【Berachain】Emerging L1 blockchain adopting Proof of Liquidity (PoL) / BeaconKit built with Cosmos SDK for EVM compatibility / $BERA, $BGT, $HONEY tokens / @berachain

I very much agree with the idea that liquidity is important.

Good morning.
Mitsui from web3 researcher.

Today we summarize "Berachain".

🐻What is Berachain?
🤑Transition and funding information
💧Airdrop andToken Economics
💬How far new concepts can work

🐻What is Berachain?

Berachain is a new Layer 1 blockchain that employs a proprietary consensus Proof of Liquidity (PoL), with a mainnet release on February 6, 2025.

The foundation is a modular execution environment called BeaconKit, using the Cosmos SDKand is fully compatible with Ethereum at the EVM level.In addition, the Inter-Blockchain Communication (IBC) protocol support derived from the Cosmos SDK enables interoperability with other blockchains in the Cosmos ecosystem.

Now, let me explain the main feature, Proof of Liquidity (PoL).The concept may be a little difficult to understand, but I will try to explain it as clearly as possible.

PoL is a consensus mechanism originally devised by Berachain with the aim of achieving "both network safety (security) and liquidity.

We will start by explaining the problems with conventional PoS.

• A large amount of capital is staked (locked) to protect the network, but that capital is not used for anything other than securing the network and becomes idle capital.

• The security and growth of the chain does not match the incentives of Dapp and users.

• Market liquidity is reduced because of network security tokens and network tokens together.

• Large holders may stake many tokens and easily monopolize the validator operating rights.

It is in this area that the major mention is made.The most distinctive aspect of BeraChain is that it takes a scalpel to what has been taken for granted in previous PoS and builds a PoL.

Let's take a look at how it works.

First we will review the tokens that appear.

• $BERA:Berachain's network native token for gas fee paymentsandvalidator staking.

• $BGT(Berachain Governance Token): Berachain governance token, representing PoL rewards and network voting rights.The $BGT is non-transferable and non-tradable, but can be converted to $BERA.This is a one-way operation, and $BERA cannot be converted to $BGT.Users can acquire $BGT by providing LPs.

• $HONEY: A Berachain native stable coin, soft-pegged to the U.S. dollar value, HONEY is issued through an overcollateralized crypto asset security.New HONEY can be borrowed (minted) by depositing a specified amount of collateral assets in a Vault called the "Honey Factory.

We have described three types of tokens, but it is mainly $BERA and $BGT that appear in the PoL description.First, this "separation of gas tokens from governance and reward tokens" solves the problem mentioned earlier in the PoS issue of "network security tokens and network tokens together, which reduces market liquidity".

Given how important liquidity is to the financial environment, it makes no sense to use the same token for security and transactions.You can't buy a cup of coffee with split Starbucks shares because legal tender is more accessible.

This is a bit off topic, but let's get into the main mechanism.