MT Capital Research Report: Breaking the liquidity dilemma of public chains, Berachain may become a new generation of super L1

Author: Severin & Ian, MT Capital

TL;DR

1. Berachain originated in 2021. The founder was inspired by the liquidity fragmentation between multiple chains and the ghost town effect of the public chain, which led to the idea of creating a liquidity public chain. CommunityIt has very distinctive Ponzi culture, Meme culture and NFT culture characteristics.

2. Berachain is a high-performance EVM-compatible public chain built on a liquidity proof consensus. EVM compatibility enables Berachain to widely integrate the mature EVM ecosystem. PoL consensus can help Berachain directly incentivize on-chain liquidity through BGT emissions and vote bribing, avoid the liquidity ghost town dilemma faced by existing public chains, promote the prosperity of on-chain DeFi ecology and trading activities, and allow public chains to obtain protocol-level flexibility, which can more effectively incentivize and guide on-chain liquidity, thereby promoting the balanced development of the ecology and turning the rising flywheel of the public chain.

3. Ecosystem projects on Berachain are still in a very early stage of development. In addition to official components, Berachain's ecosystem projects present three different development trends: (1) Supplementing the long-tail market that official components cannot reach; (2) Innovating around the PoL mechanism, BGT and vote buying; (3) There are also a large number of external high-quality projects attracted by the PoL mechanism and siphoned into the Berachain ecosystem;

4. From the perspective of investment opportunities, we will focus on high-quality DeFi projects on Berachain and infrastructure that can innovate around Berachain's PoL mechanism, BGT mechanism, and vote-buying mechanism. We will continue to pay attention to the NFTFi protocol that can combine NFT and DeFi, as well as Berachain-based L2 and its related infrastructure. (Related track project parties are welcome to DM @0X_IanWu, @Severin0624 at any time)

introduction

An interesting phenomenon recently is that the Alt-L1 public chains that were once proud of their technology have begun to use Meme to grab the attention of the Crypto market. Just like Solana, the technical advantages of high TPS and low confirmation delay have finally been perceived by users in the magnificent wave of Meme speculation, achieving a multi-harvest of public opinion, funds, users and traffic. Solana's Meme speculation wave not only brought a large amount of traffic attention and new users to Solana, but also brought a large amount of active transactions and liquidity to Solana. The injection of liquidity funds also makes Solana's Meme ecology more vital and further drives the prosperity of the entire Solana ecology. In particular, Solana Meme transaction preferred DEX Raydium achieved a monthly TVL growth of 246%. This shows that although the technology is stillBlockchainThe historical background of the iterative wave, but technology is by no means the only factor to measure the future development of the public chain. Market attention and liquidity represented by Meme may become the main battlefield of the new round of public chain competition.

source:https://defillama.com/protocol/raydium?events=false&volume=true

However, there is a public chain, Berachain, which has its own Meme culture since its inception, which has enabled it to gather a large number of loyal fans in the Crypto bear market despite the anonymity of the team and the lack of technical documentation.CommunityThe name Bera itself is one of the most distinctive Crypto Meme cultures. The reason why it was named Bera is to pay tribute to the classic crypto meme HODL, so Bear was rewritten as Bera. It also innovatively proposed the PoL mechanism, which aims to provide liquidity on the chain.TokenThe reward method attracts liquidity and avoids the ghost town dilemma of the existing public chain. In addition, it is EVM-compatible and supports seamless migration of developers and users in the EVM ecosystem. The superposition of the three major buffs has enabled its test network to quickly attract millions of users once it was launched, and achieved one million active users in just 7.5 days.walletgrowth.

source:https://twitter.com/berachain/status/1749522523895570700?ref=research.despread.io

As a public chain with its own technology, community, meme culture and liquidity, Berachain is expected to reshape the competitive landscape of existing public chains, break the ghost town dilemma of public chain liquidity, and become the superstar public chain in this bull market cycle.

Development History

Berachain Development History

Several founders of Berachain are early anonymous DeFi players. They started investing in Crypto projects and speculating in cryptocurrencies in 2015, and fully participated in DeFi Summer. In 2021-2022, the founders also participated in the DeFi ecosystem between different chains, switched back and forth between different Alt-L1s, and felt the liquidity split between multiple chains and the ghost town effect of public chains. They found that public chains always rely too much onToken激励补贴来吸引 TVL 和流动性，一旦Token排放枯竭，大部分公链都会逐渐丧失流动性。并且，他们发现 PoS 公链也存在些许问题，大量的价值代币被用于质押以保障网络Safety. Despite the networkSafetyThe degree of liquidity has been improved, but the liquidity cost is also huge, and liquidity is the lifeline of DeFi and ecological protocols. The rich experience of participating in the DeFi industry has shaped their basic understanding of the ideal public chain model and laid the foundation for the subsequent proposal of the PoL mechanism.

About a year and a half ago, Smokey and another co-founder almost jokingly talked about making Bong Beras, a smoking bear NFT. After the release of Bong Bears NFT, it unexpectedly received a lot of attention and support from the community. Since the founders themselves were the first industry OGs to mint the OHM and Luna communities, most of the community members who came here were also DeFi enthusiasts. After communicating with the community again and again, several founders gradually came up with the idea of creating a liquidity public chain and started voting in the community. The amazing thing is that they, who had never done a public chain before, unexpectedly received a lot of support from the community, and Berachain came into being.

