Liquidity in POL: Vase’s Gateway

In traditional Proof of Stake (PoS), users constantly face the challenge of deciding how to utilize their tokens. They can either stake them to earn rewards or use them in Defi, but rarely both. This dilemma gave rise to LSTs, which allow users to retain staking yields while maintaining liquidity for Defi. However, traditional LSTs often compromise some of the native utility of staked tokens.

Berachain’s Proof of Liquidity (PoL) was specifically designed to eliminate this opportunity cost in PoS, seamlessly aligning security with liquidity and removing the need to choose between the two. However, for non-native tokens, another challenge remains: the opportunity cost of forfeiting staking rewards.

Vase Finance addresses this issue head-on by creating a seamless gateway for external liquidity to flow into Berachain, positioning itself as the most efficient entry point for external assets into the ecosystem.

Liquidity in POS

Traditional PoS focuses on network security. Users stake their tokens to secure the blockchain, receiving rewards generated by chain inflation in return. While security is important, this staking model can stifle on-chain activity, as staking becomes a constant competitor for capital.

Consider a scenario where a PoS chain offers a staking APR of 10%. Users are faced with a choice: stake their tokens to earn that 10% or deploy them in Defi. Rationally, a user would only participate in Defi if it offers returns greater than 10%.

In ecosystems like Ethereum, where inflation is low and staking APR hovers around 3%, this issue is less pronounced as Defi often yields higher returns. However, on chains like Celestia, where the staking APR is 11%, the situation becomes problematic. Here, the chain itself competes directly with its Defi protocols, creating a suboptimal environment for growth.

Liquidity in POL

Berachain’s PoL consensus was designed to align security with liquidity, effectively eliminating the traditional trade-off between staking and Defi participation. In this model, the chain doesn’t compete with Defi; rather, it turbocharges liquidity, making it readily accessible for protocols to leverage.

This innovation leads to a significant increase in liquidity efficiency, fostering a synergistic environment where protocols on Berachain thrive together.

However, one challenge remains: when bringing external assets into Berachain in any form other than an LST, users face an opportunity cost, as they miss out on potential staking rewards.

Vase LST Liquidity in POL

Vase Finance eliminates the final opportunity cost in the liquidity equation. Through chain-agnostic liquid restaking, Vase allows users to bring assets from any ecosystem as LSTs, maintaining full native exposure while turbocharging those assets within our restaking framework, resulting in the most productive liquidity available.

To truly maximize performance, users must consider the hidden costs of Defi, with inflation being the most significant. When assets are not staked, their value diminishes at a rate equal to the chain’s inflation, effectively subsidizing growth for those who do stake.

For example:

• Unstaked ETH incurs a yearly loss of 3%.
• Unstaked SOL incurs a yearly loss of 7%.
• Unstaked TIA incurs a yearly loss of 11%.

Holding these assets while engaging in Berachain Defi without staking is a challenging position to start from, as you basically start in the red. Instead, by bringing these assets as Vase LSTs, users can retain their staking APR, full governance and choice rights, benefit from a baseline Restaking APR through our incentive infrastructure, and maintain full liquidity through rehypothecation.

With Vase’s Liquid Restaking, users from any ecosystem gain a competitive edge in Berachain Defi.