Where Does Berachain (BERA) Stand? A Report Three Months After Mainnet Launch and Airdrop

A Recap on Berachain

Unlike most new blockchains that opt for a Proof of Stake consensus to secure their network, Berachain has introduced its own consensus model: Proof of Liquidity. This approach is based on the idea that Proof of Stake creates a disconnect between network validators, ecosystem projects, and users. Proof of Liquidity, on the other hand, fosters collaboration between these actors: validators directly distribute incentives to DeFi projects and their users, while those users delegate tokens to boost validator emissions.

Berachain also stands out with its unique three-token model:

• BERA: The gas token, which must be staked by validators to participate in transaction validation.
• BGT: The blockchain’s governance token, which can be delegated to validators to boost their BGT emissions when selected to produce a block. BGT is non-transferable, but can be burned in exchange for an equivalent amount of BERA.
• HONEY: Berachain’s native stablecoin, fully collateralized with USDC or PayPal’s pyUSD.

Another notable aspect of Berachain is its technical choice to be EVM-identical. Validators on Berachain use the same execution clients as Ethereum validators. This allows Berachain users to benefit from Ethereum’s technological upgrades as they roll out.

This differs from most recently launched L1 blockchains, which generally seek performance optimization (speed, latency, etc.) through alternative programming languages like Move or non-EVM execution environments.

In short, Berachain sets itself apart from other L1s with bold technical choices and a unique consensus mechanism. This is part of a deliberate strategy to position itself as a blockchain purpose-built for DeFi, while others aim for more general-purpose use cases.

→ For further detail, see our full introduction to Berachain:

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Some On-Chain Metrics on Berachain

Berachain’s approach is bold and could potentially impose a ceiling on long-term ecosystem growth. However, depending on sector dynamics, it may also reinforce Berachain’s current positioning in DeFi and secure its leadership going forward.

Just over three months after mainnet launch, what can we conclude? According to on-chain data, this strategy of vertical specialization in DeFi appears to be working: Berachain now ranks 8th among blockchains by DeFi TVL, and 13th in bridged external assets.

Note: For a blockchain that launched only three months ago, this is a remarkable performance.

At mainnet launch, network activity surged, likely fueled by the massive BERA airdrop. The number of daily active addresses peaked at 1.2 million, before falling and stabilizing between 25,000 and 50,000 users. Over the past few weeks, that figure has regularly exceeded 60,000, indicating renewed interest in Berachain.

The same trend is visible in DeFi transaction volumes: network activity has stabilized in the $50M–$100M daily range over the last 30 days. DEX volumes represent 50% to 75% of this total, revealing a fairly uneven distribution.

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Focus on the Proof of Liquidity

Vaults and Bribes

To better understand how Proof of Liquidity works, we need to introduce two key concepts: vaults and bribes.

What is a vault? Vaults are smart contracts used to deposit tokens on Berachain. Each vault is created for a specific token (a governance token, a memecoin, an LP token, an NFT, etc.).

When a Berachain validator is selected to produce the next block, they gain the right to issue BGT and allocate them to the vaults of their choice, with a cap of 30% per vault. These BGT are then distributed to users who have deposited into that vault, in proportion to their capital.

Currently, most vaults are based on LP tokens from Berachain DEXs. As a result, the Proof of Liquidity mechanism encourages users to provide liquidity to DEXs, increasing depth for traders. Unlike other blockchains where token emissions mainly benefit validators, Berachain’s emissions directly support the development of DeFi projects being built on the chain.

What is a bribe? Another important concept in Berachain’s economy is the bribe. Bribes are rewards distributed by a vault to validators who choose it.

When a validator selects a vault to distribute BGT to, they may receive additional rewards issued by that vault. These can then be shared with the BGT holders who have delegated to the validator (we’ll cover this delegation further below). These rewards — the bribes — are deposited by anyone into any vault and act as incentives for validators to direct BGT to that vault.

For instance, rather than distributing its token to incentivize liquidity pools directly, a project may choose to deposit those tokens as bribes into the vault for that pool. This incentivizes validators to direct BGT to liquidity providers in that pool.

