Consensus mechanisms are the linchpins of securing blockchain networks and enabling their functionalities. While Proof of Stake (PoS) has been a stalwart method, ensuring robust security and operational efficiency, it is not without its limitations. Berachain, an Ethereum Virtual Machine (EVM) compatible Layer 1 blockchain, introduces a unique alternative: Proof of Liquidity (PoL).
This article delves into the innovative mechanisms of Berachain, exploring its genesis, unique tri-token model, and the technical prowess that Chorus One brings to optimizing this approach, with ‘BeraBoost’.
Berachain's Proof-of-Liquidity (PoL) consensus mechanism addresses several limitations inherent in Proof-of-Stake (PoS) systems. In PoS, validators and users lock up a substantial amount of native tokens to secure the network. This staked capital, while ensuring network security, remains idle and does not contribute to the liquidity of the ecosystem. Consequently, these tokens cannot be used for DeFi applications, trading, or other on-chain activities. Although PoS is a resilient method for achieving consensus and securing blockchain networks, aiming for a high percentage of staked tokens can counteract liquidity needs within the ecosystem.
Liquid staking was developed to mitigate these concerns by creating liquidity for staked tokens, and it has proven successful in many ecosystems. However, Berachain's PoL model aims to surpass liquid staking. PoL can be simplistically described as "security by liquidity," meaning the only way to secure the chain is by providing liquidity. Given Berachain's primary focus on DeFi, this model is particularly relevant. But how does PoL actually function on Berachain?
Berachain's innovative journey began with the "Bong Bears" NFT project—a whimsical collection that captivated the DeFi community. Through this creative endeavor, the founders recognized a crucial gap: the need to harmonize liquidity provision with network security. This insight led to the birth of Berachain, designed to leverage liquidity as the cornerstone of its security model. With substantial backing from prominent investors such as Framework Ventures, Brevan Howard, Polychain Capital, and Samsung Next, Berachain is well-positioned to redefine blockchain consensus.
At the heart of Berachain's ecosystem lies its tri-token model, consisting of BERA, BGT, and HONEY. Each token serves distinct purposes, ensuring that the network can achieve its objectives of security, governance, and efficient transaction processing while maintaining a stable economic environment for decentralized finance (DeFi) activities:
$BERA (Liquid Token)
$BGT (Governance and Staking Token)
$HONEY (Stablecoin)
Let’s take a deeper look at their individual roles:
Under the hood, PoL requires validators to direct incentives to on-chain pools of capital called "reward vaults”. We are committed to approaching this process scientifically, through an algorithm we’ve named “BeraBoost” - it will be open source software, and run on a public dashboard. Beraboost will distribute incentives such that delegators to Chorus One earn maximum rewards, by tracking their LP positions and directing incentives to the relevant pools.
Berachain is currently on testnet and staking is not enabled. We are closely involved with the Berachain team and will support all institutional and individual use-cases for supporting BGT. If you're interested in knowing more, fill out this form.
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About Chorus One
Chorus One is one of the biggest institutional staking providers globally, operating infrastructure for 60+ Proof-of-Stake networks, including Ethereum, Cosmos, Solana, Avalanche, and Near, amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.