As Web3 continues to grow, new blockchains are emerging. Bear-themed Berachain is one the hottest new entrants, promising to tackle the liquidity issues that blockchains so often face.
In this guide, we’ll cover what Berchain is, how it’s designed, its potential use cases and what you can expect from the Berchain ecosystem.
Berachain is a Layer 1 blockchain with an Ethereum Virtual Machine (EVM)-identical execution layer and proof of liquidity (PoL) consensus mechanism.
It aims to become the next big Layer 1 blockchain while addressing the liquidity issues present in other blockchains by building the solution directly into its governance model.
This blockchain is still in testnet, so if you’re interested in checking it out, connect a compatible Berachain wallet and get started.
Three main factors come together to make Berachain possible.
Berachain’s execution layer is EVM-identical, which should not be confused with EVM-compatibility.
As the name implies, EVM-identical layers are fully compatible with Ethereum, with interoperability and a full Ethereum ecosystem of use cases. EVM-compatible layers, on the other hand, can have varying degrees of similarity and interoperability with Ethereum.
In practice, for Berachain this means that any Ethereum upgrade can immediately be implemented on Berachain as well. Additionally, it uses Ethereum’s execution clients like Geth, Erigon, Nethermind, etc., to execute smart contracts and use Ethereum-specific tools.
Another important aspect of Berachain is its proof of liquidity consensus model. It incentivizes participants to provide liquidity to the network, thereby securing it and attracting new users and potential validators.
If you want to become a validator, you first need to acquire BGT, the network’s non-transferable governance token. To do this, you need to lock up your capital into the ecosystem through reward vaults, which provide liquidity. Once you have BGT, you can get BERA (the gas token) by either delegating BGT to a validator or burning it.
Meanwhile, delegating to a validator offers a host of advantages. By delegating, you boost the validator, letting them earn more rewards, some of which come back to you. In turn, validators with the most BGT get to vote on who to reward next by choosing which reward vaults to approve.
All of this helps the chain to secure liquidity, which goes beyond rewarding simple staking as in the proof of stake consensus models.
Berachain has developed its own modular framework called BeaconKit that introduces the CometBFT, a blockchain consensus engine for Byzantine fault-tolerant applications, to any EVM execution environment.
It uses the Engine API, which is the interface that allows communication between the execution and the consensus layer of an Ethereum node, to enable pairing with any EVM execution client, making it EVM-identical.
The importance of modularity stems from the different layers of an ecosystem: this approach lets it integrate things like a custom block builder, rollup layer, data availability layer, etc. Additionally, it serves as a framework for potential Layer 2 solutions that can be built upon Berachain.
Berachain’s ecosystem is made up of three separate tokens, all of them serving different purposes.
The first significant token is BERA. Its primary purpose is to serve as a gas token, but it is also designed to be used for staking to activate validator nodes. All the BERA tokens staked together serve as a foundation for the security of the Berachain network.
The second token, also a key factor of the Berachain network’s security, is BGT, short for Berachain Governance Token. This token is non-transferable (so you can’t buy or trade it to participate in the blockchain’s governance), but it can only be obtained by providing liquidity in PoL-eligible assets.
This includes depositing liquidity in the native BEX (the chain’s exchange) for a pair that earns BGT emissions, borrowing HONEY, the third token, on Bend, Berachain's non-custodial lending protocol or providing HONEY in the bHONEY vault for Berps, a decentralized leveraged trading platform that allows for perpetual futures contract trading.
HONEY, the third and final token that makes up Berachain’s tokenomics, is the chain’s native stablecoin. It aims to maintain a peg of USD 1. The developers of the project claim that the stablecoin is fully collateralized by a diverse range of crypto collateral, from which it can also be minted, simply by depositing whitelisted crypto into a vault and minting HONEY against that collateral.
Since Berachain’s technology is EVM-identical, all use cases that make up Ethereum’s ecosystem apply here as well. Still, the blockchain already has its native dApps that are operating on its testnet as a basis for its ecosystem.