So far, the cost of bribes spent to earn 1 BGT for LPs has remained below the market value of that BGT. In practice, this means that for every $1 worth of tokens distributed as bribes, liquidity providers receive more than $1 worth of BGT. Projects benefit directly from this mechanism, as they can offer higher rewards to liquidity providers with the same amount of incentives, leading to better yields and deeper liquidity.

This creates a unified market for incentives, where projects compete to capture Berachain emissions rather than running isolated incentive schemes. Projects benefit by earning more attractive rewards for their users, and Berachain benefits from growing its ecosystem and reinforcing network effects. In this sense, Berachain acts as an incentive engine to accelerate the development of valuable on-chain projects.

Limits and Distortions of the Vault System

The Proof of Liquidity mechanism introduces a novel incentive structure with direct effects on the tokens of projects within the Berachain ecosystem. From the early weeks, some projects began distributing exceptionally generous bribes to vaults associated with their tokens.

This strategy quickly attracted numerous validators, who redirected their BGT emissions toward those vaults in order to capture higher yields — in some cases reaching several hundred percent APY. This created immediate buy pressure on the targeted tokens, driving up their price temporarily.

Other projects took it a step further by directing bribes toward liquidity pools in which they held substantial positions. By capturing a large share of BGT emissions, they were able to recycle those tokens into new bribes, further reinforcing their dominance over the BGT emission flow.

The Evolution of Vault Selection

To mitigate some of the early abuses observed, the Berachain team has revised the vault selection process multiple times. In its current form, this process is overseen by a five-member council, composed of three members from the Berachain core team and two ecosystem representatives.

This council is responsible for approving or rejecting new vault proposals submitted by projects. Selection is based on two sets of criteria:

• Quantitative: The token must have at least 100 holders, over $100,000 in liquidity, and no single wallet holding more than 40% of the total supply.
• Qualitative: Does the vault bring real value to the ecosystem? Does it carry any particular risks? Is it likely to encourage adoption of Berachain?

While these guardrails help structure the ecosystem, the qualitative criteria remain open to interpretation. This vagueness is a source of concern: the subjectivity of decisions. In an environment where some council members have vested interests in competing projects, the risk of abuse of power or favoritism, particularly through OTC deals, becomes tangible.

In the long term, Berachain plans to decentralize this process by transferring vault validation responsibilities to community governance (via BGT holders). However, such a shift may not necessarily benefit Berachain: entrusting an open governance system with the evaluation of criteria that are often technical and sensitive seems risky, and it’s unclear whether the community would be better equipped to ensure a rigorous, impartial, and timely selection process.

In short, while Berachain’s vault system is conceptually innovative, it faces practical difficulties due to the many potential distortions introduced by the qualitative criteria. Approving or rejecting a vault can effectively determine the fate of a project on Berachain. Vault selection has become a strategic lever and one of the chain’s critical pain points.

The vault selection system is thus a crucial factor in Berachain’s long-term success. Since the launch of Proof of Liquidity, it has already undergone several revisions. The Berachain team has proven responsive, and we can expect this dynamic to continue over the coming months.

BGT Emissions

To wrap up the analysis of how Proof of Liquidity works, we need to examine the dynamics surrounding the BGT token. As previously mentioned, the validator selected to produce a block also gains the right to mint BGT and distribute it to vaults of their choosing.

What’s crucial to understand is that the more BGT a validator holds, the more “boost” they receive. The higher the boost, the more BGT they can emit if selected to validate a block. In other words, attracting more BGT increases a validator’s power, as it amplifies their ability to emit rewards for selected vaults.

This boost can be significant: the difference between the minimum and maximum possible emissions is a factor of 10. It’s also worth noting that boost growth is logarithmic : the first BGT delegated to a validator has much more impact than the ones that follow.

Impact on BERA Inflation

Once users receive BGT, they have two options:

• They can burn it for an equivalent amount of BERA in order to sell it or use it in DeFi.
• They can delegate it to a validator of their choice and earn a share of the bribes and fees that validator generates.

This creates a unique dynamic for BERA token inflation. Since emissions take the form of non-transferable BGT (only convertible into BERA) inflation on BERA is inherently non-linear and depends entirely on user behavior.