Although the founding team has rich DeFi experience and accurate market knowledge, developing a public chain requires a lot of technical work after all. During the conversation, the Berachain team met the Polaris team, which focuses on EVM-compatible development. The two teams hit it off and together formed the main body of the current Berachain. So far, Berachain has basically taken shape. Technically, Berachain will adopt Polaris's technical development to create a high-performance L1 compatible with EVM based on Cosmos. In terms of mechanism, Berachain will adopt the PoL mechanism to promote the prosperity of the on-chain DeFi ecosystem by incentivizing on-chain liquidity.

Key historical nodes

2021.8 Bong Bears NFT was minted and issued, laying the groundwork for the subsequent creation of Berachain.

2021.10 Bong Bears NFT rebase occurred for the first time.

2021.11 Berachain was mentioned for the first time.

source:Bonga Bera 101 — The Honey Jar (mirror.xyz)

2022.3 Olympus DAO The proposal OIP-87 on Berachain's seed round financing was approved, and Berachain will receive 0.5M financing from Olympus at a valuation of 50M.

2023.4 Berachain disclosed a $42M financing led by Polychain.

source:https://twitter.com/berachain/status/1649050293080915968?ref=research.despread.io

2024.1 Berachain testnet released.

2024.3 Berachain was revealed to be raising over $69M in funding led by Framework Ventures.

Community Culture

Ponzi Culture

Berachain was first jointly initiated by several old OGs in the OHM community and the Luna community. OHM and Luna are one of the DeFi protocols and public chains that are considered the most Ponzi in the last cycle. The founding team of Berachain are all core members of the community, and they do not reject or even enjoy the Ponzi culture. Therefore, in the Berachain community, people do not shy away from Ponzi, and even talk about Ponzi as soon as they open their mouths. Berachain is also considered by the current market to be the next Luna with a Ponzi model. Although this metaphor is not reasonable, it also indirectly reflects the cultural core of the Berachain community and the outside world's perception of the Berachain community culture.

Meme Culture

In addition to Ponzi, Berachain is also born with Meme culture. After all, the origin of Berachain comes from the Bong Bears NFT, which is a very Meme-like smoking bear. Bong Bears was originally a joke among several founders from idea to implementation, and unexpectedly received a lot of attention and support from the community. In addition to Bong Bears, the name Bera itself is one of the Meme cultures. The reason why it was named Bera is to pay tribute to the classic crypto stalk HODL, so Bear was rewritten as Bera. Smokey, the founder of Berachain, will also wear a Bera headgear to attend various formal events, spreading the Meme spirit in person. The Berachain community also loves to play Meme culture. The official tweets will deliberately misspell words, such as spelling Hello as Henlo. In other communities, you may often see GM and GN, but in the Berachain community, you will see Ooga Booga, who has a very Meme personality, sweeping the screen. It can be said that from top to bottom, from official to community, Berachain is immersed in the unique Meme culture.

NFT Culture

Since Berachain was born from NFT Collection, NFT has naturally become one of the most representative cultures of public chains. When we talk about other public chains, we rarely think of symbolic NFTs of other public chains besides Ethereum. But when talking about Berachain, the topic that cannot be bypassed is Bong Bear NFT based on the Rebase mechanism. In addition to the NFTs issued by the founder, ecological projects on Berachain are also issuing their own NFT Collections, and the NFT Collections of different projects will be linked to the theme of Bear. To some extent, for Berachain, NFT is an asset that is as important as Token. Compared with a simple token, NFT comes with an extra layer of cultural attributes and community recognition, which also makes the entire Berachain community have a stronger consensus and community stickiness. Taking Bong Bear and Honey Comp as examples, although these two NFT series have achieved considerable growth in the secondary market, few users have sold them for profit, and the listing rate of NFTs is even less than 2%, which also indirectly reflects the strength of community consensus under Berachain NFT culture.

source:https://opensea.io/collection/bongbears

summary

Berachain’s unique cultural attributes are also one of the characteristics that distinguish Berachain from other public chains. We expect that Berachain’s unique community culture will have the following impacts on Berachain:

1. Stronger purchasing power and wealth effect compared to other public chains: The appeal of Ponzi culture to capital is self-evident. The myth of OHM and Luna increasing by hundreds or thousands of times in a short period of time in the last cycle is still vivid in our minds. Berachain is native to the loyal users of OHM and Luna communities and Berachain's preference for Ponzi may give Berachain stronger purchasing power than other public chains, making it the best soil for Ponzi projects to survive.

2. Stronger traffic attention compared to other public chains: In this cycle, public chains have gradually realized that native Meme is the best marketing for public chains. From this perspective, Berachain, which is born with Meme culture, uses Meme culture to make fun of itself, and can continuously reproduce Meme culture, is more likely to stand out and capture more market attention.

3. Stronger community cohesion compared to other public chains: To some extent, existing public chains lack a unified symbol as a spiritual consensus. But just like every country has its own national treasure as a representative and consensus of the country, for Berachain, Bera is the best spiritual symbol and consensus of Berachain. Almost all NFT Collections on Berachain are created with Bera as the basic carrier. The spread of NFT culture will further bring community recognition and enhance community stickiness. At the same time, different project parties on Berachain will also cooperate and make concessions based on NFT, which will also bring stronger ecological synergy and community cohesion to the Berachain ecosystem.

