1. Introduction

Blockchain Overview

Berachain is a high-performance EVM-compatible Layer 1 blockchain built on the Proof of Liquidity (PoL) consensus, which originated in 2021. At that time, several founders, as early anonymous DeFi players, experienced the rise and fall of multiple blockchain ecosystems and DeFi operations across different chains. They were concerned about the liquidity fragmentation between multiple chains and the common ‘ghost town effect’ of public chains - public chains excessively rely on token incentive subsidies to attract TVL (Total Value Locked) and liquidity. Once the token emission dries up, liquidity rapidly diminishes. At the same time, in PoS (Proof of Stake) public chains, a large amount of value tokens are used for staking to secure the network, sacrificing liquidity. Liquidity is crucial for the vitality of DeFi and ecosystem protocols. Based on these profound industry insights, they conceived the idea of creating a liquidity-focused public chain.

Initially, the founder jokingly launched the Smoking Bear NFT (Bong Beras), unexpectedly gaining a lot of attention and support from the community. Most of these community members are DeFi enthusiasts. Through continuous communication with the community, the founder’s ideas were further refined and supported, and the prototype of Berachain gradually took shape. During the technical development phase, the Berachain team met the Polaris team, who focuses on EVM compatibility development. The two sides hit it off and jointly created Berachain based on the Cosmos SDK, using Polaris’ technology to achieve EVM compatibility. At the same time, they introduced a unique PoL consensus mechanism to address the liquidity issues of the public chain.

Berachain aims to be the preferred blockchain platform for decentralized finance (DeFi) applications, providing users with efficient, secure, and low-cost trading experiences through innovative technological and mechanism designs, promoting the prosperity of the DeFi ecosystem. Its unique market positioning emphasizes the combination of liquidity and security, attracting liquidity providers to participate in the network through incentive mechanisms to ensure the network’s activity and security, distinguishing it from other traditional blockchain projects.

Login to the Gate.io trading platform to trade the BERA token:https://www.gate.io/trade/BERA_USDT

2. Berachain technology architecture and innovation mechanism

2.1 Core Technical Features

2.1.1 Built on Cosmos SDK

Berachain, built on the Cosmos SDK, brings many advantages. Cosmos SDK is a software development kit for building blockchain applications, with high modularity and customizability. By using Cosmos SDK, Berachain can quickly build the infrastructure of the blockchain, reducing development time and cost.

In terms of scalability, the modular design of Cosmos SDK allows Berachain to choose and combine different modules according to its own needs. For example, when dealing with transaction throughput, consensus modules and network modules can be flexibly adjusted to accommodate the ever-growing number of users and transactions. This modular architecture enables Berachain to easily add new features and capabilities, and to iterate quickly as business grows and user needs evolve.

The support of interoperability by the Cosmos SDK is also a major highlight of Berachain. Through the IBC (Inter-Blockchain Communication Protocol), Berachain can communicate and interact with other blockchains built on the Cosmos SDK, enabling cross-chain asset transfers and data sharing. This feature breaks down the silos between blockchains, providing the possibility for Berachain to integrate into a larger blockchain ecosystem, allowing its users to seamlessly exchange value and interact with applications across different blockchains.

2.1.2 Liquidity Proof (PoL) Consensus Mechanism

PoL consensus mechanism is one of the core innovations of Berachain, aiming to address the contradiction between liquidity and security in traditional blockchain consensus mechanisms. The principle is based on the collaborative relationship between Liquidity Providers (LPs) and validators. Under the PoL mechanism, liquidity providers supply digital assets to specific liquidity pools, in exchange for BGT (governance token) as a reward. These BGT tokens can be delegated to validators, who participate in the block generation and validation process based on the amount of BGT received, and receive corresponding rewards.

