Berachain Explained: Proof of Liquidity & Tokens

Disclaimer: This article is for educational purposes and is not financial or investment advice. Consider consulting a professional before making financial decisions.

What Berachain Is and Why It Matters

Berachain is a Layer‑1 blockchain that centers liquidity as a primary network resource, using a consensus model called Proof of Liquidity (PoL). By combining liquidity incentives with a fully compatible Ethereum execution layer and a three‑token design, Berachain aims to make participation, governance and stable-value transactions more integrated and efficient.

Key points at a glance

• Proof of Liquidity makes liquidity provision a core security and reward mechanism.
• A three‑token system—BERA, BGT and HONEY—separates gas, governance and stable-value functions.
• An EVM‑identical execution layer lets Ethereum tooling and smart contracts run without extra adaptation.

How Proof of Liquidity (PoL) Actually Works

Instead of traditional staking that simply locks tokens, PoL ties network validation to active liquidity provision. Users earn governance credits and validation rights by supplying assets to designated vaults or liquidity pools. That approach both rewards participants and helps maintain on‑chain liquidity for trading and lending.

From liquidity to governance: earning and using BGT

Participants receive the network’s governance token, BGT, by locking capital into reward vaults or supported pools. BGT is non‑transferable and is used to assign voting power: holders can delegate their BGT to validators or redeem it for the native gas token under protocol rules. This design ties governance influence directly to on‑chain economic activity.

Why EVM‑identical Matters for Developers

Berachain’s execution layer is described as EVM‑identical, meaning it aligns fully with the Ethereum Virtual Machine rather than providing partial compatibility. For developers and users, that means smart contracts, developer tools and client implementations built for Ethereum work with minimal or no changes.

Because the layer mirrors Ethereum’s execution behavior, updates and improvements from the Ethereum ecosystem can be applied quickly, and common execution clients are supported to run smart contracts reliably.

Modular architecture: BeaconKit and resilience features

The chain’s framework is modular, incorporating components that ensure fault tolerance and flexibility. A consensus/runtime layer provides robustness so the network keeps operating even when parts encounter problems. The architecture also exposes an engine interface that supports seamless integration with Ethereum setups and enables adding new modules such as custom block builders, rollups or specialized storage layers.

The Three‑Token Model: Roles of BERA, BGT and HONEY

Berachain separates responsibilities across three tokens to reduce role conflict and improve clarity for users:

• BERA: The native gas token used to pay transaction fees and participate in security functions. Validators can stake BERA as part of network operation.
• BGT: A non‑transferable governance token earned by providing liquidity or staking into reward mechanisms. BGT determines governance power and can be delegated to validators.
• HONEY: The protocol’s USD‑pegged stablecoin designed for payments and collateral. HONEY is minted by depositing approved collateral into vaults, with minting parameters set through BGT governance.

Core DApps and Typical Use Cases

Berachain runs native decentralized applications that illustrate how its PoL model flows into real use:

BEX — Decentralized exchange and liquidity incentives

BEX is the on‑chain exchange where users can swap tokens and supply liquidity to pools. Certain pools are selected for PoL rewards, so participants who add liquidity can earn incentives in line with the protocol’s reward rules. To transact, users connect a wallet and hold BERA for transaction fees.

BEND — Lending and borrowing, using HONEY

BEND provides lending and borrowing services, with HONEY commonly used as the borrowing asset. Lenders deposit assets to earn fees, while borrowers post collateral to draw HONEY. The platform tracks account health and collateral ratios to manage risk, and active participants may receive governance rewards.

BERPS — Leveraged trading with liquidity rewards

BERPS offers leveraged futures trading, where HONEY often serves as margin. Liquidity providers to BERPS markets can earn governance incentives, and traders must maintain adequate collateral and pay transaction fees in BERA.

Distribution and Market Access

BERA and the protocol’s ecosystem tokens have been distributed through various early‑supporter programs and later listed on trading venues. As with many new chains, availability across markets and pairs expanded after initial distributions; details vary by platform and region.

Practical steps for users and validators

1. Acquire native tokens and supported collateral to participate in vaults or liquidity pools.
2. Connect a compatible wallet and ensure you have BERA for transaction fees.
3. Decide whether to provide liquidity, delegate BGT to a validator, or run a validator node if you meet the requirements.
4. Monitor account health when borrowing or trading and follow governance proposals if you hold BGT or influence a delegation.

Final thoughts: What Berachain Could Change

By elevating liquidity to a core protocol function and pairing that with an EVM‑identical execution environment and a clear three‑token split, Berachain proposes an alternative approach for Layer‑1 design. Its model may influence how future chains balance security, utility and governance — particularly for projects that want liquidity to play a direct role in network operation.