Berachain Technical Architecture

Berachain is a high-performance L1 public chain built on Cosmos SDK, using the CometBFT consensus engine and compatible with EVM. Building on the Cosmos SDK enables Berachain to seamlessly integrate with the Cosmos ecosystem and achieve horizontal expansion between chains through the IBC module. At the same time, Berachain has also developed its own Polaris Ethereum module, which aims to provide EVM compatibility for Berachain, allowing Berachain to better aggregate developers and users of the existing EVM ecosystem, integrate the existing EVM ecosystem, and bring users a more familiar development and usage experience. Berachain wants to become a key node that unifies the liquidity of the EVM ecosystem and the liquidity of the Cosmos ecosystem, and create the most powerful, fastest, and most liquid in the multi-chain ecosystem.Blockchainnetwork.

Polaris Ethereum

Polaris Ethereum can provide developers with an advanced EVM development experience. In addition to providing basic EVM compatibility, Polaris Ethereum can also provide developers with the ability to create stateful precompiledcontractModules, support for developers to customize opcodes, etc., so that developers can use Polaris Ethereum to customize and build more flexible and applicable smartcontract.

EVM Compatibility

The basic principle of Polaris is similar to running an additional virtual machine equivalent to Ethereum on top of the L1 main chain. By plugging and unplugging corresponding plug-ins such as Configuration plugin, State plugin, Gas plugin, etc., Polaris can effectively input state transitions, thereby supporting any type of L1 main chain smart contract to execute Ethereum transactions.

source:Polaris Architecture – Polaris Ethereum Docs (berachain.dev)

Precompilation

Precompilation is also called precompiled contract, which is a set of specific functions built directly intoBlockchainA smart contract that is executed as bytecode in a node rather than in the EVM. Precompiled contracts can achieve more efficient state operations at a lower gas cost and provide additional functional logic. Polaris' support for precompiled contracts enables direct interaction with various Cosmos modules. Currently, the types of precompiled contracts on Berachain are as follows. For example, the BGT precompiled contract includes the redemption operation of BGT, and the Bribe precompiled contract includes operations such as creating bribes and obtaining bribe fees.

Support for custom opcodes has also been added to the Polaris EVM implementation to enable more complex smart contracts.

source:Precompiles & Deployment Addresses | Berachain Docs

Modularity and interoperability

Polaris is a modular implementation of EVM that can be easily integrated into any consensus engine. Each component of Polaris is developed as a unique package and comes with comprehensive test documentation. Developers can use some components in Polaris individually according to the complete documentation, or combine multiple components as needed to create a personalized EVM integration. Polaris' modular implementation of EVM integration can help developers significantly reduce the time cost of implementing EVM integration solutions on their own.

In addition, the combination of Polaris Ethereum and Cosmos SDK can also achieve interoperability with the Cosmos ecosystem in an EVM-compatible environment. By integrating multiple state precompilations on the chain, Polaris enables EVM users to perform native operations of Cosmos, such as governance voting, validator delegation, etc., as well as interact with other chains through IBC. This design further realizes true interoperability between Cosmos and EVM while retaining the native EVM experience, allowing Berachain to get closer to its vision of becoming the liquidity hub of the EVM ecosystem and the Cosmos ecosystem.

(Of course, since Polaris has not been tested in practice, Berachain’s specific performance, traffic load, and compatibility with EVM after the mainnet launch remain to be seen.)

PoL consensus

Why PoL is needed

PoS is one of the most common consensus mechanisms. Although PoS has been tested in practice for many years and has been confirmed by the market to be effective, it can take into account the networkSafety性、去中心化程度以及共识效率的共识机制，但 PoS 也存在些许问题。例如 PoS 网络的Safety性依赖于网络中资产质押的数量，质押资产价值越大，网络被攻击的概率也会越低。但质押资产价值过大也相当于可被用于链上流动性的资产价值减少，不利于链上交易活动的繁荣。特别是在流动性质押尚未高度普及的 2021、2022 年。此外，PoS 网络中的代币激励只会流向代币质押者，即 PoS 网络只会激励质押活动，而对于链上交易，提供流动性等能够促进生态繁荣的活动，PoS 网络并未给予足够的激励支持。上述两大问题的存在使得 Berachain 最终抛弃了 PoS 共识，转而提出了 PoL：Prove of Liquidity 流动性证明机制。

The core of PoL is to stimulate the prosperity of the DeFi ecosystem on the chain, and one of the lifeblood of DeFi is liquidity. Therefore, the core of PoL is to stimulate sustainable deep liquidity on the chain.

PoL Mechanism

The specific mechanism of PoL is as follows:

1. Users who want to obtain token incentives similar to those in the PoS network need to provide liquidity to a specific liquidity pool on Berachain, and Berachain will give users governance tokens BGT as rewards. Note that the way to obtain native token rewards in traditional PoS networks is staking, while the way to obtain native token rewards in PoL networks is to provide liquidity.

2. Similar to token staking in PoS, users can also entrust the BGT they obtain to the verification node, which will participate in the network verification work on behalf of the user.

3. Similar to PoS, validators will also participate in block generation and construction according to the weight of their delegated BGT proportion, and receive block generation rewards and block fees as rewards.

4. Unlike PoS, validators can vote on the future BGT reward emission in different liquidity pools. In the PoS network, the rewards received by stakers are relatively fixed. But in PoL, the rewards received by liquidity providers are dynamic and will be affected by governance factors.

5. Finally, a new round of BGT will be dynamically released among different liquidity pools based on the previous voting results, and BGT rewards will be distributed to liquidity providers, forming a closed loop.

source:What is Proof-of-Liquidity? | Berachain Docs

PoL vs PoS

The improvement of PoL over PoS is obvious.