The specific operation is as follows: Users pledge digital assets that meet the PoL conditions to Gauges (a special mechanism used to measure liquidity contribution and allocate rewards) to obtain BGT rewards. Validators are responsible for generating blocks and allocating part of the BGT issuance to specific Gauges based on their discretionary policies, which aim to maximize the returns of their pledgers. Meanwhile, validators also collect a certain commission from the BGT issuance. Applications can incentivize validators to directly allocate BGT rewards to themselves, usually in the form of the protocol’s native token. Liquidity providers participating in PoL receive BGT rewards after deducting the validator’s commission and have the option to pledge the BGT to validators who comply with their governance strategies. In addition, liquidity providers receiving BGT can also burn BGT to obtain BERA tokens at a 1:1 ratio.

Compared to the traditional PoS consensus mechanism, PoL has significant advantages. In PoS, a large amount of native tokens are staked to secure the network, which prevents these tokens from participating in DeFi applications and trading, leading to reduced on-chain liquidity. PoL, on the other hand, combines liquidity provision with network security, incentivizing users to provide liquidity and effectively avoiding centralization issues. Additionally, the close collaboration between validators, liquidity providers, and protocols in the PoL mechanism enhances the security and stability of the entire ecosystem, allowing the network to maintain high liquidity while ensuring fast transaction confirmation and ledger consistency.

2.1.3 Polaris EVM and EVM Compatibility

Polaris EVM is the key technology implemented by Berachain for EVM compatibility. It is a framework designed for creating EVM-compatible blockchains, running on top of the CometBFT consensus engine. Polaris EVM enables Berachain to run Ethereum smart contracts and interact with the Ethereum ecosystem through a series of technical means.

Polaris EVM allows Berachain to easily separate the EVM execution layer, enabling the development of stateful precompiles and custom modules. This feature empowers developers to create more efficient and powerful smart contracts on Berachain. For example, through custom modules, developers can optimize the functionality of smart contracts according to specific use cases, enhancing execution efficiency and flexibility. At the same time, stateful precompiles can accelerate the execution of common contract operations, reducing transaction processing time and costs.

EVM compatibility has had a profound impact on the developers and application ecosystem of Berachain. For developers, they can use existing Ethereum development tools and languages (such as Solidity) without the need to relearn a completely new technology stack, enabling them to develop and deploy smart contracts on Berachain. This greatly reduces the development threshold, attracting a large number of Ethereum developers to migrate to the Berachain platform, accelerating the development of its application ecosystem. From the perspective of the application ecosystem, EVM compatibility enables Berachain to reuse Ethereum’s extensive smart contract library and rich application resources, promoting the rapid development of various decentralized applications (DApps) on Berachain, covering multiple areas such as decentralized finance (DeFi), non-fungible tokens (NFTs), games, and providing users with a more diverse range of services and experiences.

2.2 Unique Three-Generation Token Model

2.2.1 BERA Token

BERA is the native token of Berachain, playing a crucial role in the network by mainly covering fuel fees and block rewards. As a tool for paying fuel fees, BERA is similar to gas tokens in other blockchains, compensating for the computational resources consumed during transactions. When users conduct transactions or execute smart contracts on Berachain, they need to pay a certain amount of BERA as a fee. This mechanism helps regulate network usage, prevent malicious attacks and resource abuse, and ensure the stable operation of the network. At the same time, BERA is distributed as block rewards to validators, incentivizing them to actively participate in network validation and maintenance work, ensuring the security and consistency of the blockchain. In this way, BERA plays an indispensable role in maintaining the health and vitality of the network, serving as an important incentive for user participation in network activities and validators to provide services.

2.2.2 BGT Governance Token

BGT is the governance token of Berachain, with unique non-transferable characteristics. This non-transferability design is intended to ensure that governance remains in the hands of users who truly contribute to the network and participate in the long term, avoiding arbitrary circulation and concentration of governance rights, and enhancing the fairness and stability of governance. Users mainly acquire BGT by providing liquidity on BEX (Berachain’s native decentralized exchange), lending HONEY, and providing HONEY in the bHONEY vault on Berps.

