Berachain updates PoL Consensus Mechanism, giving a new role to BERA Token

Berachain, as a distinctive Layer 1 blockchain project, stands out for its innovative use of the PoL (Proof of Liquidity) block reward distribution mechanism. This mechanism transforms the chain's block rewards into a driving force for ecological growth by directly allocating most of the rewards to users and liquidity providers within the ecosystem, thereby promoting application growth and on-chain liquidity accumulation.

In this model, all eco-assets participating in staking will provide on-chain liquidity support for Berachain. The rewards generated from PoL liquidity mining come from the chain's native incentive mechanism, aiming to build a more capital-efficient and incentive-oriented underlying structure.

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

The operating logic of PoL integrates the PoS Consensus Mechanism, liquidity mining, and the veCRV liquidity game model introduced by Curve, creating 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, while also bearing the on-chain Gas fee function.

The main participant roles in the PoL model include: on-chain protocols on Berachain, validators in the network, and liquidity providers (LP).

In this mechanism, protocols or DApps wishing to receive BGT incentives must apply to join the PoL reward fund whitelist pool and provide attractive bribes to attract validators' BGT allocations. Berachain validators are the block-producing roles in the network, and becoming a validator requires staking BERA tokens. When a validator successfully produces a block, the system provides BGT token rewards, including a base block reward and a "variable reward." The system allocates different amounts of BGT tokens based on the validator's "Boost" value and the percentage of BGT delegated to the validator out of the total delegated BGT across all validators.

Validators will allocate most of the variable rewards according to their own strategies through the BeraChef contract to the governance-approved whitelist PoL pools. When allocating BGT rewards to Reward Vaults, validators will also receive incentives at the rate set by the vault owners, such as HONEY, USDC, etc.

Protocols that can provide higher returns for LPs typically offer better returns for validators, so validators tend to allocate more BGT rewards to PoL pools that can provide higher protocol incentives.

After the PoL pool of the protocol receives BGT rewards, it will be distributed to LP users. By becoming an LP in some PoL pools of projects on Berachain, in addition to receiving regular Farming rewards, you will also receive native BGT token incentives from the underlying protocol, with APY usually being very high.

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

Under the PoL model:

1. Agreements between protocols will form long-term games to achieve better circulation, continuously attracting liquidity through yields. This "yield arms race" brings a better liquidity foundation for Berachain.

2. Validators are also engaging in games, hoping to attract more BGT holders to support them in order to obtain better "Boost" values and potential profits, thus helping the network optimize liquidity.

3. The party that provides more liquidity can hold more say and economic benefits, continuously forming a growth flywheel that integrates liquidity, security, and incentive distribution.

In Berachain v1, the BGT Token, which serves both governance and incentive functions, has been deeply integrated into the economic circulation system. As an incentive asset with inflationary properties, BGT has clear native use cases at the blockchain layer and possesses sustainable yield capabilities.

In contrast, the economic role of BERA in the v1 stage is relatively weak. Apart from bearing Gas fees and serving as a staked asset for validators, users can hardly obtain on-chain returns from BERA in a native way. Most BERA holders can only rely on third-party DeFi protocols, such as participating in LP farming in PoL pools that support BERA or its wrapped assets to indirectly obtain returns, but these paths have high thresholds, cumbersome operations, and poor experiences.

In the current global environment of increasingly stringent compliance, BERA faces similar issues as other native PoS assets on the chain, namely the lack of compliance-friendly yield models, making it difficult for institutional users to adopt or integrate into the traditional financial system, thus limiting market expansion.

The most intuitive improvement of v2 for Berachain is the introduction of the BERA incentive module, which allows BERA to better integrate into the Berachain economic ecosystem and empower the ecosystem without significantly altering the original economic ecosystem.

In v2, Berachain introduced the BERA incentive module, allowing users to stake BERA tokens directly in a single coin staking method through Berahub, thereby earning native rewards from the chain ecosystem.

The BERA incentive module is similar to a staking method. When users stake the native BERA tokens, the system first converts them into the wrapped token WBERA, and after staking it in the network, it provides a certificate token sWBERA. Users can also directly stake WBERA tokens, and the system will similarly provide the certificate token sWBERA.

sWBERA Token is similar to LST and can serve as a proof of asset, with the potential to capture additional yields in the DeFi protocols of the Berachain ecosystem, enhancing capital utilization for multiple benefits.

When users stake BERA tokens, they directly stake into the Berachain contract, which is similar to single-coin staking in PoS, rather than delegating to validators. It should be noted that redeeming sWBERA for BERA requires a 7-day unlocking period.

From the perspective of revenue sources, in v2, the bribe income obtained by validators will have 33% repurchased as WBERA, which is then distributed to the BERA stakers ( for reinvestment ). The staking income obtained by users depends on the proportion of their staked BERA tokens to the overall share.

In v2, the threshold for users to earn income from BERA has been significantly lowered; they can directly stake at the blockchain layer, which offers higher security and reliability. Users no longer need to become LPs or engage in delegated staking through third-party protocols.

Currently, the unilateral staking yield of BERA can reach 103%(, which is the highest yield for single-token staking in Layer1), representing a very considerable yield status. Although some trading platforms also have BERA's earning coin feature, the overall yield is between 60% and 90%, but staking directly on-chain is more cost-effective.

The native staking of BERA does not rely on inflation to "mint coin distribution"; its mechanism itself provides real yield support. In Berachain's PoL model, the protocol competes for BGT rewards by initiating "bribes" to validators. Most of these bribe funds come from the protocol's own treasury and are paid in the form of stablecoins, mainstream assets, or protocol tokens. These funds are not directly given to validators but are subject to a 33% fee collected by the system, which is then auctioned off uniformly as WBERA and finally distributed proportionally to users staking BERA.

Although BERA rewards are indeed being issued on-chain, this is not inflation created out of nothing like other PoS networks; it is backed by real funds. This process is similar to the network selling the "coin issuance rights" and then distributing the monetized income to the stakers.

If ETH and BERA both issue 100M tokens annually:

ETH directly distributes 100M to stakers.

Berachain sells inflation through a bribery mechanism, and if the efficiency is 80%, it will yield an additional 80M in real profits.

The result is: with the same inflation, Berachain can achieve a return of 180M on-chain value, while ETH only has 100M.

Therefore, the staking rewards of BERA belong to the "real yield of the protocol layer", which is not only more sustainable but also provides long-term value support for its native staking scenario.

The Berachain PoL v2 model monetizes inflation into real income for the protocol, building a clear and well-defined on-chain real yield model for BERA that does not rely on third-party protocols or speculation in the secondary market, but is entirely derived from the real bribery expenditures of the on-chain protocol, and is converted into traceable incentive funds through auctions.

The returns generated by this model can be uniformly packaged, split, and distributed directly in a custody environment, allowing BERA staking to have the potential to be packaged by institutions as wealth management products, custody agreements, and structured income tools. This effectively addresses the pain point of being difficult to directly reach institutional users.

The recently highlighted "Clarity Act" establishes a clearer compliance framework for crypto assets, making the launch of PoL v2 quite timely. By binding returns to real economic activities through the mechanism layer, on-chain financial instruments should have clear sources of income, a transparent and auditable underlying structure, and asset attributes that are custodial and interpretable for holders. This is one of the directions advocated by the Clarity Act.

If BERA launches Digital Asset Treasury(, it will also provide institutions and even publicly listed companies with a compliant, custodial, and on-chain revenue path with continuous cash flow characteristics.

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In summary, the launch of v2 not only accelerates the flywheel within the ecosystem but also has a more profound long-term strategic significance for ecological development.