Berachain's Layer-1 Testnet Goes Public: A Leap for Liquidity

• Berachain's Testnet Launch: A Debut for Proof of Liquidity
• About Berachain
• Proof of Liquidity Mechanism
• How Protocols Reward Liquidity Providers
• The Unique Aspects of BGT Tokens
• Proof of Stake vs Proof of Liquidity
• Berachain's Appeal

Berachain's Testnet Launch: A Debut for Proof of Liquidity

The forthcoming layer 1 blockchain, Berachain, made its testnet available to the public on Thursday. This marked the initial presentation of its proof of liquidity consensus mechanism, which managed to secure $42 million in funds during the previous year.

About Berachain

Berachain is a project influenced by internet memes and operates within the Cosmos ecosystem. Its creators are primarily anonymous crypto developers who choose to present themselves on the internet through images of cartoon bears, with some depicted smoking marijuana. This unique approach did not deter renowned investors such as Polychain Capital from supporting their vision for a revolutionary blockchain. Berachain functions through a fresh perspective on the acclaimed proof of stake module for securing blockchains, known as proof of liquidity, or PoL.

Proof of Liquidity Mechanism

According to the PoL model, ecosystem participants contribute to the security of the Berachain network by supplying liquidity to the trading infrastructure built over it. Infrastructure can refer to various elements such as an automated market maker, a crypto game, a lending protocol or any entity requiring a pool of user-supplied tokens to enable transactions via smart contracts.

How Protocols Reward Liquidity Providers

In decentralized finance (DeFi), it's a common practice for these protocols to reward their liquidity providers (LPers) with a token. Berachain plans to follow this path. Any protocol that receives approval through a Berachain governance vote will receive BGT to distribute to their LPers.

These BGT tokens serve as the governance tokens for Berachain, implying that the holders have influence over the network. Notably, these tokens cannot be bought or sold - they're illiquid. The only method to acquire them is through earning them as a reward.

The Unique Aspects of BGT Tokens

The creators of the token intend for it to possess some economic value. Any BGT holder will have the ability to burn their assets in exchange for an equivalent amount of BERA tokens, which will be tradeable. Alternatively, they can delegate their BGT to others in return for the Berachain stablecoin known as HONEY, which is said to be backed by USDC.

However, this arrangement does not guarantee that Berachain will be completely protected from economic whales. While purchasing the staking token is not an option, holders of big bags could potentially buy a substantial amount of BERA, provide it as liquidity to trading protocols, and earn a large number of BGT tokens.

Proof of Stake vs Proof of Liquidity

Nonetheless, the system stands as a more proactive version of proof of stake as compared to simply lending one's tokens to a validator. In the Berachain model, the protocols themselves receive the liquidity from all the users seeking economic rewards.

The ability of the liquidity bootstrapping process to let Berachain accomplish more with fewer initial resources could be a key feature considering the growing number of new layer 1 blockchains being announced and launched.

Berachain's Appeal

Berachain aims to attract both the Ethereum$2,315 -2.42% enthusiasts and Cosmos builders. It has been running in a private testnet for approximately a month and already hosts more than 30 native teams. Additionally, dozens more protocols from other ecosystems are preparing to launch their projects on Berachain.

Edited by Jonathan Stoker