Berachain Launches Proof-Of-Liquidity On Its Platform, Redefining Incentives And User Rewards
In Brief
Berachain has launched its Proof-of-Liquidity consensus model, marking a shift in how consensus, incentives, and liquidity will function on-chain.
Layer 1 blockchain Berachain has introduced its Proof-of-Liquidity (PoL) consensus model, marking a shift in how consensus, incentives, and liquidity will function on-chain. PoL is an extension of the traditional Proof-of-Stake (PoS) model, designed to better align the incentives of a blockchain’s users, decentralized applications (dApps), and validators.
On Berachain BERA is responsible for securing the chain, while BGT governs rewards and governance processes. Validators are required to stake BERA tokens in order to participate in the consensus mechanism and gain eligibility to produce blocks. The amount of BERA staked determines their block production capabilities. Block rewards are distributed in the form of BGT tokens, which cannot be transferred and are used primarily for governance. Users earn BGT by engaging in reward vaults—dedicated smart contracts designed by applications to distribute network emissions and direct incentives to participants.
PoL was introduced to address a common challenge in many Layer 1 blockchains, where users are forced to choose between staking their network tokens or using them for transactions on-chain. By separating the functions of utility between BERA for security and BGT for governance and rewards, Berachain allows the network to grow in a more sustainable way and provides users with the opportunity to participate without sacrificing utility or incurring opportunity costs.
Validators need BGT delegation to maximize their block rewards, managing the direction of emissions efficiently to boost their incentives. Users can maximize their returns by delegating earned BGT rewards to validators or engaging with BGT-eligible protocols. Meanwhile, protocols compete or collaborate to offer the most attractive incentive rates to validators, ultimately aiming to secure a larger share of BGT emissions. These emissions are then reinvested to attract and incentivize users, creating a feedback loop of incentives within the ecosystem.
Furthermore, with PoL, users can leverage reward vault systems, track validator performance, and adjust their on-chain behaviors to better suit their individual preferences. This flexibility allows them to tailor their engagement with the network based on their unique needs.
PoL represents the first step toward proving that blockchain security can be achieved without isolating it from other components and that aligning incentives properly is not an insurmountable challenge. The real test, however, will be demonstrating that PoL can effectively manage real-world demands, including high transaction volumes, a wide range of dApp use cases, and the evolving nature of incentive models on-chain.
What Is Berachain?
It is a high-performance, EVM-compatible Layer 1 blockchain that incorporates the PoL consensus mechanism, built on the BeaconKit framework. The project initially launched with Boyco, a pre-launch liquidity platform aimed at bootstrapping liquidity for dApps within the Berachain ecosystem. The platform’s mainnet officially went live shortly thereafter in early February.
By the time Boyco came to a close and funds were being bridged to Berachain’s mainnet, the platform had successfully accumulated $3 billion in total value locked (TVL), highlighting strong initial adoption and confidence in the ecosystem.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