1. First of all, PoL can directly stimulate on-chain liquidity and promote the prosperity of on-chain DeFi ecology and trading activities. The only way to obtain token emission rewards in the PoL network is to provide liquidity. Therefore, the emission rewards of the PoL network's native currency will attract users to provide liquidity. Moreover, the higher the value of the network's native currency, the more attractive the token emission rewards will be, which will spawn more and more users to become LPs and continuously deepen the liquidity of the network. In addition, the persistence of liquidity incentives also makes the liquidity of the PoL network more sustainable, unlike other PoS public chains, which will face the dilemma of large-scale withdrawal of liquidity once the airdrop incentives are completed.

2. Secondly, PoL enables public chains to gain protocol-level flexibility, which can more effectively incentivize and guide on-chain liquidity and promote the balanced development of the ecosystem. The PoL mechanism of the public chain is similar to the vetoken mechanism at the protocol level. Through the governance module, the public chain can incentivize specific assets and specific liquidity pools to guide the originally disordered liquidity. Its core essence is very similar to the token subsidies provided by the public chain for specific ecosystems, specific protocols, and specific assets, but the implementation method is more elegant.

3. PoL 机制或将得到比 PoS 更高的Safety性。PoL 机制存在一套潜在的正向飞轮。在 PoL 机制中，用户在提供流动性，获得网络代币排放奖励的同时会深化网络的流动性，为 DeFi 用户带来更好的使用体验，促进网络生态的繁荣。网络基本面的向好也会一定程度反映在代币价格上，促进代币价格的上涨。代币价格的上涨则又会进一步激励用户提供流动性，捕获网络的代币排放，从而形成一套闭环的正向飞轮。在这个过程中，用户提供的流动性的增加也意味着网络安全性的提高，因此，PoL 机制或将得到比 PoS 网络更高的安全性。

In summary, the PoL mechanism can effectively promote sustainable liquidity on the chain and the prosperity of the DeFi ecosystem through the form of token reward emission, get rid of the dilemma of the existing public chain's over-reliance on airdrop marketing to attract users and liquidity, and capture higher security. The PoL mechanism can also allow the public chain to conduct ecological incentives more flexibly, which is expected to turn the upward flywheel of liquidity, currency prices and ecology.

However, the PoL mechanism also has its corresponding disadvantages, that is, PoL only incentivizes liquidity and only incentivizes the bottom-level liquidity needs of DeFi. Although liquidity is the lifeblood of DeFi, liquidity is not the whole of DeFi. PoL cannot incentivize DeFi protocols that do not have high liquidity needs. For example, the transaction aggregator protocol does not have a very high TVL, but it can contribute a large amount of trading volume. However, under the PoL mechanism, Berachain cannot effectively incentivize such protocols. In addition, it is difficult for PoL to achieve incentive balance for non-DeFi tracks such as NFT and GameFi. Therefore, the current version of PoL may also be further optimized in the future development of Berachain to more evenly incentivize the development of different DeFi protocols and different inter-chain ecosystems.

Token Model

Berachain's token model is also different from other public chains. Berachain's token economy consists of three different tokens: governance token BGT, gas token BERA, and stablecoin HONEY.

Introduction to the Three-Token Model

The positioning of BGT is similar to the governance token in the PoS network, except that BGT is set to be non-transferable. In addition, the ways to obtain BGT are relatively limited. Currently, users can obtain BGT emission rewards by providing liquidity on BEX, lending HONEY, and providing HONEY in Berps' bHONEY Vault. BGT can be used to participate in governance. Users can delegate BGT to validators and receive governance rewards and bribe rewards at the same time. Once the validator participates in the block, the user can also obtain transaction fee rewards and gas fee rewards from Berachain's native applications BEX, Bend and Berps in the block. BGT can also be converted 1:1 into Berachain's gas token BERA, but the process is one-way and irreversible, that is, users can no longer convert BERA 1:1 into BGT.

BERA is positioned similarly to native tokens in other public chains, mainly used to pay gas fees and block rewards. The difference is that holding BERA tokens does not have governance voting rights, and the governance rights are allocated to BGT.

HOENY is positioned as the native stablecoin of Berachain, providing a stable transaction medium for applications on Berachain. Users can mint HONEY by pledging USDC at a 1:1 ratio.

How to understand the three-token model

To understand the three-token model, we have to go back to Berachain’s PoL mechanism. PoL incentivizes Berachain’s liquidity by giving users BGT token rewards. Therefore, in order to achieve the effect of incentivizing liquidity, BGT must have value to attract sufficient liquidity.

How to ensure the value of BGT? If the native currency is only used as a governance token like other L1s, then the value of the token is actually difficult to guarantee. In this case, the value of the token is only weakly related to the fundamentals of the public chain, which is obviously not a reasonable path. There are two ways to ensure the value of BGT. One is that there is indeed real value inflow behind BGT, or that users can see expected returns. The second is to try to ensure that users hold BGT instead of selling it. Based on these two ideas, we will look back at Berachain's PoL and three-token model design and it will be clearer.

First of all, regarding the issue of how to prevent users from selling, Berachain’s idea is very simple. It designs BGT as a governance token that cannot be traded or transferred, and adds an additional gas token BERA. If users want to sell BGT, they need to exchange BGT 1:1 for BERA, which is equivalent to setting up an additional barrier for users to delay the sale of BGT as much as possible.

