Bear Necessities: A Berachain Introduction
The scalable EVM-equivalent smart-contract and cross chain interoperability platform, promises to deliver high performance
What is Berachain?
Berachain is an EVM equivalent Layer 1 built on top of the Cosmos SDK, using proof of liquidity consensus, which aims to align incentives between security and liquidity at the protocol level.
In Proof of Liquidity, the only way to contribute towards network security is by first doing the “work” of providing liquidity to a set of DeFi primitives that are built into the chain itself; namely a native AMM DEX, a perps exchange, and a stablecoin lending platform.
One of the protocol’s key distinguishing features lies in its plans to create a new level of capital efficiency in the DeFi space
Another notable feature includes Berachain’s two-pronged approach to addressing the fractionalized liquidity issue (commonly found on DeFi platforms) through its Tri-Token system and its novel Proof of Liquidity mechanism.
Consensus Mechanism (PoL):
By using this novel system, Berachain is trying to:
- Build Liquidity Systemically
- Solve Stake Centralization
- Align Protocols and Validators
The mechanism uses vaults to calculate validator vote weights, and to distribute block rewards. In this mechanism users and validator operators deposit a variety of assets (ETH, BTC, etc) into the consensus vault system (or Berachain BEX). In turn they are rewarded with tokenized shares that represent their deposit and can be used in governance (BGT).
BeraChain’s PoL doesn’t require that staking be done with their native tokens. But similar to a dPoS, participants are able to delegate their deposits to a particular validator, handing over consensus voting power to their chosen validator.
The bonded assets will be used to provide liquidity to BeraChain’s DEX and lending markets.
Tokenomics
This unique Tri-Token system separates the critical functions of its decentralized economy into three (3) distinct tokens…
○ BERA:
Represents the gas token of Berachain. It’s essentially a medium that’s used to both price a unit of work and perform that work.
○ BGT (Bera Governance Token):
Is the protocol’s non-transferable soulbond, staking, and governance token. It allows holders of the token to delegate to a validator, to participate in chain governance, or create a proposal, such as rewards rates or which pools or protocols receive BGT emissions.
New BGT tokens can only be earned by providing liquidity to Berachain’s core defi primitives, which Include a DEX, stablecoin lending platform, or perps exchange, as well as other specific actions. The amount of emissions earned is determined by the amount of BGT being emitted by a particular pool + the amount of liquidity that the user has provided to that pool (out of the total.
BGT can be burned 1:1 for BERA tokens but BERA tokens cannot be burned for BGT. This is meant to ensure the security of the network’s governance.
○ HONEY:
The network’s native consensus stablecoin is collateralized 1:1 with USDC. It’s used to settle the platform’s perp exchange funding fees and is paired with assets staked by the network’s users who stake BGT will earn fees from protocols powered by PoL in the form of Honey.
Tech stack
→ Polaris
Berachain has also developed and released Polaris, a new open-source blockchain library that serves as the foundation for its EVM network that’s meant to support multiple highly secure, fast finality, EVM-based chains capable of ensuring interoperability and composability for smart contracts in the Cosmos Interchain.
In a nutshell Polaris is an Ethereum mainnet-equivalent Virtual Machine on top of a host chain.
Built atop the Cosmos SDK, Polaris’ EVM support outperforms existing solutions across the board (such as Ethermint) and promises to facilitate a better experience for developers, users and operators.
It’s also been designed to protect against re-entrancy attacks and gas limit vulnerabilities.
→ Consensus Mechanism
Berachain’s network is built on its novel Proof-of-Liquidity mechanism.
The mechanism offers sybil resistance and uses vaults to calculate validator vote weights, and to distribute block rewards.
By using this novel system, Berachain is trying to:
- Build Liquidity Systemically
- Solve Stake Centralization
- Align Protocols and Validators
The mechanism uses vaults to calculate validator vote weights, and to distribute block rewards. In this mechanism users and validator operators deposit a variety of assets (ETH, BTC, etc) into the consensus vault system (or Berachain BEX). In turn they are rewarded with tokenized shares that represent their deposit and can be used in governance (BGT).
BeraChain’s PoL doesn’t require that staking be done with their native tokens. But similar to a dPoS, participants are able to delegate their deposits to a particular validator, handing over consensus voting power to their chosen validator.
The bonded assets will be used to provide liquidity to BeraChain’s DEX, and lending markets.
→ Consensus Algorithm
The blockchain utilizes the Cosmos native Tendermint (CometBFT) consensus algorithm.
One of the market’s most trusted and high-performing consensus algorithms.
→ IBC Module
Another interesting feature of Berachain is its interoperability functions made possible with the help of the Cosmos SDK.
By implementing the SDK’s Inter-Blockchain Communication Protocol module, Berachain has made it easier to create a communications hub allowing different chain tokens 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.
Berachain Pools
These can be separated into 2 categories:
→ House Pools
These have deep liquidity and represent the foundational/default pools within the Berachain BEX. They play a vital role by earning BGT emissions for validators who have not customized their emissions.
→ MetaPools
These are a BEX innovation and are derived from House Pools (due to deep liquidity).
MetaPools are made up of at least 1 token that represents shares of another liquidity pool. ⇒ LP token
MetaPools are meant to increase capital efficiency and add liquidity depth of pools with the same tokens.
Example:
There is $200 of $HONEY on Berachain. This $HONEY needs to be paired against both $BERA and $DAI, separately.
→ Traditional Pools
- $100 of $HONEY paired with $100 of $BERA
- $100 of $HONEY paired with $100 of $DAI
→ MetaPools
- $200 of $HONEY paired with $200 of $DAI
- $200 of $HONEY/$DAI LP tokens paired with $200 of $BERA
Berachain Ecosystem
A number of dApps covering marketplaces, gaming, AMMs/DeFi, and security are already anticipated for Berachain’s mainnet launch, including…
Bera-Land:
Self-described as being located within the “Beraverse”, Bera-Land is a community hub dispensing news and announcements related to the greater Bera population.
Bera-Drome:
A liquidity and low-slippage trading hub on the protocol that protects liquidity providers from asset volatility.
Honey-Pool:
A prize savings protocol, that allows participants to win by saving.
Participants deposit USDC to take part in daily prize draws, with each dollar increasing the likelihood of winning.
Prizes come from the interest accrued on all deposited funds, and users can withdraw deposits any time.
Berachain Support
The chain has accrued US$ 42 mil. in funding from Hack VC, dao5, Tribe Capital, Shima Capital, CitizenX, Robot Ventures, and others.
Berachain Roadmap and Conclusion
Still under construction, mainnet launch is not yet known, but support for the network has seen steady growth and a wide array of projects are planned for the chain.
Backed by unique technology, such as its novel Proof of Liquidity mechanism, its own EVM scalable framework (Polaris), and its Tri-Token system the chain and its developments warrant close attention.
What is Cøsmostation?
Cøsmostation is a Cøsmos genesis validator and a key player in the Cøsmos ecosystem, providing invaluable infrastructure legos essential for scaling and onboarding users onto blockchain networks. Cøsmostation also bootstraps networks and onboards end-users.
Mintscan
Moreover, Cøsmostation offers its own blockchain explorer, Mintscan. It provides insightful interactions with chain data across various networks and also features a user-centric design, with transparency placed at the core of its ethos.
