Berachain—The Blockchain Merging Proof-of-Liquidity with a Three-Token Model

Berachain is a Layer 1 blockchain that employs Proof-of-Liquidity, an innovative mechanism designed to align validators, protocols, and users in a shared effort to maintain security and operational efficiency.

Its EVM compatibility ensures that applications and tools originally built on Ethereum can be easily deployed on Berachain with minimal modifications. This also extends to Ethereum-native wallets and infrastructure, providing a seamless user experience.

The blockchain is powered by BeaconKit, a specialized consensus layer for EVM-based networks. Transaction finalization is handled by CometBFT, a protocol that ensures both high reliability and fast execution, making Berachain an attractive environment for decentralized application development.

Berachain’s Journey: How an NFT Collection Evolved into a Blockchain

Before becoming a blockchain ecosystem, Berachain was initially an NFT collection called Bong Bears, launched in August 2021 by two anonymous creators, Smokey the Bera (@SmokeyTheBera) and Dev Bear (@itsdevbear). The collection included 101 bear-themed NFTs.

Unlike traditional NFTs, Bong Bears introduced a novel mechanic called Rebase, which allowed holders to passively accumulate additional NFTs over time—a unique approach that set them apart in the market. 

The second collection, Bond Bears, launched two months after Bong Bears, granting each holder of the original NFTs a Bond Bears NFT (notice the subtle one-letter difference in their names?).

With every Rebase, the collection expanded, distributing more NFTs to existing holders.

In October 2021, the project introduced its third collection, Boo Bears, designed for those who owned both prior collections. Each qualifying holder received two Boo Bears NFTs, further incentivizing long-term participation.

The fourth NFT collection, Baby Bears, was distributed strategically: each Bong Bears and Bond Bears holder received one NFT, while Boo Bears holders were granted two. This structured release continued with Band Bears and Bit Bears, culminating in a set of six NFTs officially linked to the Berachain team.

The Rebase system didn’t just distribute assets—it built a thriving community. As engagement grew, the project’s vision expanded beyond NFTs. Conversations evolved, new ideas surfaced, and eventually, Berachain was conceived.

Proof of Liquidity: The Berachain Crypto Consensus Model Explained

Let’s talk about the flaws in today’s most popular consensus models. In Proof-of-Stake (PoS) blockchains, the incentives for validators, protocols, and users often exist in separate silos, failing to create a unified system.

Validators make money when users interact with protocols—whether through staking, trading, lending, or liquidity provision. Their role is essential for securing the network.

Meanwhile, protocols benefit from on-chain activity but don’t directly participate in securing the network through transaction validation or consensus mechanisms.

Meanwhile, users get the short end of the stick—they earn almost nothing while still having to cover transaction fees for their DeFi activities. In the end, validators walk away with the biggest slice of the pie.

Berachain aims to flip this dynamic on its head with Proof-of-Liquidity, a model designed to ensure fairer value distribution across the entire network, creating a more inclusive and balanced ecosystem.

Proof-of-Liquidity: How It Works

In DeFi, liquidity providers supply assets that power decentralized trading, lending, and other financial services. Their role is essential—but under traditional systems, liquidity does not contribute to securing the network.

Berachain aims to change this by integrating liquidity providers into the protocol’s core infrastructure. With this model, user-supplied liquidity will serve a dual purpose: facilitating market activity and enhancing network security.

The diagram below illustrates how liquidity levels fluctuate in Proof-of-Liquidity compared to traditional Proof-of-Stake models.

This model ensures that value flows fairly between users, protocols, and validators, eliminating the divide between security and liquidity and creating a more efficient blockchain ecosystem.

In simple terms, Berachain is working to unite all participants so that everyone—no matter their role—can benefit from being part of the network.

Berachain’s Three-Token Economy

Ethereum’s ETH functions as an all-in-one asset, facilitating transactions, staking, and liquidity provision. However, the more ETH that is staked, the less liquidity is available for other activities. This inefficiency has led to the widespread adoption of liquid staking solutions, which issue 1:1 tokenized representations of staked ETH, allowing users to remain active in DeFi despite their assets being locked.

Berachain eliminates this liquidity-security tradeoff by replacing the single-token structure with a three-token model, where each token has a defined, independent role.

The Berachain team believes this three-token model makes token distribution more efficient, giving network participants greater flexibility and more opportunities to engage. Each token has a clear purpose, ensuring better support for staking, liquidity, and DeFi transactions.

Meet BERA: Berachain’s Native Token

BERA is the core сrypto of Berachain, used for paying transaction fees and interacting with protocols. Validators rely on it for staking and securing the network. According to the official documentation, becoming a validator requires a minimum stake of 250,000 BERA.

BGT: The Berachain Governance Token You Can’t Trade

Unlike most governance tokens, BGT is non-transferable—you can’t buy, sell, or send it. The only way to earn BGT is by providing liquidity on BEX, Berachain’s native exchange, or engaging with other protocols in the ecosystem.

When users add liquidity, it must meet specific protocol requirements. In return, they receive LP tokens, which can then be staked in reward vaults. These vaults distribute BGT to users based on the LP tokens they’ve locked in, reinforcing long-term participation and commitment.

BGT is not a tradable asset—it is earned exclusively through liquidity provision and engagement in DeFi activities permitted by Berachain’s protocols. Holders have the option to delegate their BGT to validators in exchange for staking rewards.

Since BGT is a governance token, it gives holders voting power over protocol decisions. Plus, if needed, BGT can be burned to convert into BERA at a 1:1 ratio—but once you convert, there’s no going back.

HONEY: Berachain’s Сrypto Answer to Stability in DeFi

As the native stablecoin of Berachain, HONEY provides a stable, dollar-pegged asset for transactions, trading, and ecosystem-wide payments. Designed for price stability, HONEY maintains a 1:1 peg to the U.S. dollar, making it a critical component of Berachain’s financial infrastructure.

To mint HONEY, users must deposit approved collateral into protocol-defined vaults. Currently, USDC and BYUSD are among the accepted tokens, with additional stablecoins expected to be introduced in the future. Alternatively, HONEY can be obtained through decentralized exchanges by swapping assets such as BERA for HONEY.

Berachain’s Unique Value Proposition

Berachain represents a new class of Layer 1 blockchains, integrating EVM compatibility, Proof-of-Liquidity consensus, and a specialized three-token economy. This model ensures optimal value distribution across all network participants, fostering a sustainable and efficient blockchain infrastructure.

The three-token system (BERA, BGT, HONEY) directly addresses inefficiencies seen in traditional blockchains, particularly the competition between staking and liquidity provision.

• BERA serves as the network’s core asset,
• BGT facilitates governance and decision-making, and
• HONEY functions as a stable unit of exchange.

By structuring the ecosystem in this way, Berachain strengthens the foundation for DeFi growth, making it an appealing choice for developers and users seeking an economically sustainable decentralized finance platform.