However, this approach is only a temporary solution. To make users think that BGT is valuable, the most direct way is to let users see the benefits behind BGT. In this way, Berachain has given two empowerment plans. First, Berachain grants BGT governance rights. This governance right is not the governance right for project development, but the governance right directly for BGT emissions, that is, the governance right for user benefits. The significance of governance rights is that every user must hold BGT in order to maximize their own benefits, and entrust BGT to the liquidity pool that is willing to vote for them to mine, so as to obtain more BGT emission rewards. In the PVP between users, if one party chooses to mine, withdraw and sell, it is obvious that the BGT emissions that this party is expected to obtain in the future are relatively less, which is not conducive to the goal of maximizing its own benefits. From this perspective, Berachain can effectively delay the process of users mining, withdrawing and selling BGT by granting BGT income governance rights, and promote more users to hold BGT and gain higher future benefits.

Secondly, not only Berachain, but also the nodes themselves will empower BGT. Because the income of nodes comes from the ecological income and gas income obtained from block production. In order to maximize their own interests, nodes must receive as many external BGT commissions as possible to increase their own block production rate. In order to attract external BGT, nodes need to bribe. There are many ways to bribe, for example, nodes can share the ecological income obtained by nodes with users, or nodes can start their own disks and exchange the high APY of new disks for BGT in the hands of users. The competition process of nodes to maximize their own interests has gradually evolved into a process of empowering BGT. The value of BGT is guaranteed by the protocol income and bribery income shared by nodes, which can further enhance the confidence of users in holding.

At this point, the relationship between the entire PoL mechanism and the three-token model has gradually become clear. I believe it is not difficult for everyone to understand why Berachain officials want to take control of the three-piece set of DEX, Lending and Perps. The reason is very simple. DEX, Lending and Perps, as the three components with the strongest money printing capabilities, can enjoy the huge gains brought by PoL and generate high protocol income. The official transferred this part of the income to the hands of the intermediate underwriter node, and the node empowered this part of the income on BGT as the most real value guarantee of BGT. Imagine, if there were no income dividends from DEX, Lending and Perps, would the value empowerment of BGT feel a bit like a castle in the air?

Furthermore, BGT and the entire Berachain ecosystem are also mutually infiltrated. The income of ecological projects is the most real value inflow behind BGT. If the Berachain ecosystem is not active enough, the value of BGT will not be more guaranteed, and users will tend to sell BGT. The decline in the value of BGT will reduce Berachain's attractiveness to LPs, causing users to withdraw liquidity and look for other mining pools with higher returns, which will further lead to a worse experience of using DeFi on the chain, further reducing the activity of the ecosystem, and thus heading towards a negative spiral. On the contrary, if the Berachain ecosystem is active enough, the protocol income of the Berachain official three-piece set is high enough, and the income and profit that can be shared with users is high enough, BGT will get more value protection, and users will be more willing to hold BGT. The increased attractiveness of BGT to users will attract more users to provide more liquidity, thereby further driving the prosperity of the DeFi ecosystem on the chain and starting a positive spiral. Rationally speaking, the start and stop of the spiral depends on the relationship between BGT's entrusted staking income and BGT's current price. If the values of the two are similar, the system will maintain overall stability. If the values of the two differ greatly, Berachain will easily enter an upward or downward spiral.

source:https://twitter.com/burstingbagel/status/1565705660888596481

Berachain Ecology

Although Berachain was born in 2021, the core mechanism of Berachain has been optimized and designed, and its related documents have not been made public. Therefore, a very complete project ecosystem has not yet been formed on Berachain. In fact, since the relevant documents of Berachain were published late, most community projects have been established since January 2024, and the Berachain ecosystem is still in a very early stage.

Official Ecosystem

Berachain's official ecosystem is the most important basic component of Berachain's ecosystem. According to the founder, in order to avoid the mutual involution of protocols such as DEX, Lending, and Perps with similar product functions and services, and to conduct meaningless vampire attacks, the official decided to personally provide DEX, Lending, and Perps products. Combined with the above analysis, it can be seen that DEX, Lending, and Perps are also the bulk of Berachain's ecological income. The official holding these three sets firmly in hand is conducive to better concessions to BGT holders, providing more value sources for BGT, and turning the positive flywheel of Berachain's spiral upward.

In addition to BEX, BEND and BERPS, the official also provides BGT Station, a management platform based on BGT delegated governance, a minting and redemption platform for the native stablecoin HONEY, and Berachain’sBlockchainBrowser Beratrail and testnet faucet.

source:https://www.berachain.com/

DeFi Ecosystem

Infrared

Infrared is a PoS and LSD protocol on Berachain, and in January 2024, it disclosed a 2.5M seed round of financing led by Synergis, with participation from NGC Ventures, Tribe Capital, CitizenX, Shima Capital, Dao5 and other institutions. Infrared cleverly degraded Berachain's PoL into PoS, which is more familiar to the market and users, and further released the efficiency of users' capital utilization by issuing pledged liquidity certificates. Infrared captures Berachain's BGT emissions by receiving users' liquid assets and providing liquidity. Subsequently, Infrared will give users liquidity certificates iBGT and pledge certificates siBGT as mappings of BGT. Users can not only enjoy the corresponding BGT benefits, but also use iBGT and siBGT to further participate in other DeFi ecosystems on Berachain. Infrared is expected to become Lido on Berachain and expand its own iBGT ecosystem.

source:https://medium.com/@infraredfinance/understanding-ibgt-the-future-of-liquid-staking-on-berachain-ed1a803acff1

Kodiak

Kodiak is the only DEX project incubated by Berachain's Build-a-Bera accelerator program, and in February 2024, it disclosed that Build A Bera, Amber Group, Shima Capital,DAO5 and other institutions participated in the 2M seed round of financing.