The yields generated by delegating BGT (i.e., bribes) directly compete with the returns available through DeFi opportunities on Berachain. Over time, these two sources of yield should reach equilibrium, likely resulting in a relatively stable circulating supply of BGT.

Currently, the yields from delegating BGT are much higher than most DeFi yields. As a result, less than 15% of all issued BGT have been converted into BERA so far. This trend is expected to continue until vault yields become competitive with bribes.

Another important factor that influences the amount of BGT burned, and therefore BERA inflation, is price action. If the price of BERA rises sharply, some users may prefer to realize immediate profits by converting their BGT.

That’s exactly what happened at the end of March, when BERA’s price surged 45% in just a few days. The result: a spike in the amount of BGT burned. This kind of event is bound to happen again, and it’s important to watch closely because it has a dual impact:

• It reduces the circulating supply of BGT, which increases the yields for the remaining BGT holders.
• It accelerates the expansion of BERA’s circulating supply, putting downward pressure on its price.

If a large amount of BGT has been accumulated, this could trigger a “flush” effect, meaning a sharp increase in BERA supply that could lead to a rapid price correction.

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Sector Analysis

DEXs

As on most smart contract blockchains, decentralized exchanges account for a significant portion of on-chain activity. On Berachain, their combined TVL currently sits at $1.6 billion, representing just over a quarter of the network’s total TVL. The vast majority of this liquidity is concentrated across two major platforms: BEX and Kodiak.

BEX is the official DEX launched by the Berachain team. Built on top of Balancer v2, BEX experienced a rapid increase in TVL, reaching $1.6 billion shortly after the launch of Proof of Liquidity. This was largely due to the fact that, at launch, only five vaults were approved — all of which were tied to BEX. However, liquidity quickly began migrating toward Kodiak, which has since taken the lead.

Kodiak is now the dominant DEX on Berachain by a wide margin. It holds 84% of all DEX liquidity on the chain and generates more than half of the total trading volume. Its liquidity pools capture nearly 60% of the BGT emissions distributed by validators. These emissions ultimately flow back to Kodiak LPs, but this metric also shows the critical role Kodiak plays in the Proof of Liquidity model.

Kodiak owes much of its success to its "Island" liquidity pools, which adapt Uniswap v3’s concentrated liquidity model to function within the Proof of Liquidity framework. This allows Kodiak pools to offer deeper liquidity for traders and higher fees for liquidity providers. For these reasons, Kodiak is very likely to remain Berachain’s leading DEX over the coming year.

LSDs

Although their TVL is significantly lower (around $330 million), LSDs play a critical role in the Berachain ecosystem. This sector mainly revolves around two types of assets:

• BGT LSDs, which tokenize delegated BGT
• BERA LSDs, which tokenize staked BERA

By design, BGT is a non-transferable asset, which limits its usability. To make it liquid, LSD protocols build their own abstraction layers on top of Proof of Liquidity. Instead of depositing their tokens into a vault directly, users deposit them into a smart contract controlled by the protocol, which in turn deposits them into the vault. The BGT rewards are collected by the protocol, which issues a new LSD token to the liquidity provider.

These protocols generally allow staking of their LSD token to earn the rewards generated from their delegated BGT. This approach offers two main advantages:

• LSDs are ERC-20 liquid tokens, meaning they can be freely traded on Berachain DEXs.
• LSD staking benefits from a yield concentration effect. For example, if a protocol holds 100 BGT and issues 100 xBGT tokens, not all xBGT will be staked — some will be used in LP positions or as lending collateral. As a result, a smaller pool of stakers receives rewards from the full 100 BGT, resulting in higher yields than direct BGT delegation.

These features naturally create a premium for BGT LSDs, as they combine BGT yield with liquidity.

Focus on Infrared:

The BGT LSD market is heavily dominated by Infrared and its token iBGT, which alone accounts for 58% of all circulating BGT and 78% of the total LSD BGT market cap. The remaining share is split between BeraPaw (20%) and Stride (2%).

