Berachain is an innovative new decentralised platform that has the stated aim of creating ‘a cooperative economy that rewards working capital by aligning incentives across the network’. It’s built to connect seamlessly with Ethereum’s Virtual Machine (EVM), and therefore also benefits from all the use cases that make up Ethereum’s ecosystem.

Berachain aims to set itself apart from other projects by solving the liquidity issues that occur in cryptocurrencies where people must lock up their tokens to verify transactions. It does this by using a consensus mechanism to confirm transactions called Proof of Liquidity, which allows users to stake assets while keeping them accessible for DeFi use.

How does Berachain work?

Proof of Liquidity (PoL)

A traditional Proof of Stake (PoS) consensus mechanism is dependent on people staking their tokens to validate transactions. When a token is staked, it is locked and no longer available on the market. Proof of Liquidity allows users to stake assets without fully locking them up, which keeps liquidity in the market. This is particularly beneficial for DeFi applications that depend on there being sufficient tokens in circulation.

In a PoL mechanism, a validator is a participant in the network responsible for verifying transactions and securing the blockchain. To become a validator on Berachain, you need to acquire the Berachain Governance Token (BGT). This is done by locking capital into reward vaults, which contributes liquidity to the network and supports its operations. Validators with more BGT influence governance decisions, ensuring a decentralised and secure network.

This process is the main way to earn BGT. Once you hold BGT, you can choose to delegate it to a validator or burn it in exchange for BERA, the blockchain’s native gas token. Validators holding the most BGT will have the greatest influence in governance decisions, as suggested by the token’s name.

Ethereum Virtual Machine (EVM) compatibility

Berachain has been designed with an execution layer fully identical to Ethereum’s Virtual Machine (EVM), ensuring seamless compatibility with Ethereum’s smart contracts, wallets, tools, and infrastructure. This allows for easy updates as they roll out to Ethereum.

The execution layer is responsible for processing transactions and executing smart contracts. By mirroring Ethereum’s execution layer, Berachain ensures compatibility and smooth execution of code across both networks.

This EVM-identical architecture simplifies adoption for developers and users. Developers can redeploy existing applications without modifying their code, and users can keep using familiar Ethereum-based tools like wallets and interfaces. Berachain also benefits from instant updates and relies on well-established software like Nethermind, Erigon, and Geth to process transactions securely and efficiently.

BeaconKit framework

Berachain has developed BeaconKit, a modular framework that powers its blockchain ecosystem. Built using the Cosmos SDK, a toolkit designed to help blockchains communicate and interact with each other. BeaconKit ensures Berachain remains EVM-identical, meaning developers can use Ethereum’s tools and features without modification.

The framework’s flexibility allows for easy integration of Layer-2 solutions, rollups, and other blockchain enhancements, helping to improve transaction speed, reduce fees, and support more customized applications. Additionally, BeaconKit includes a system called CometBFT, which ensures the network remains stable and secure even if parts of it experience issues.

Berachain tokens

Berachain operates with a three-token model, with each token serving a distinct role in the ecosystem.

BERA: The primary token of the network, BERA is used to cover gas fees for transactions. It also serves as a staking token for validators, helping to maintain and secure the network’s integrity.

BGT: A key token for governance, BGT holds decision-making power in Berachain’s ecosystem. Governance refers to the process by which decisions about the network’s development, rules, and updates are made. BGT is non-transferable, meaning it can’t be traded or bought, but it can be delegated to a validator. By delegating BGT, holders can participate in governance, allowing them to have a say in important decisions without transferring ownership of their tokens.

HONEY: Berachain’s native stablecoin, HONEY is tied to a value of 1 US Dollar. It is designed to provide price stability within the network. To create (or “mint”) HONEY, users must deposit approved tokens into a secure vault using the HoneySwap DApp. The amount of HONEY that can be minted is decided by BGT holders through governance. 

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