Kodiak aims to become a comprehensive liquidity platform on Berachain, providing users on Berachain with services such as DEX + automated liquidity management + code-free token deployment. Although both are DEX, Kodiak's positioning does not conflict with the official DEX. Kodiak aims to provide users with long-tail asset trading services on Berachain, and Kodiak can also provide liquidity providers with automated liquidity management solutions, eliminating the trouble of LP actively managing liquidity. In addition, Kodiak also provides a set of code-free token deployment solutions to support developers to quickly deploy and issue tokens. It can be said that Kodiak provides a full set of service process solutions from token deployment, issuance, to trading, and liquidity management.

source:https://medium.com/@KodiakFi/introducing-kodiak-berachains-native-liquidity-hub-63c3e7749b30

Beradrome

Beradrome aims to become the DEX and Restaking liquidity market on Berachain. Through the design of ve(3,3) token economics, it brings Solidly's gameplay into the Berachain ecosystem. Users holding iBGT can use Beradrome to purchase and stake BERO. While obtaining hiBERO certificates, they can also capture the validator rewards, protocol bribe rewards, and oBERO emission rewards owned by the Beradrome platform. At the same time, users can also use hiBERO to recycle iBGT for staking without liquidation risks, further improving the efficiency of fund use and amplifying returns.

source:https://twitter.com/beradrome

It is worth noting that Beradrome has reached a cooperation with The Honey Jar, and the two will work together to run a BeraChain validator node. In addition, Beradrome has also issued its own NFT Collection Tour de Berance, and NFT holders can obtain higher hiBERO distribution rights and voting rights.

source:https://opensea.io/collection/tour-de-berance

HoneyPot Finance

Similar to Infrared's idea, HoneyPot Finance also provides a staking solution for BGT that degenerates Berachain's PoL into PoS, which is more familiar to users. Unlike Infrared's idea of absorbing users' liquidity assets and giving users iBGT liquidity certificates, HoneyPot Finance receives BGT entrusted by users through platform currency bribes, and encourages users to use the liquidity pool provided by the bribed platform currency through revenue governance to obtain BGT emissions and form POS. In addition, HoneyPot Finance has also launched Launchpad for fair launch of long-tail assets, and the Batch AMM model for optimizing long-tail asset transactions, aiming to become the liquidity infrastructure for long-tail asset issuance and transactions on Berachain.

source:https://docs.honeypotfinance.xyz/v/zh-cn/overview/map

In addition to the above-mentioned DeFi Protocol, there are still a number of high-quality protocols in the Berachain ecosystem that are still under construction but have not yet disclosed product details, which are worth paying attention to, such as

• Supports any supported money market protocol Gummi

• Commodities on Berachain, RWA Protocol Wakalah

• Exponents, an oracle-free derivatives platform on Berachain

• 0DTE Options AMM Platform IVX

• DEX Trading Aggregator OOGA BOOGA

• Smilee Finance, an options protocol that provides up to 1000 times leverage, no liquidation, and impermanent returns

• Shogun, an intent-centric order flow aggregator and modular smart liquidity routing platform

• 100% On-chain non-custodial multi-strategy hedge fund protocol D^2 Finance

• …….

NFT Ecosystem

NFT Collection

Bong Bears

Berachain originated from the Bong Bears NFT Collection. On August 27, 2021, the three anonymous founders of Berachain released the Bong Bears NFT Collection, which consists of 100 unique bears. The subscription process is also different from other NFTs. Each NFT is priced at 0.069 ETH, and buyers can view specific bears on OpenSea for subscription before purchasing.

Bong Bears NFT also proposed the concept of Rebase NFT, and subsequently rebased four different NFT Collections: Boo Bears, Baby Bears, Band Bears and Bit Bears.

The high user stickiness of the early Bong Bears community meant that even if Berachain did not disclose any relevant information, the price of Bong Beras NFTs continued to rise, from 0.069 ETH to over 50 ETH. With the disclosure of Berachain's financing information, holding Bong Bears NFTs was also seen as the best choice to win Berachain's airdrops. The listing rate of Bong Bears NFTs dropped rapidly, and now it has become a state of having a price but no market, with the floor price reaching 200 ETH.

source:“Proof of Liquidity” Project Berachain Launches Public Testnet, Artio (investingcube.com)

The Honey Jar

In addition to the official Bong Bears NFT Collection, the most popular NFT Collection and community on Berachain is The Honey Jar. The Honey Jar is the traffic entrance of the Berachain ecosystem. Before Berachain publicly launched its PR, The Honey Jar began to help Berachain operate related online and offline activities and its own The Honey Jar community. The Honey Jar is not only the traffic entrance of the Berachain ecosystem, but also responsible for user education for users of the Berachain ecosystem. In addition, as a community itself, The Honey Jar also operates the incubation and cooperation with other projects in the Berachain ecosystem.

The Honey Jar also launched its own NFT series Honey Comb NFT. As an NFT project of the Berachain core community, holders of Honey Comb NFT can enjoy additional benefits brought by The Honey Jar partners, such as NFT whitelist casting opportunities, additional mining income increase, etc. At present, the transaction volume of Honey Comb NFT on OpenSea has reached 4.3k ETH, the floor price is about 0.25 ETH, and the listing rate is only 1%, which also reflects the extremely high user stickiness of The Honey Jar community.

source:https://opensea.io/collection/honey-comb-2

NFT Protocol

Goldilocks

Goldilocks is a comprehensive DeFi + NFTFi platform on Berachain. Goldilocks can provide NFT-based lending services to users on Berachain. The features of Goldilocks NFT lending service are: (1) The reserve price of NFT Collection is determined by voting by the holders of its governance token LOCKS, and does not need to rely on oracle price feeds. (2) NFT loans are denominated in iBGT. Users can provide BGT to the lending pool and obtain liquidity certificates GiBGT. While enjoying the interest income from lending, users can also use GiBGT to further participate in other Berachain ecosystems.

