Build-A-Bera will also provide more operational support (bizdev, technical resources) to help these teams scale.

Berachain and its PoL already act as a sort of incubator by funding projects. Relaunching Build-A-Bera is thus a logical step to pre-incubate projects and grow the Berachain ecosystem, still one of its core strengths.

Beyond PoL: the return of native DeFi primitives

While Proof of Liquidity sits at the heart of Berachain’s narrative, the team emphasizes it is only one part of a broader vision. The chain’s original roadmap included native DeFi primitives, which were shelved for regulatory and technical reasons, but are now returning.

Next steps include: expanding the role of the HONEY stablecoin (now mintable from USDT); launching Bend, a native lending protocol designed for greater capital efficiency and deeper liquidity; and Berps, an on-chain perpetuals infrastructure still under discussion but central to future ambitions.

Berachain aims to solidify its DeFi foundation by embedding core building blocks directly at the chain level, supporting ecosystem expansion.

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Conclusion

Berachain’s launch was chaotic and clearly disappointed part of its community, marked by a controversial airdrop, poorly managed inflation, and limited BERA utility. The capital outflow and TVL decline have made it look like a project losing steam.

Even so, it would be premature to write it off. The team remains active, technical updates like the BRIPs strengthen the chain’s robustness, and PoL v2 brings tangible adjustments to incentives even if its success appears limited for now. The launch of C.R.I.M.E., the revival of Build-A-Bera, and the return of native DeFi bricks show a willingness to build for the long term.

In the end, Berachain remains a risky bet, but not a dead project. Its success will depend on its ability to regain user trust and prove that its unique Proof of Liquidity model can genuinely establish itself in an already saturated market.