Introduction to Berachain

Berachain represents a new evolution in blockchain design, introducing the world's first Proof-of-Liquidity (PoL) consensus mechanism. Launched in February 2025, this EVM-compatible Layer 1 blockchain solves a problem plaguing traditional networks. That is the misalignment between network security (which requires token staking) and DeFi activity (which requires token liquidity). With a current price of $1.65-$1.68 USD and a market cap of $179-$203 million (as of July 2025), Berachain has quickly gained attention as a DeFi-native blockchain.

What makes Berachain special is its innovative three-token ecosystem:

• BERA serves as the gas token.
• BGT (Bera Governance Token) handles governance and staking rewards but cannot be transferred.
• HONEY acts as the ecosystem's stablecoin.

This separation lets users simultaneously participate in network security and DeFi activities without the traditional trade-offs. Berachain's staking ecosystem caught our attention because it reimagines how blockchain economics work. Instead of simply locking tokens for security, validators direct BGT emissions to application reward vaults in exchange for protocol incentives. This creates a marketplace where the most valuable applications attract the most security.

How Berachain Proof-of-Liquidity Works

What is Proof-of-Liquidity?

Proof-of-Liquidity builds on regular Proof-of-Stake but works differently. Instead of just locking up tokens, it rewards you for using DeFi apps. This keeps the network secure while encouraging more activity.

Traditional Proof-of-Stake validators just lock their tokens and wait. Berachain validators have to actively participate in the ecosystem's liquidity marketplace. They can't just sit back and collect rewards. They need to engage with DeFi protocols to maximize their earnings.

The Three-Token System:

Note: Data accurate as of June 2025

How PoL Mechanics Work

Step 1: Validator Operations Validators stake BERA (250K-10M) to secure the network and receive BGT rewards. They can then direct these to application reward vaults in exchange for protocol incentives.

Step 2: BGT Distribution When you stake BGT, it enters a queue before becoming fully active, and you’ll need to click the "Queue Boost" button to proceed with the staking process. Distribution of BGT emissions may change every 5 hours based on validator allocations.

Step 3: Reward Vault System Each eligible (whitelisted) pool on BEX has an associated LP token. Once liquidity is deposited into a BEX pool, an LP token would be issued relative to the user's total contribution percentage to the pool. With this LP token, users must stake them into their respective Reward Vaults in order to be eligible to receive BGT.

Step 4: Application Incentives Applications will compete to bribe validators – the more attractive the bribe, the more likely validators will direct their BGT to that application.

Current Ecosystem Applications

Note: Annual inflation rate is approximately 10% through BGT emissions, subject to governance decision.

Staking APY Comparison

Berachain's rewards are unique because they come from multiple sources rather than simple staking yields:

Comparison with Traditional Networks:

Key Differences:

• Berachain rewards scale with ecosystem adoption and application success
• Multiple simultaneous reward streams possible
• Rewards are not just from inflation but from real economic activity
• Higher complexity requires active management for optimal returns

Berachain Staking Overview

Staking Requirements & Minimums

Validators only need to stake BERA within the designated min and max range of 250,000 and 10,000,000, and once in the active set they’ll propose blocks. Validators receive rewards in BGT.

For delegators:

• Minimum BGT: No minimum specified for delegation
• Queue System: The Delegation Queue mechanism is used to stake BGT on Berachain. When you stake BGT, it enters a queue before becoming fully active
• Processing Time: The confirmation can take 1-2 hours

Reward Distribution & Claiming

As validators direct BGT emissions to Reward Vaults, a user will accumulate BGT to claim. Users must perform an additional action to claim BGT, it is NOT automatically sent to the user.

Reward Types:

• BGT Emissions: From validator block production
• Application Incentives: From protocols competing for BGT direction
• Fee Sharing: From core applications (BEX, HONEY swap)

Risk Considerations Slashing Protection: Only a validator's initial bond can be slashed, delegated BGT is not slashable. This is a significant safety feature compared to other PoS networks.

BGT Characteristics: BGT is soul bond and can't be transferred to another wallet. BGT can be redeemed (burned) 1:1 for BERA. This is a one-way function, and BERA cannot be converted into BGT.

Liquidity Provision Risks: Liquidity providers are also exposed to impermanent loss. The risk associated with impermanent loss is highest when providing liquidity for pools containing assets whose prices may move against each other dramatically.

Understanding the Validator Marketplace

Validator Selection Strategy: Delegators can evaluate validators' strategies, and choose to delegate to a validator based on the expected bribes the validator would earn for its delegates.

Dynamic Emissions: New vault pools will reach full APY over a 3-day ramp-up period. New vaults may receive BGT emissions by end of day with incentives becoming claimable by the following day.

Performance Optimization: Choose validators based on:

• Their application incentive strategies
• Historical bribe capture rates
• Technical reliability and uptime
• Fee sharing arrangements

Recent Governance Evolution (April 2025)

Berachain's ecosystem has matured significantly with a notable governance update introducing new standards for staking tokens and protocols to improve transparency and quality of reward vaults. These enhanced standards include:

Minimum Requirements:

Liquidity Thresholds: Staking tokens must maintain at least $100,000 in Total Value Locked (TVL)

Active Trading Requirements: Tokens must demonstrate consistent trading activity to qualify for reward vault eligibility

Team Transparency: High-quality, transparent teams are prioritized over opaque or potentially extractive token projects

Impact on Ecosystem: The goal is to ensure high-quality teams can participate in Proof-of-Liquidity incentives while avoiding extractive or opaque token setups. This governance update signals a maturing ecosystem with evolving criteria for which applications and tokens can receive validator-directed BGT emissions, aiming to enhance the long-term sustainability and fairness of the staking rewards system.

What This Means for Stakers: While the core staking process remains unchanged, the ecosystem governance is actively refining the standards for reward vault eligibility to improve transparency and quality. This creates a more curated but potentially more reliable reward environment, reducing risks from low-quality or potentially malicious applications while maintaining the innovative PoL mechanics.