Kingdomly

Kingdomly aims to be the native OpenSea of Berachain. For C-end users, Kingdomly can provide users with NFT casting, sales, trading and leasing services. For B-end users, Kingdomly supports users to quickly deploy NFT Collection and seamlessly complete NFT issuance. Kingdomly has reached a cooperation with Honeypot Finance and completed the issuance of Honeypot Finance Genesis NFT.

Protecc

Protecc is a comprehensive NFTFi platform. Protecc aims to become a one-stop NFT trading market, providing NFT AMM for traders to trade at any time, providing NFT OTC and bulk trading platforms, supporting whale transactions, providing NFT automatic income strategy vaults to help users automatically earn income, and providing cross-chain NFT trading robots and other products.

Gumball Protocol

Gumball Protocol is an innovative NFT Launchpad and AMM protocol. In Gumball Protocol, each NFT Collection will have a corresponding token and underlying assets corresponding to it, allowing users to trade NFTs in a timely manner. By combining fragmented NFT assets with underlying assets to form liquid trading pairs, Gumball Protocol supports users' instant buying and selling needs for NFT transactions.

source:https://www.gumball.fi/collections/arbi/0x794075aef95d9bd7e5cfd0ea8a1e68493b7e0e23/buy

GameFi Ecosystem

BeraTone

BeraTone is a multiplayer online open world role-playing game inspired by Animal Crossing and centered on farming. Each player has his own piece of land, which can be freely customized and expanded. Players can plant crops, collect resources, raise animals and livestock, trade with other farmers, etc. BeraTone is also an evolving virtual world based on 3D aesthetics. In addition to basic planting and gathering activities, players can also explore the rich virtual world.Xiaobai Navigation, interact with a variety of characters, complete tasks, upgrade, solve different game puzzles, and gradually uncover the mystery of BeraTone.

BeraTone also released its genesis NFT BeraTone Founder's Sailcloth in January 2024, with a minting price of 0.1E. The current floor price is close to 1E, with a total transaction volume of 355E and a shelf rate of only 3%. Although BeraTone has not yet been released, the hot performance of its NFT in the secondary market also reflects the market's high expectations for BeraTone as a BAB incubation project.

source:https://opensea.io/collection/beratone-founders-sailcloth

Beramonium

Beramonium is an ARPG blockchain game on Berachain. They released an action role-playing game called Gemhunters. In this game, players can let their Beramium Genesis beras explore dungeons, challenge bosses, and perform tasks to obtain gems, which can be exchanged for NFTs of other well-known Berachain projects, such as Honey Combs, Beradoges, and other NFTs. At present, the floor price of Beramonium's Genesis character NFT is about 0.06 ETH, the total transaction volume is 158 ETH, and the listing rate is only 3%. The overall game community is very active.

source:https://opensea.io/collection/beramonium-chronicles-genesis

Meme

BabyBera

BabyBera aims to become a three-in-one ecosystem of NFT + Yield Farming + Meme Coin on Berachain. BabyBera will be released in three phases, first NFT issuance, then Yield Farming, and finally $BBBERA Meme Coin issuance. All $BBBERA will be issued as liquidity mining rewards in the Yield Farming phase to ensure that BabyBera users are loyal Degen users with super high stickiness, so as to realize the vision of making $BBBERA the leading Meme Coin on Berachain.

BeraDoge

BeraDoge is another meme project of Berachain. The project has two NFT collections, Beradoge Gen 1 and Mibidiots. Holding these two series of NFTs will be promised to be granted "a lot of useless stuff" or "a lot of useless BDOGE". In addition, there are also rumors that BeraDoge will also issue a DeFi platform itself.

source:https://element.market/collections/beradoge-d51393

Ecological Summary

At present, the official components are still one of the most important infrastructures of the Berachain ecosystem. In addition to the official components, the DeFi ecosystem on Berachain presents three different development trends:

(1) Supplementing the long-tail market that official components cannot reach;

(2) Innovate around PoL mechanism, BGT and vote buying;

(3) There are also a large number of high-quality DeFi projects attracted by the PoL mechanism and siphoned into the Berachain ecosystem;

Judging from the current DeFi ecosystem on Berachain, it is just as the official thought. After the official itself made the most basic but most important DEX, Lending and Perps components, there are no longer a large number of homogeneous projects that continue to reinvent the wheel and play vampire attacks. On the contrary, the existence of official components has forced DeFi projects to explore practical innovations and make more refined innovations based on existing businesses.

At this stage, in terms of project quality, the projects incubated by Build A Bear incubator are of relatively higher quality, followed by external high-quality projects introduced by Berachain. The quality of native community projects on Berachain is slightly uneven and slightly inferior.

As mentioned above, because the Berachain public chain itself has NFT culture, the issuance and management platform and liquidity protocol for NFT will also be extremely important components of Berachain.

Currently, the games and Meme ecosystem on Berachain are still in a very early stage of development.

