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

Berachain, as a distinctive Layer 1 blockchain project, has its greatest innovation in adopting 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 distributing most of the rewards to users and liquidity providers within the ecosystem, thereby promoting application growth and on-chain liquidity accumulation.

In the PoL model, all ecosystem assets participating in staking will directly 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.

Recently, Berachain upgraded its PoL Consensus Mechanism and officially released the new V2 version. This upgrade mainly introduces a new Token economic model, providing clearer rights to收益 and value support for the BERA Token.

Overview of PoL Consensus Mechanism

The operational logic of PoL integrates the PoS Consensus Mechanism, liquidity mining, and Curve's veCRV liquidity game model, 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: The staking asset for validators, also承担链上 Gas 费用功能.

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

In this mechanism, protocols or DApps that wish to receive BGT incentives must apply to join the PoL reward pool whitelist and provide attractive bribes to attract validators' BGT allocations. Validators will receive BGT token rewards upon successfully producing blocks, which include the base block reward and "variable reward".

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

Stakers of BGT 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 that support them.

This mechanism encourages long-term games among protocols, continuously attracting liquidity through yields. Validators are also in competition, hoping to attract more BGT holders to support them. Those who can provide more liquidity will gain more influence and economic benefits, creating a growth flywheel that integrates liquidity, security, and incentive distribution.

Main Improvements of PoL v2

In Berachain v1, the BGT Token is deeply integrated into the economic circulation system, with clear native use cases and sustainable profitability. In contrast, the economic role of BERA in the v1 phase is relatively weak, and users find it difficult to obtain on-chain returns from BERA through native means.

The main improvement of v2 lies in the introduction of the BERA incentive module, which allows BERA to better integrate into the Berachain economic ecosystem and empower the ecosystem.

BERA Incentive Module

The BERA incentive module introduced in v2 allows users to stake BERA tokens directly in a single coin staking manner through Berahub, earning native rewards from the chain ecosystem.

After staking BERA tokens, the system will convert them to WBERA, and after staking, a receipt token sWBERA will be issued. Users can also directly stake WBERA tokens to receive the sWBERA receipt.

sWBERA, as an LST, can capture profits and enhance capital utilization within the DeFi protocols of the Berachain ecosystem. Users stake BERA directly into the contracts of Berachain, experiencing a single-coin staking similar to PoS. It is important to note that redeeming sWBERA for BERA requires a 7-day unlock period.

In terms of sources of revenue, in v2, part of the bribery income is repurchased as WBERA and then distributed to BERA stakers. Currently, the unilateral staking yield of BERA can reach 103%, making it the highest single-coin staking yield among Layer 1.

BERA The authenticity of staking rewards

The native staking of BERA does not rely on inflation for "coin distribution"; its mechanism is supported by real yield. In Berachain's PoL model, the protocol initiates "bribery" towards validators for competing for BGT rewards, with most of these funds coming from the protocol's own treasury. The system charges a 33% fee, the auction is for WBERA, and then it is distributed proportionally to users staking BERA.

This mechanism ensures that the staking rewards of BERA belong to the "real returns at the protocol layer", making it not only more sustainable but also providing long-term value support for its native staking scenario.

Institutional Friendliness

The Berachain PoL v2 model turns inflation into real income for the protocol, constructing a clear and well-defined on-chain real yield model for BERA. The income generated by this model can be directly packaged, split, and distributed in a unified manner within a CEX custody environment, giving BERA's staking the potential to be packaged by institutions as financial products, custody agreements, and structured yield instruments.

This improvement aligns with the recent requirements of the "Clarity Act," binding profits to real economic activities through the mechanism layer, allowing on-chain financial instruments to have clear sources of income, an auditable underlying structure, and asset attributes that are custodial and interpretable for holders.

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

In summary, the launch of PoL v2 not only accelerates the flywheel within the ecosystem but also has more far-reaching strategic significance for ecological development.