BEX is the native decentralized crypto exchange of Berachain. It allows for the trading of cryptoassets through swapping and providing liquidity into liquidity pools. The pairs offered are determined by supply and demand, while liquidity is ensured through the PoL consensus protocol.
Some BEX pools can be upgraded to become proof of liquidity Reward Vaults, making them eligible for rewards and BGT emissions. This is decided through the blockchain’s governance.
When swapping, if a direct pair doesn’t exist (which is usually called a single-hop swap), an off-chain API is designed to find the best route through different coins to be swapped to return the wanted crypto coin, also referred to as a multi-hop swap. In other words, there’s no need to worry that you can’t make a swap just because a direct pair doesn’t exist (yet).
Berachain’s non-custodial lending protocol is called Bend. Lenders deposit stablecoins and, in return, earn transaction fees, while borrowers can deposit crypto collateral to access these stablecoins.
Currently, the only token available for borrowing is Berachain’s native stablecoin HONEY. There is no indication that the protocol will be adding other assets to its offering.
Bend also serves as a proof of liquidity Reward Vault, letting borrowers become eligible to receive BGT emissions. This is one of the very few ways users can get BGT, as the token isn’t transferable.
Bend's design is inspired by lending protocol Aave, which is highly optimized and battle-tested.
Berps is the name of Berachain’s decentralized leveraged trading platform. HONEY is the go-to token for all trading collateral, payouts, and deposits. It’s the main and only token used to open any positions.
Berps allows for perpetual futures contract trading with low trading fees on a variety of pairs with leverages of up to 100x.
Berps is another implementation of proof of Liquidity Reward Vaults, where stakers are eligible for BGT emissions when they deposit HONEY to provide liquidity to the protocol.
Berachain is currently in testnet, so none of their tokens are actually available to the public (there are, however, various testnet Berachain faucets offering the testnet version of the tokens for those participating in this phase).
This means that the community might be gearing up for a potential airdrop.
It’s important to note that any Berachain airdrop date is also dependent upon their mainnet launch date, which is also not yet known. Berachain’s social networks are expected to announce the mainnet launch whenever it happens. Only after this will it be possible to get any Berachain tokens.
The airdrop campaign is expected to distribute BERA tokens. The other tokens are ineligible, as BGT is not transferable, while HONEY is a stablecoin collateralized by other cryptoassets. The eligibility for the airdrop is not announced.
Magic Eden has already announced support for Berachain NFTs. Magic Eden will be among the first Berachain NFT marketplaces.
The Berachain ecosystem aims to tackle liquidity fragmentation with its proof of liquidity (PoL) consensus mechanism and unique three-token model. By boosting liquidity and making it easier to access, Berachain is set to secure the network, drive user growth, and ensure price stability.
Any EVM-based wallet that allows RPC file importing can be configured to work with Berachain. This includes the likes of MetaMask, Coinbase Wallet, and Brave Wallet, among others. The Berchain team has a detailed explanation of how to configure each of these wallets in Berachain docs. Magic Eden Wallet will also roll out Berachain support in the near future.
Berachain is currently in testnet, meaning that if you want to participate, you’re probably not risking anything. However, as with any blockchain, there is some potential risk of technical issues, delays, etc., so you should definitely do your own research before committing to it. Additionally, the founding team is anonymous, which is not everyone’s cup of tea.
The main difference between Berachain and Ethereum lies in their consensus models: Berachain uses proof of liquidity, while Ethereum relies on proof of stake. The best part? Berachain is fully EVM-identical, meaning everything that runs on Ethereum can run on Berachain, too.
The information provided on this website is provided for general educational purposes only and is in no way financial or investment advice. Certain information may have also been provided to us or prepared by third parties; these materials are provided for convenience and are not an endorsement by Magic Eden. Magic Eden is not liable for any errors, changes or amendments to such information, including any actions taken in reliance on such information.