BGT plays a core role in on-chain governance. BGT holders have the right to participate in on-chain decision-making processes, such as voting on block rewards for staked assets and determining the allocation ratio of rewards for different staked assets, which directly affects the earnings of validators and liquidity providers, thus guiding the rational allocation of resources. They can also vote to select tokens that can be staked for network validation, which helps maintain asset diversity and security of the network. Through these governance activities, BGT holders can collectively shape the development direction of Berachain, ensuring that the network’s operation aligns with the overall interests of the community.

2.2.3 HONEY Stablecoin

HONEY is a stablecoin anchored to USDC on Berachain, with its value intended to stay close to 1 USDC. Users can mint HONEY by collateralizing other assets on the Berachain platform, providing users with a stable store of value and medium of exchange. In terms of medium of exchange, the stability of HONEY enables it to provide a reliable value scale in transactions within the Berachain ecosystem, reducing the risk of price fluctuations and facilitating smooth transactions. Particularly in DeFi applications, stablecoins form the foundation for many trading and financial operations, and the existence of HONEY provides a stable source of funding for various activities such as lending, trading, and liquidity provision.

In terms of ecological stability, HONEY plays an important supporting role. As a stable asset, it helps balance the value of assets within the ecosystem and reduce the impact of large fluctuations in cryptocurrency prices on the ecosystem. For example, when the market experiences severe fluctuations, users can convert other high-risk assets into HONEY to avoid risks, thus maintaining the liquidity and stability of the ecosystem. At the same time, the minting and burning mechanism of HONEY is related to the collateral assets, which also to a certain extent regulates the currency supply in the market, further enhancing the stability of the ecosystem.

2.3 The Meaning and Impact of Technological Innovation

Berachain’s technological innovation has had profound significance and impact on the blockchain industry in many aspects. In terms of addressing industry pain points, its PoL consensus mechanism effectively resolves the conflict between staking and liquidity in traditional PoS consensus mechanisms. Under traditional PoS mechanisms, a large amount of tokens being staked leads to a lack of liquidity, affecting the development of DeFi applications and the vitality of the ecosystem. PoL combines liquidity with network security, incentivizing users to provide liquidity, ensuring high liquidity of the network, promoting the prosperity of DeFi applications, and enabling blockchain to better serve various application scenarios in the financial sector.

The third-generation token model also has significant implications, separating gas token (BERA), governance token (BGT), and stablecoin (HONEY) to each fulfill different functions. This design addresses the liquidity loss issue caused by token staking, enhances the fairness and transparency of governance, provides a stable trading medium for the ecosystem, and strengthens the stability and sustainability of the ecosystem.

Based on the Cosmos SDK and implemented with Polaris EVM for EVM compatibility, Berachain’s scalability and interoperability have been greatly improved, reducing the entry barrier for developers and accelerating the development of the application ecosystem. These technological innovations have laid a solid foundation for the long-term development of Berachain, enabling it to stand out in the fierce competition of the blockchain market. With continuous improvement in technology and the sustained growth of the ecosystem, Berachain is expected to become an important force driving the development of the blockchain industry, leading the application and innovation of blockchain technology in more fields.

3. Development of the Berachain ecosystem

3.1 Application Scenarios and DApp Ecosystem

3.1.1 DeFi Applications

A batch of innovative DeFi applications has emerged on Berachain, with Gummi being a typical representative in the lending field. As a currency market leverage trading platform on Berachain, Gummi supports various asset formats such as ERC-20, ERC-721, LP Token, etc. Borrowers can use various assets like iBGT from Infrared and island from Kodiak on Berachain to establish isolated lending pools without permission, effectively isolating risks. Users’ lending experience on Gummi is highly autonomous, allowing them to customize and control lending risk management. They can borrow assets with a loan-to-value ratio (LTV) of up to 99% and hold positions with leverage of up to 100x. This high flexibility and powerful functionality provide users with diverse options for fund utilization and investment strategies, catering to users with different risk preferences and capital needs.

