Berachain upgrades to PoL Consensus Mechanism, introducing a new Token economic model

Berachain is a unique Layer 1 blockchain project, whose most notable innovation lies in the adoption of the PoL (Proof of Liquidity) block reward distribution mechanism. This mechanism transforms the chain's block rewards into an internal economic driver that promotes ecological growth by directly distributing the majority of rewards to users and liquidity providers within the ecosystem, thereby fostering application growth and on-chain liquidity accumulation.

In this model, all ecological assets participating in staking directly provide on-chain liquidity support for Berachain. The rewards generated from PoL liquidity mining come from the chain's native incentive mechanism, aimed at building a capital-efficient and more targeted underlying structure.

Recently, Berachain upgraded its PoL Consensus Mechanism and officially launched the V2 version. This upgrade mainly introduces a new Token economic model, further endowing the $BERA Token with clearer rights to yield and value support.

Introduction to PoL Consensus Mechanism

The operational logic of PoL is both simple and creative; it integrates the PoS Consensus Mechanism, liquidity mining, and the veCRV liquidity game model introduced by Curve, establishing a new paradigm for on-chain governance and incentive distribution.

Berachain has designed two types of core on-chain native assets:

• BGT: As the native governance Token and the leading asset for incentive distribution.
• BERA: Staking asset for validators, also承担链上Gas费用功能

The main participants in the PoL model include the on-chain protocol on Berachain, the validators in the network, and the liquidity providers (LP).

In this mechanism, protocols or DApps wishing to obtain BGT incentives need to apply to join the PoL reward fund whitelist pool and provide attractive bribes to entice validators for BGT allocation. Validators are the block-producing roles in the network (required to stake BERA tokens), and when they successfully produce blocks, they will receive BGT token rewards, including a base block reward and a "variable reward."

Validators will allocate most of the variable rewards to the governance-approved whitelist PoL pools according to their own strategies through the BeraChef contract. The protocol's PoL pools will distribute the BGT rewards to LP users after receiving them.

BGT stakers can delegate BGT tokens to validators to help increase their "Boost" value, and the validators will periodically distribute the protocol rewards proportionally to the BGT delegators who support them.

This mechanism design encourages long-term games between protocols, continuously attracting liquidity through returns. Validators are also constantly engaging in games to obtain better "Boost" values and potential returns. Ultimately, whoever can provide more liquidity will have more say and economic benefits, forming a growth flywheel that integrates liquidity, security, and incentive distribution.

Main Improvements of PoL v2

In Berachain v1, the BGT Token, serving as an asset with both governance and incentive functions, has been deeply integrated into the economic circulation system. In contrast, the economic role of BERA in the v1 phase is relatively weak, making it difficult for users to obtain on-chain rewards of BERA through native means.

The most intuitive improvement of v2 is the introduction of the BERA incentive module, allowing BERA to better integrate into the Berachain economic ecosystem and provide better empowerment for the ecosystem.

BERA Incentive Module

In v2, users can stake BERA tokens directly through Berahub in a single-coin staking manner to earn native rewards from the chain ecosystem. The system will convert the staked BERA into a wrapped token WBERA, which will then provide a receipt token sWBERA after staking. Users can also directly stake WBERA tokens and similarly receive sWBERA as proof.

sWBERA is similar to an LST (liquid staking Token), which can be used as a certificate asset to capture yields again in the DeFi protocols of the Berachain ecosystem, enhancing capital efficiency.

The income from BERA staking comes from the bribe income obtained after validators provide incentives for a specific PoL pool. 33% of this income will be repurchased as WBERA and then distributed to BERA stakers. The staking income received by users depends on the proportion of their staked BERA tokens relative to the overall total.

Currently, the unilateral staking yield of BERA can reach 103%, making it the highest single-coin staking yield among Layer 1.

The authenticity of BERA staking rewards

The native staking of BERA does not rely on inflation to "distribute coins", as its mechanism itself is supported by real returns. In Berachain's PoL model, the protocol initiates "bribes" to validators in order to compete for BGT rewards, with most of these bribe funds coming from the protocol's own treasury. The system charges a 33% fee, which is converted into WBERA through auctions, and finally distributed proportionally to users staking BERA.

This model enables the staking rewards of BERA to belong to "protocol layer real returns", which not only makes it more sustainable but also gives long-term value support to its native staking scenarios.

Institutional Friendliness

The Berachain PoL v2 model transforms inflation into real income for the protocol, creating a clear and well-defined on-chain real income model for BERA. The income generated by this model can be uniformly packaged, split, and distributed in a CEX custody environment, allowing BERA's staking to have the potential to be packaged by institutions as financial products, custody agreements, and structured income tools.

This design is in line with the direction advocated by the recently highly publicized "Clarity Act," establishing a clearer compliance framework for crypto assets. By binding returns to real economic behavior at the mechanism level, on-chain financial instruments have clear sources of income, an underlying structure that is auditable, and asset properties that are custodial and interpretable for holders.

In the future, if BERA launches the Digital Asset Treasury, it will provide institutions and even listed companies with a compliant, custodial, and sustainable cash flow on-chain income path.

Overall, the launch of v2 has not only accelerated the flywheel within the ecosystem but also carries significant strategic implications for ecological development.