Investment Opportunities

Focus on high-quality DeFi protocols on Berachain

Berachain's PoL mechanism will have great appeal to high-quality DeFi protocols. In addition, there are fewer vampire attacks on Berachain, and high-quality leading DeFi protocols can enjoy greater traffic exposure in their sub-tracks, and are expected to gain higher TVL, traffic and user support. More concentrated liquidity will also further improve the user experience of the protocol. We expect that on Berachain, the leading effect will be more obvious, and the leaders of the sub-tracks will also receive higher valuation premiums. Therefore, early participation in high-quality segmented leading DeFi projects must be the best choice to enjoy the Berachain market premium.

Focus on the innovative infrastructure around Berachain's PoL mechanism, BGT mechanism and vote buying mechanism

The biggest difference between Berachain and other public chains is its innovative PoL mechanism and three-token model. In addition to replicating the gameplay of other public chains, some projects on Berachain will inevitably make innovations in the adaptability of the PoL mechanism and the three-token model at the underlying infrastructure level. The direction of innovation can be to follow Infrared and transform the PoL that market users are not familiar with into PoS that the public is more familiar with, so that the liquidity certificate tokens issued by itself can inherently gain larger-scale market adoption. Or, starting from the BGT mechanism and the bribery mechanism, innovations can be made around the user's delegation rights, income rights and bribery rights at the token model level, and combined with Berachain's bribery mechanism to bring more composable gameplay. Innovations at the infrastructure level around Berachain's PoL mechanism and the three-token model are expected to create the protocol's own ecological moat and shape its own ecological barriers.

Optimistic about the NFTFi ecosystem that can combine NFT and DeFi

Unlike other public chains, NFT is also an important component of liquidity on Berachain. How to release its liquidity around NFT and how to combine NFT gameplay with DeFi gameplay on Berachain are also topics worth exploring on Berachain. Although the NFTFi protocols of other chains have not generated much spark, the NFTFi protocol on Berachain is expected to capture sufficient liquidity and have a greater chance of long-term development. The income strategy and income treasury derived from the NFTFi protocol can also be combined with mechanisms such as node bribery to make the NFTFi protocol more flexible.

Optimistic about Berachain-based L2 and its related infrastructure

The popularity of the Berachain testnet at this stage also reflects the market's strong expectations for Berachain to a certain extent. With the launch of the Berachain mainnet, with the support of the PoL mechanism, Berachain is expected to replicate the prosperous Ethereum DeFi Summer. Although Berachain is positioned as a high-performance L1 public chain, in the face of massive traffic influx and high-frequency on-chain interactions, Berachain also has scalability needs. Moreover, once Berachain starts its positive flywheel, the increase in BGT prices will also lead to an increase in Berachain interaction gas fees. Therefore, Berachain also needs to reduce costs and increase efficiency. In summary, we expect that some Berachain super DeFi applications and applications with high-frequency interaction needs such as GameFi and SocialFi will develop their own based on Berachain in the future. L2 Based on this logic, we will continue to be optimistic about and pay attention to Berachain-based L2 and its related infrastructure ecology.

Summarize

Liquidity has always been the most important topic in the crypto space. All tokens, grants, and points are ultimately aimed at competing for users and liquidity. Without liquidity as a foundation, even the most complete ecosystem and infrastructure are just castles in the air.

Berachain is expected to become a game-changer in the liquidity dilemma of public chains. Through its original PoL consensus mechanism and three-token model, it can siphon liquidity from other public chains and become the liquidity hub of the EVM ecosystem and the Cosmos ecosystem. Solid liquidity can not only bring financial support to Berachain, but also bring more developers, users and market attention to Berachain. Berachain is expected to become a new infrastructure that carries massive Crypto liquidity, make liquidity, maker DeFi great again!

Finally: MT Capital is very optimistic about the future development of Berachain. Early-stage projects and entrepreneurs in the Berachain ecosystem are welcome to contact us at any time.

(Twitter: @0X_IanWu, @Severin0624, MT Capital Email: deck@mt.capital )

Reference

1. What is Berachain? ⛓️ | Berachain Docs

2. Welcome to Polaris Ethereum – Polaris Ethereum Docs (berachain.dev)

3. Berachain — The Convergence of a Strong Community and Experimental Endeavors | DeSpread Reports

4. https://research.despread.io/reports-berachain/

5. Berachain – Innovating the Approach to L1 Building | blocmates.

6. Berachain: Building Sticky Liquidity – by Pavel Paramonov (shoal.gg)

7. https://twitter.com/berachain/status/1749522523895570700?ref=research.despread.io

8. https://twitter.com/burstingbagel/status/1565705660888596481

9. https://twitter.com/DylanXVFETH/status/1745176859728560131

10. https://www.shoal.gg/p/berachain-building-sticky-liquidity

11. https://foresightnews.pro/article/detail/31431

12. https://foresightnews.pro/article/detail/54714

13. https://foresightnews.pro/article/detail/52627

MT Capital

MT Capital is a global investment institution managed by a team of senior investors, focusing on investing in innovative Web3 projects around the world, covering the United States, Hong Kong, Dubai and Singapore. Our main investment areas include:

1) Mass adoption: decentralized social platforms, games, applications, and DEPINs are key to driving the diffusion of Web3 technologies to a broad user base;

2) Crypto-native infrastructure: We focus on investing in public chains, protocols, and other infrastructure that support and strengthen the ecosystem, as well as native DeFi solutions.

In addition, our team has many years of professional experience in secondary trading.

Official website:https://mt.capital/

Twitter:https://twitter.com/mtcap_crypto

Medium:https://medium.com/@MTCapital_US

The article comes from the Internet:MT Capital Research Report: Breaking the liquidity dilemma of public chains, Berachain may become a new generation of super L1

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