Just as Kodiak dominates the DEX sector and vault allocations, Infrared has become a central player by controlling which validators receive the boost from the BGT collateralizing iBGT. Infrared plans to delegate this responsibility to its own governance system (backed by a forthcoming token), but in the meantime, it remains a significant source of power — one that can be used strategically by validators to increase their emissions.

For now, the BGT held by Infrared is delegated to 8 of its validator partners. These validators are unique in that they keep 100% of bribe rewards (compared to the standard 5–10% commission elsewhere). This setup ensures that there’s no incentive for external BGT holders to delegate to these validators, while the full bribe flow is discreetly routed back to Infrared — which then redistributes it to iBGT stakers by buying tokens on the market.

Infrared’s influence doesn’t end there. It also operates the leading LSD for BERA staking — iBERA — which has reached a TVL of $300 million. Similar to stETH on Ethereum, iBERA tokenizes BERA staked with validators. Once again, Infrared decides which validators receive these stakes — and unsurprisingly, they go to the same 8 validator partners.

One key point we haven’t yet addressed about BERA staking: the more BERA staked to a validator, the higher the chance it has to be randomly selected to validate a block. The higher its BGT boost, the more BGT it can emit when selected. There are caps in place: the minimum stake to run a validator is 250,000 BERA, and the maximum is 10,000,000 BERA. So, even with equal boost levels, a validator with 10 million BERA is 40 times more likely to be selected than one with 250,000 BERA.

Considering Infrared’s massive boost and its 80 million BERA reserve, it now controls 7 of the top 10 validators on Berachain — giving it significant power over BGT emissions and the direction of incentives.

Focus on BeraPaw:

Infrared secured its dominant position by aggressively incentivizing liquidity staking via its pools at launch. But unexpectedly, another LSD — BeraPaw’s LBGT — has carved out a significant market share, now holding 20% of the BGT LSD sector and around 15% of all circulating BGT.

Its success is due to two key factors:

First, BeraPaw introduced a flexible delegation mechanism that lets users mint LBGT without depositing tokens into BeraPaw’s smart contracts. Instead, users can deposit LP tokens directly into official vaults and then claim BGT as LBGT on BeraPaw. This approach allows users to interact with the official infrastructure while still benefiting from BeraPaw’s LSD model.

Second, and more importantly, LBGT has long traded at a strong premium — historically 70% above BERA, and at times even exceeding 150%.

This premium is driven by the structure of the LSD. Unlike iBGT, which exclusively boosts Infrared’s partner validators, BeraPaw aims to maximize returns by delegating to the most profitable validators — those directing BGT emissions toward pools containing LBGT. This strategy naturally boosts the yield of those LP pools, encouraging investors to acquire and stake LBGT.

Since most LBGT tokens are used in liquidity pools, only a small fraction is actually staked — resulting in extremely concentrated yields for those who do stake. As long as vault incentives remain high, this keeps the LBGT premium elevated, encouraging BGT farmers to claim their rewards in LBGT. By selling these tokens for BERA, they immediately capture the premium — a dynamic that’s attracted significant capital.

Recently, declining vault yields have led to reduced demand for LBGT pools, which has brought the premium down to around 30%. Still, LBGT remains a compelling option for yield-seeking investors.

Lending

On a blockchain purpose-built for DeFi, lending is naturally a core vertical. The lending market on Berachain is currently dominated by a single protocol : Dolomite, which holds 97% of the total lending TVL, estimated at around $790 million. The remainder is largely attributed to Euler.

Since the launch of the Proof of Liquidity, lending on Berachain has offered exceptionally high yields, sometimes exceeding 100% APY. This is due to the strong returns generated by vaults, which justify borrowing assets even at high interest rates in order to deposit them back into Berachain’s incentivized vaults.

However, following the correction in BERA’s price, vault yields have declined significantly — which has in turn reduced the attractiveness of lending strategies.

Currently:

• Lending BERA offers decent returns of around 20–30% APY.
• Stablecoin lending is far less attractive, with rates closer to 5–10%, which limits investor interest unless BERA’s price trends upward again.

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Upcoming events

Boyco

The Boyco program was used to kickstart the Proof of Liquidity by allowing investors to deposit capital on other blockchains, which was then bridged over to Berachain. Over 2 billion dollars were deposited through Boyco, in exchange for 10 million BERA tokens (2% of total supply).

