WTF is Berachain

Author

Daniel
07 Mar

WTF is Berachain

Berachian is the talk of the town with demand for projects building on Berachain seeming to outweigh supply. Multiple projects on the chain closing rounds in under 48 hours, but the question for many remains, what is Berachain?

  • Berachain is an EVM-equivalent L1 built on the Cosmos SDK and powered by Proof of Liquidity. 

  • Berachain’s main selling points are its new consensus mechanism and the Polaris EVM.

Architecture

Instead of building from scratch, Berachain built atop of existing middleware such as:

  • Cosmos SDK

As a modular framework that allows developers to create customisable blockchains for specific needs, Berachain utilises Cosmos SDK

  • Tendermint

Whislt Berachain appears to have utilised Tendermint, they have built their own consensus mechanism called Proof of Liquidity to differentiate from Tendermint.

Proof of Liquidity

Berachain utilises a new consensus mechanism that they call Proof-of-Liquidity (PoL). This mechanism aligns network security and liquidity by rewarding liquidity providers when staking the network’s token, $BGT (Bera Governance Token), which cannot be bought or sold.

The way it differentiates itself from Proof of Stake is that instead of staking the network’s native token, you stake a non-tradable governance token. The reasons to not use the main token are:

  • The token’s value isn’t locked when staking it.

  • The staking yield goes to active participants (liquidity providers).

  • It makes the chain more decentralised. The goal is to not have validators with big voting power.

The benefit of holding the governance token:

  • The network is secured by the community’s participation.

  • Users earn fees whenever someone uses a berachain-powered app, plus a share of the gas fees for every network transaction.

  • Users can vote for higher rewards for their liquidity pool.

    • Once you are rewarded with the governance token, you can weigh in to choose which pools give better rewards. Best apps, more support = best incentives.

Polaris EVM

It’s an alternative to EVM created by Berachain. It is an EVM but on Cosmos, allowing developers to use Cosmos' tools and security features, while also making it simple for apps from Ethereum to deploy easily on the Berachain ecosystem..

  • It’s attractive because joining the Cosmos and Ethereum ecosystem’s is an insane opportunity to onboard a lot of projects in Web3.

  • Polaris was designed to be fully customizable and modular, this means that any app or blockchain can use it. Just like Celestia can be used by any project on any chain for data availability, Berachain can be used on any project.

  • With Polaris, Berachain aims to build network effects by allowing assets from other chains to be used across all of its native DeFi applications

It is the blockchain consensus engine that powers Berachain. 

CometBFT consists of two main technical components:

  1. A blockchain consensus engine

    1. It is based on the Tendermint consensus that ensures that all machines record the same transactions in the same order.

  2. An Application Blockchain Interface (ABCI)

    1. It delivers transactions to applications for processing.

CometBFT was designed to have high performance and also be user-friendly and easy to understand.

  • The BFT can be replicated and written in any programming language and development environment that suits developers’ needs.

Tokens & Incentive Alignment

There will be 3 tokens in total:

  • BERA - it serves as the gas token used to send transactions on the blockchain.

  • BGT - non-transferrable governance token mentioned above.

  • HONEY - a stablecoin that aims to be pegged to the US dollar.

Berachain was designed to create a positive cycle where users participate in the network, earn rewards, and further enhance the network's security and utility, benefiting the entire ecosystem.

Their consensus mechanism aims to center around incentive alignment between security and liquidity by rewarding liquidity providers with the staking token of the network, BGT (Bera Governance Token), which cannot be bought or sold:

  • Their 3-token design separates the tokens to fulfill different purposes within the platform.

  • Validators earn fees from the network by producing blocks based on the weight of BGT delegated to them.

  • Validators can offer customisable bribes to their delegators, encouraging them to support certain proposals or protocols.

What’s Behind the Hype?

  • Berachain aims to be the liquidity and DeFi hub of the Cosmos ecosystem.

  • They plan to achieve this via their PoL consensus mechanism which acts differently than other blockchains.

  • In other blockchains, staked assets are normally considered illiquid because they cannot be moved without unstaking.

  • In Berachain, they allow staked assets to be used in DeFi protocols which leads to a natively capital-efficient blockchain.

  • And of course, Berachain has built a culture around airdrops, which will be expanded upon in a future article.