In terms of trading, Kodiak is the native liquidity center of Berachain, providing users with a unique trading experience. It addresses the issue of decentralized liquidity for BEX and proposes an automated liquidity management system called Islands. On Kodiak, users can experience something similar to Uniswap V3 and set their own liquidity range. After users provide liquidity to the pool, Kodiak dynamically adjusts to maintain the optimal price range, allowing users to manage their liquidity more accurately, improve capital utilization efficiency, and reduce trading costs. Currently, the Kodiak testnet has launched Swap, LP, and staking platform Token KDK, completing over 100,000 interactions and more than 10,000 transactions, demonstrating high user engagement and activity.

These DeFi applications have significant advantages on Berachain. Based on Berachain’s Proof of Liquidity (PoL) consensus mechanism, these applications can attract more liquidity providers to participate. In the PoL mechanism, liquidity providers can not only profit from the liquidity they provide but also earn additional income by delegating the received tokens to validators to indirectly participate in the network validation process, greatly increasing the motivation of liquidity providers. Berachain’s EVM compatibility allows these DeFi applications to reuse Ethereum’s rich development resources and smart contract libraries, reducing development costs and complexity, accelerating application development and deployment, and attracting more developers to build innovative DeFi projects on its platform.

3.1.2 Other Potential Application Areas

In the NFT field, Berachain has also shown great potential. Bong Bears is a representative NFT project in the Berachain ecosystem. This series was created by the founder of Berachain in August 2021, with a total of 100. It is a Rebase NFT. What sets it apart is that the previous NFT holders will receive airdrops of the next generation NFTs. After multiple Rebases, it has now produced 5 NFT series including Bond Bears, Boo Bears, Baby Bears, Band Bears, Bit Bears, etc. Due to its deep integration with Berachain, the Bong Bears series is expected to have airdrop rewards, with the current floor price reaching 112E. The floor price of the entire Rebase NFT collection ranges from 2.8E to 27.5E, demonstrating the market’s high recognition and value expectations.

In the gaming sector, although large-scale projects based on Blockchain have not yet emerged, with its high performance and innovative technical architecture, Berachain is expected to attract game developers. Berachain’s high transaction processing speed and low transaction costs can provide a smoother gaming experience for players, reduce transaction delays, and lower the costs for players to trade assets in the game. Its unique economic model and security mechanisms can also provide more reliable protection for the ownership and trading of game assets, such as game props and virtual land, which can be confirmed and traded in NFT form on Berachain, ensuring the rights of players.

In the social field, Berachain can provide decentralized solutions for social applications. Through blockchain technology, social applications can achieve autonomous control of user data and privacy protection, and users can decide how their data is used and shared. Social applications based on Berachain can also introduce tokenomics, incentivizing users to participate in social interactions. For example, users can earn token rewards by publishing high-quality content, participating in community governance, and other behaviors. This incentive mechanism can promote the activity and user stickiness of social platforms, creating a more fair and active social ecosystem.

3.2 Community Building and Participation

3.2.1 Community Size and Activity

Berachain has achieved significant results in community building, attracting a large number of users’ attention and participation. On social media platforms, Berachain has a huge fan base. As of [specific time], its Twitter account has nearly [X] thousand followers, who come from all over the world, covering different groups in the blockchain industry such as developers, investors, enthusiasts, etc. They follow the latest developments of Berachain on Twitter, participate in topic discussions, share their views and suggestions on the project, and form an active online communication atmosphere.

On the Discord platform, Berachain also has [X] thousand active members, where community members communicate technical issues, project progress, market trends, and more in different channels. They actively participate in various community activities such as technical lectures, AMA (Ask Me Anything), etc. In technical lectures, project team members and industry experts share the latest developments and use cases of blockchain technology, helping community members improve their technical skills; the AMA sessions provide community members with the opportunity to directly communicate with the project team, where they can ask the team questions about their concerns and obtain first-hand information.

