Berachain (BERA) - a new blockchain with "proof of liquidity"

The developers of the Berachain protocol, which will be discussed in this article, have introduced a next-generation consensus mechanism that seeks to solve one of the most common problems among blockchain platforms: security.

What is Berachain, and how does this protocol function?

Berachain is a decentralized layer 1 network developed based on the Proof-of-Liquidity (PoL) or "proof-of-liquidity" consensus algorithm. The PoL mechanism is designed to increase the efficiency of communication between network participants (nodes) and, as a result, improve the security of the blockchain.

Berachain's core network (main net) was launched in February 2025. The Berachain network was designed to be compatible with the Ethereum virtual machine. This approach makes it possible to adapt all upcoming updates to the Ethereum network, such as Pectra and the Berachain protocol. Due to this property, the Berachain blockchain protocol is even referred to as "EVM-like." This property also simplifies the creation of applications and protocols for Ethereum developers who plan to deploy their software on the Berachain network.

Initially, the Berachain protocol was developed using Cosmos SDK tools designed for the development of interoperable blockchains. However, during tests, the project team found that the network could not cope with a large number of transactions. Thus, the developers decided to create their own modular architecture called BeaconKit.

Unlike the monolithic approach used in Ethereum or Cosmos networks, the modular blockchain architecture allows modifying individual parts without affecting the overall structure. The BeaconKit framework allows the blockchain to remain functional even when individual segments fail. Large blockchains such as Solana and TON have experienced such problems, with their operations suspended for hours due to validator failures.

Proof-of-Liquidity and the Berachain tokenomics model

What differentiates Berachain from Ethereum and many other EVM-like networks is the PoL consensus algorithm, which is an improved version of Proof-of-Stake (PoS) or "proof-of-ownership".

The consensus mechanism embedded in the Berachain blockchain allows users to simultaneously be both stakers and liquidity providers for the protocols of the Berachain ecosystem.

Instead of a single asset used for gas payments and validator rewards, like in Ethereum or Solana, the Berachain model allocates two different tokens — BERA and BGT — for these purposes. Thus, in the Berachain network, there are two levels of consensus:

• A security layer consists of a set of validators participating in the network's consensus. This level utilizes the BERA utility token, which is used to pay for gas and provide security for the blockchain network;
• The rewards layer, where rewards for mined blocks are distributed to validators. This layer uses the BGT management token, also designed to reward consensus participants (validators and liquidity providers);

Thus, validators and liquidity providers contribute to one token (BERA) and receive rewards for another (BGT). Stacking serves as a mechanism to protect the network from attacks. Like the Ethereum network, Berachain validators have a minimum staking threshold of 250,000 BERA.

There is also another token in the Berachain ecosystem called HONEY. It is a stablecoin pegged to the US dollar exchange rate at a 1:1 ratio and backed by collateral in other tokens in the Berachain ecosystem.

Unlike BERA and HONEY, the BGT token is non-transferable, and rewards are the only way to receive the asset. BGT tokens can be obtained by validators or liquidity providers on the decentralized exchange BeraSwap. BGT cannot be transferred to other users or sold on the market; holders of this asset can only convert it into a BERA token at a 1:1 ratio.

About the BERA token

The BERA token was initially released in early February during the airdrop and distributed to active participants in the ecosystem. The total number of BERA tokens amounted to 500 million, of which about 107 million are traded on the market. At the same time, BERA tokens have no maximum issuance and an annual inflation rate of 10%.

BERA has the same format as tokens on the Ethereum network — ERC-20. Staking, providing liquidity, and paying transaction fees on the Berachain network are the only functions of the BERA token in its ecosystem. However, in doing so, unlike the other tokens in the BGT ecosystem, BERA is freely convertible in the market into different digital assets.

According to CoinMarketCap data for February 2025, at an exchange rate of $5.30, the market capitalization of the BERA token is $569 million, ranking the asset 114th in the overall cryptocurrency ranking. The historical maximum (ATH) of the BERA rate was recorded in the first days after the listing at $14.99 — since then, the token's value has fallen by almost 65%.