Berachain: Proof of Liquidity
By
Aditya Saraf, Kelvin Koh
Apr 22, 2025
The crypto industry continues to evolve despite the market turbulence, driven by innovations that challenge traditional models of network security, governance and liquidity. Among the most exciting developments is Berachain, a new EVM identical Layer 1 blockchain that introduces Proof-of-Liquidity (PoL), an incentivization mechanism designed to address liquidity inefficiencies in DeFi. By aligning incentives among validators, developers and users, Berachain has the potential to reshape how blockchains operate.
Traditional Proof-of-Stake (PoS) blockchains face two critical issues: assets locked for staking become illiquid, reducing capital efficiency and a creating misalignment between validators and users wherein validators do not need to actively grow the ecosystem. Berachain’s PoL flips this traditional model by rewarding users who actively provide liquidity to DeFi protocols rather than passively staking tokens.
Berachain’s PoL model utilizes three interconnected tokens:
$BERA - used to pay network gas and set up a validator. The token is inflationary with an annual target of 10% emissions
$BGT - a non-transferable governance token that can be delegated to validators who decide how incentives are directed to a different liquidity pools within DeFi apps. $BGT can only be earned by providing liquidity and can be converted to $BERA at a 1:1 ratio
$HONEY - an overcollateralized stablecoin to be used in dapps on Berachain
Validators stake $BERA to secure the network but need $BGT delegations from liquidity providers to maximize rewards. This ties validators’ success directly to ecosystem activity.
The liquidity lifecycle of Berachain ends up as follows:
Users deposit assets (e.g., BTC, ETH) into DeFi protocols
Protocols distribute $BGT rewards based on usage
$BGT holders delegate to validators, steering block rewards
Validators share protocol incentives with delegators
This creates alignment between users who provide liquidity and earn $BGT, validators that need $BGT to scale up block rewards, and protocols that use $BGT to incentivize liquidity.
Berachain's Proof-of-Liquidity Framework
Source: Berachain
Before its mainnet launch, Berachain cultivated a vibrant and highly engaged community by embracing internet meme culture and leveraging NFTs as a cornerstone of its identity. The project's branding revolved around playful, irreverent themes, such as James Bond themed animated bears, inside jokes like "Henlo" and "Ooga Booga", and self-aware humor that resonated deeply with crypto enthusiasts. This approach fostered a unique cultural identity, positioning Berachain as a blockchain with personality rather than just technology. The Bong Bears NFT collection became the nucleus of this community, with holders actively participating in events, creating content, and building lore around the ecosystem. These grassroots efforts transformed Berachain into a cult-like movement, with 21,237 NFT holders eagerly awaiting the chain’s launch and contributing to its growth through social media engagement and grassroots campaigns. By empowering its community to lead initiatives like content creation and meme contests, Berachain maintained an authentic connection with its users while building anticipation for its debut.
Berachain’s mainnet launched on Feb 6, and the core team took a unique approach to bootstrap liquidity in the ecosystem. Boyco, Berachain’s pre-launch liquidity platform, solved the "cold start" problem by securing $3 billion in pre-deposits before mainnet launch. Built with Enso and LayerZero, Boyco allowed users to lock assets like BTC and ETH into vaults on Ethereum, which were then bridged to Berachain at launch. Participants earned $BERA tokens (2% of total supply) and protocol-specific incentives, creating immediate liquidity for dapps like decentralized exchange BEX and perpetual swap platform Berps. This model enabled projects to negotiate directly with liquidity providers via intent-based markets, ensuring transparency and eliminating double incentivization.
Post launch, Berachain’s TVL quickly grew from $700 million to $3 billion as Boyco assets kept getting bridged to Berachain with the launch of over 50 dapps. The project’s market cap rose from $3 billion to $6.5 billion within hours of the launch but quickly corrected to $2.5B. Berachain’s moat is in their incentive design and liquidity. However, it is yet to be seen whether the TVL on the chain will sustain or farm the ecosystem dry and migrate to the next hottest ecosystem. The Boyco asset unlocks begin in June, a critical period for the ecosystem that will test the attractiveness of yields and stickiness of assets in the ecosystem.