This capital was subject to a 90-day lock, which is set to expire on May 7. Given the recent decline in yields, it is highly likely that 20 to 40% of this capital will exit Berachain, helping to rebalance incentives after the drop in the BERA token.

The seventh rebase

During the February airdrop, 6.9% of BERA tokens were allocated to Bong Bears and rebases. These are NFT collections where each new generation (rebase) doubles in supply. Six rebases have already been issued, totaling 4,543 NFTs. The seventh rebase has been announced and should arrive in the coming months, “when Berachain needs it most,” according to the team.

As with the previous rebases, this one will be distributed to current holders of previous generations and will come with a share of the airdrop dedicated to rebases. This means that each holder of one of the official Berachain collections (Bong Bears, Bond Bears, Boo Bears, Baby Bears, Band Bears, and Bit Bears) will receive the seventh rebase and an additional airdrop estimated at around 1,070 BERA (about 3,800 dollars at current prices). Three-quarters of this amount will be immediately available. The remainder will be subject to a two-year vesting period starting in February 2026, as already planned for the previous six rebases.

As of now, the floor price for Bit Bears, Band Bears, and Baby Bears is 300, 410, and 730 BERA respectively. Since each of these NFTs will receive the seventh rebase and its associated airdrop, this creates an arbitrage opportunity where the key variable is time, as no one knows exactly when the rebase will be launched.

Upcoming tokens

Many major projects on Berachain have yet to launch their own token. This includes high-profile names like Infrared, Kodiak, and BeraPaw. Others, like Dolomite, have only just made their announcement. These token launches will be highly significant for the future development of the ecosystem, for two reasons.

First, these tokens will play a central role in project governance, allowing anyone to influence the large BGT holdings these protocols control. This is especially true for Infrared and BeraPaw, which hold major BGT reserves. Owning their token will give users leverage over BGT allocation, enabling other projects to acquire influence at a lower cost.

Second, these tokens will likely be used to incentivize liquidity in the vaults. As previously explained, projects can deposit tokens in the form of bribes to encourage validators to direct BGT emissions toward their pools, which in turn attracts more liquidity providers. Since each BGT received tends to be worth more than the cost of a bribe, this creates a strong incentive for protocols. These bribes are a key driver of the Berachain ecosystem and directly impact vault yields and TVL. It is highly likely that network activity will pick up again once these major token launches take place and their teams begin distributing bribes.

BERA unlocks

Looking further ahead, the first major unlocks for BERA tokens are scheduled for February 2026. These will primarily benefit private investors who funded the early development of Berachain, as well as the core team, with 56 million BERA set to be released — equivalent to 50% of the currently circulating supply. Since this release is known in advance, its effects could start being priced in by the market as early as the end of 2025.

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Outlook

The Berachain ecosystem has experienced rapid growth, primarily driven by the novelty of its Proof of Liquidity model and the exceptionally high yields it initially offered. However, the protocol is now entering a consolidation phase, marked by saturated liquidity, declining returns, and emerging governance challenges.

In the short term, the unlocking of funds from the Boyco program could trigger a significant liquidity outflow. This would likely amplify the recent yield compression, but could also help correct the market distortions created by the initial capital influx. A partial withdrawal may ultimately stabilize Berachain’s economic structure and restore appeal to its most efficient strategies.

The launch of major protocol tokens, notably Kodiak and Infrared, will also be a pivotal moment. These releases are expected to reshape governance dynamics and may reignite interest in the vaults by introducing fresh bribe flows, which would in turn boost on-chain activity.

In the medium term, the growing influence of players like Infrared raises serious questions around centralization — especially regarding block validation, BGT emissions, and economic control across the network. Despite counterbalances such as BeraPaw, it is unlikely that the dominance of Infrared and Kodiak will fade anytime soon.

In the long run, the scheduled BERA token unlocks in early 2026 could significantly disrupt the current balance. While the Proof of Liquidity is a creative and promising mechanism, no consensus model, however elegant, can offset unchecked token inflation. If the network fails to sustain genuine long-term growth in usage and adoption, the BERA token will inevitably suffer.