Explaining Berachain: The Liquidity Revolution and Ecosystem Landscape of Layer 1 Track

1. Technical Architecture: Double Innovation of PoL Mechanism and Third-Generation Token Model

1.1 Liquidity Proof (PoL): Redefining Consensus Mechanism

Berachain's Liquidity Proof (PoL) is its core innovation. Unlike the traditional PoS mechanism, PoL requires validators to maintain network security by providing Liquidity (rather than simply staking tokens). This design directly converts on-chain economic activities into security resources, forming a closed loop of 'Liquidity is Security'. According to testnet data, the PoL mechanism enables Berachain to achieve a Liquidity utilization rate of 91%, far surpassing Ethereum (about 65%) and Solana (about 72%).

Technical Implementation Details:

• Reward distribution model: 70% of block rewards flow into the dApps reward pool, and the remaining 30% is allocated to validators, incentivizing the self-generation of the ecosystem applications;
• Dynamic staking algorithm: The validator's earnings are positively correlated with the activity of the Liquidity pool it manages, with the formula being:

• MEV Resistance Strategy: Adopt batch order processing (Batch-A 2 MM) and off-chain matching to reduce sandwich attack risks.

1.2 Third-generation token system: BERA, HONEY, and BGT's economic synergy

The token model of Berachain achieves ecological balance through functional separation:

• BERA: Gas token, used to pay transaction fees, staking validators need to consume BERA to activate nodes;
• HONEY: Over-collateralized stablecoin, anchored through a dynamic interest rate model (basic rate ± market fluctuations), with a TVL of $1.6 billion pre-deposited on the mainnet;
• BGT: Non-transferable governance token, obtained through Liquidity mining, holders can vote to determine protocol upgrades and resource allocation. Testnet data shows that 68% of BGT holders participate in governance proposals, verifying the effectiveness of token design.

Source: Berachain Honeypaper, three-generation token interaction model

2. Ecological Map: DeFi LEGO and Cross-Chain Collaboration Network

2.1 Core Protocol: Building Financial Infrastructure

Berachain has formed a complete DeFi matrix covering trading, lending, derivatives, and other scenarios:

• Kodiak: Native DEX supports centralized Liquidity for Uniswap V3, dynamically adjusting LP range through the 'Island' feature. The testnet has accumulated over 100,000 interactions. Its smart contracts adopt a layered architecture, optimizing Gas consumption by 40%;
• Dolomite: The leverage mining protocol allows users to stake BGT to receive 5 times amplified income, combined with the veDOLO token model to lock in long-term liquidity, with a TVL of over $120 million;
• Infrared Finance: The Liquidity collateral protocol converts BGT into iBGT, allowing users to receive both collateral income and DeFi portfolio income. TVL reached $273 million, with an annualized return of 19-37%.

2.2 Strategic Cooperation: Capital Network of Cross-chain Liquidity

Berachain collaborates with top protocols to build cross-chain Liquidity pool:

• Stakestone: The full-chain Liquidity protocol introduces STONE assets, and its pre-deposited Vault attracted $111 million in funds within 24 hours. The beraSTONE/ETH pool has become the largest Liquidity pool in Uniswap V3.
• Ethena: The synthetic USD protocol USDe has joined the ecosystem, allowing users to capture a 37% annualized return and ecosystem airdrops, with a total of 430 million USDe deposited.
• Lombard: The Bitcoin DeFi protocol introduces wBTC into the ecosystem, realizing cross-chain capital appreciation through a four-layer income structure, with APY exceeding 45%.

Data:

3. Data Performance: Testnet Eruption and Mainnet Accumulation

3.1 Testnet Milestone: Double Growth for Users and Developers

• User Scale: The v2 Bartio testnet has seen a dramatic increase in the number of independent addresses, from 6.4 million to 240 million, with a peak daily active user of 7 million, surpassing the data of Avalanche during the same period.
• Interaction frequency: DEX trading, stablecoin minting, and other tasks have accumulated 27 million operations, with a transaction processing speed (TPS) of 2,300 per second;
• Developer ecosystem: Over 270 projects have been deployed, with 35% focusing on RWA and 23% on GameFi, demonstrating significant ecosystem diversity.

3.2 Mainnet Expectations: Dual Potential of Capital and Community

Through the Boyco pre-staking event, Berachain locks in $3.1 billion in assets, including ETH, BTC, and stablecoins. The airdrop rules are as follows:

• 2% of BERA is allocated to Liquidity providers, with early participants receiving a 5x weight bonus;
• Bong Bears NFT holders enjoy priority governance rights, with the airdrop share accounting for 1.5% of the total supply;
• Testnet contributors are expected to share 2% -5% of the token supply, incentivizing long-term ecosystem development.

Four, Future Outlook: Technological Evolution and Ecological Challenges

4.1 Technical Roadmap: From Quantum Security to Causal Reasoning

• Quantum Resistance: The encryption module resistant to Shor algorithm will be launched in Q1 2025 to counter the threat of quantum computing;
• Causal Inference Engine: Integrates AI model to analyze on-chain data and provides 48-hour advance warning of Liquidity fluctuations (with a test accuracy of 82%).
• Modular expansion: Collaborating with Particle Network to develop chain abstraction layer, supporting one-click interaction of multi-chain assets.

4.2 Potential Risks and Mitigation Strategies

• Token model pressure: The non-transferability of BGT may limit the secondary market Liquidity, solutions include introducing iBGT liquidity certificates;
• Stability of stablecoin: HONEY needs to address the decoupling risk in extreme market conditions (historical maximum deviation 1.7%), and plans to introduce a dynamic collateral adjustment mechanism;
• Ecological Cold Start: The mainnet needs to maintain an average of 1 million active addresses per day, attracting users through continuous airdrops and developer incentive programs.

5. Industry Comparison: The Differentiated Competitive Strength of Berachain

5.1 Differentiation from Ethereum

• Consensus Mechanism: PoL vs. PoS, Berachain directly converts Liquidity into security resources, while Ethereum relies on staked capital;
• Economic Model: The three-generation token system separates functions to reduce the impact of single asset volatility on the ecosystem, while Ethereum relies on ETH to assume multiple roles;
• User experience: Achieve 'zero Gas fee startup' through Boyco pre-staking activity, while Ethereum Layer 2 still needs to pay basic fees.

5.2 Performance Comparison with Solana

• Throughput: Berachain testnet achieves a TPS of 2,300, close to Solana's 5,000, but optimizes resource allocation through PoL.
• Fee Structure: Berachain's HONEY stablecoin reduces transaction costs, while Solana relies on SOL for payment, which is more affected by price fluctuations;
• Ecological positioning: Berachain focuses on DeFi and RWA, while Solana leans towards high-frequency trading and NFTs.

Conclusion: A New Paradigm of Democratized Liquidity

By adopting the PoL mechanism and the three-generation token model, Berachain has reconstructed the value distribution logic of the public chain. When Kodiak's 'Island' feature pushed the fund utilization rate to 91%, and when Stakestone's beraSTONE surpassed stETH to become the largest interest-bearing asset, what we see is not just technological iteration, but also a paradigm revolution in liquidity democratization. As stated in its whitepaper, 'Berachain is not another EVM chain, but a new continent of economic cooperation.' Despite the challenges of token models and ecosystem bootstrapping, this liquidity-driven experiment has opened up a whole new realm of imagination for Web3 finance.