Berachain has a growing ecosystem
Source: Twitter, Beraeco
The crypto industry continues to evolve despite the market turbulence, driven by innovations that challenge traditional models of network security, governance and liquidity. Among the most exciting developments is Berachain, a new EVM identical Layer 1 blockchain that introduces Proof-of-Liquidity (PoL), an incentivization mechanism designed to address liquidity inefficiencies in DeFi. By aligning incentives among validators, developers and users, Berachain has the potential to reshape how blockchains operate.
Traditional Proof-of-Stake (PoS) blockchains face two critical issues: assets locked for staking become illiquid, reducing capital efficiency and a creating misalignment between validators and users wherein validators do not need to actively grow the ecosystem. Berachain’s PoL flips this traditional model by rewarding users who actively provide liquidity to DeFi protocols rather than passively staking tokens.
Berachain’s PoL model utilizes three interconnected tokens:
$BERA - used to pay network gas and set up a validator. The token is inflationary with an annual target of 10% emissions
$BGT - a non-transferable governance token that can be delegated to validators who decide how incentives are directed to a different liquidity pools within DeFi apps. $BGT can only be earned by providing liquidity and can be converted to $BERA at a 1:1 ratio
$HONEY - an overcollateralized stablecoin to be used in dapps on Berachain
Validators stake $BERA to secure the network but need $BGT delegations from liquidity providers to maximize rewards. This ties validators’ success directly to ecosystem activity.
The liquidity lifecycle of Berachain ends up as follows:
Users deposit assets (e.g., BTC, ETH) into DeFi protocols
Protocols distribute $BGT rewards based on usage
$BGT holders delegate to validators, steering block rewards
Validators share protocol incentives with delegators
This creates alignment between users who provide liquidity and earn $BGT, validators that need $BGT to scale up block rewards, and protocols that use $BGT to incentivize liquidity.
Berachain's Proof-of-Liquidity Framework
Source: Berachain
Before its mainnet launch, Berachain cultivated a vibrant and highly engaged community by embracing internet meme culture and leveraging NFTs as a cornerstone of its identity. The project's branding revolved around playful, irreverent themes, such as James Bond themed animated bears, inside jokes like "Henlo" and "Ooga Booga", and self-aware humor that resonated deeply with crypto enthusiasts. This approach fostered a unique cultural identity, positioning Berachain as a blockchain with personality rather than just technology. The Bong Bears NFT collection became the nucleus of this community, with holders actively participating in events, creating content, and building lore around the ecosystem. These grassroots efforts transformed Berachain into a cult-like movement, with 21,237 NFT holders eagerly awaiting the chain’s launch and contributing to its growth through social media engagement and grassroots campaigns. By empowering its community to lead initiatives like content creation and meme contests, Berachain maintained an authentic connection with its users while building anticipation for its debut.
Berachain’s mainnet launched on Feb 6, and the core team took a unique approach to bootstrap liquidity in the ecosystem. Boyco, Berachain’s pre-launch liquidity platform, solved the "cold start" problem by securing $3 billion in pre-deposits before mainnet launch. Built with Enso and LayerZero, Boyco allowed users to lock assets like BTC and ETH into vaults on Ethereum, which were then bridged to Berachain at launch. Participants earned $BERA tokens (2% of total supply) and protocol-specific incentives, creating immediate liquidity for dapps like decentralized exchange BEX and perpetual swap platform Berps. This model enabled projects to negotiate directly with liquidity providers via intent-based markets, ensuring transparency and eliminating double incentivization.
Post launch, Berachain’s TVL quickly grew from $700 million to $3 billion as Boyco assets kept getting bridged to Berachain with the launch of over 50 dapps. The project’s market cap rose from $3 billion to $6.5 billion within hours of the launch but quickly corrected to $2.5B. Berachain’s moat is in their incentive design and liquidity. However, it is yet to be seen whether the TVL on the chain will sustain or farm the ecosystem dry and migrate to the next hottest ecosystem. The Boyco asset unlocks begin in June, a critical period for the ecosystem that will test the attractiveness of yields and stickiness of assets in the ecosystem.
Berachain has a growing ecosystem
Source: Twitter, Beraeco
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