The community forum of Blockchain is also very lively, with a large number of new posts published every day. Community members share their experiences and insights in using Berachain-related applications on the forum, make improvement suggestions, and discuss the future development direction of the project. Some technical enthusiasts also publish their analysis and research results on the technical architecture of Berachain on the forum, promoting technical exchanges and innovation within the community. These active community interactions not only enhance users’ sense of identification and belonging to Berachain but also provide valuable feedback and suggestions for the project’s development, driving the continuous improvement of the Berachain ecosystem.

3.2.2 Community Governance and Incentive Mechanism

Berachain adopts a unique community governance model, fully leveraging the power of community members to collectively drive the project’s development. The BGT governance token plays a central role in community governance. BGT holders have significant rights to participate in on-chain decision-making. They can vote on the block rewards for staked assets, determining the allocation ratio of rewards for different staked assets. This decision directly impacts the earnings of validators and liquidity providers, so BGT holders carefully consider various factors when voting to ensure the fairness and rationality of reward distribution, thereby guiding the rational allocation of resources.

BGT holders can also vote for the eligible staking tokens to decide which tokens can be used for staking and participating in network validation. This mechanism helps maintain the diversity and security of the network assets, avoiding risks caused by a single type of staking token. Through these governance activities, BGT holders can collectively shape the development direction of Berachain, ensuring that the network’s operation aligns with the overall interests of the community.

To encourage users to actively participate in the ecological construction, Berachain has designed a series of incentive mechanisms. In terms of liquidity provision, users can obtain BGT as a reward by providing liquidity on BEX (Berachain’s native decentralized exchange). These BGT not only give users governance rights, but also can earn additional income by delegating to validators. Users can also obtain BGT by lending HONEY and providing HONEY in the bHONEY vault on Berps. This incentive mechanism has attracted a large number of users to participate in liquidity provision, providing sufficient liquidity for the Berachain ecosystem and promoting the development of various DeFi applications.

In terms of community contribution, for those users who actively share knowledge, provide technical support, and participate in project promotion in the community, the Berachain community will give certain rewards, including BGT, BERA tokens, or other forms of incentives. These rewards are not only a recognition of user contributions, but also encourage more users to actively participate in community construction, forming a virtuous cycle and promoting the continuous prosperity and development of the Berachain ecosystem.

3.3 Partners and Ecological Cooperation

Berachain actively collaborates with other projects and institutions to expand its development space and enhance its influence through ecological cooperation. In terms of project collaboration, Berachain has partnered with Concrete, Lombard, and StakeStone to jointly launch the incentivized Boyco market reserve. Among them, the Berachain Boyco reserve insurance pool created by the collaboration between Concrete and Lombard provides users with the opportunity to maximize rewards before the mainnet and gain early access to Bera incentives, attracting a large number of users to participate and increasing the platform’s liquidity and user stickiness. The Berachain Vault launched by StakeStone aims to provide exclusive revenue services for one-stop Berachain reserves (Boyco reserve activities) and subsequent Berachain PoL (Proof of Liquidity) liquidity mining, further enriching users’ participation and revenue channels in the Berachain ecosystem.

Berachain also collaborates with Binance Web 3 Wallet to hold NFT events, leveraging Binance’s extensive influence and huge user base in the blockchain industry, Berachain can promote its NFT projects to more potential users, enhance project visibility and market acceptance. This collaboration not only brings a new NFT experience to Binance Web 3 Wallet users, but also injects new vitality into Berachain’s NFT ecosystem development, promoting the trading and circulation of NFT projects on Berachain.

Collaboration with investment institutions is also an important part of the development of the Berachain ecosystem. On April 20, 2023, Layer1 public chain Berachain completed a $42 million financing, led by Polychain Capital, with support from OKX Ventures, Hack VC, Dao5, Tribe Capital, Shima Capital, Robot Ventures, Goldentree Asset Management, former partners of Dragonfly Capital, Celestia founder Mustafa Al-Bassam, Tendermint co-founder Zaki Manian, and 20 other DeFi project founders. The participation of these well-known investment institutions and industry veterans not only provides Berachain with sufficient financial support for technology development, marketing, and ecological construction, but also brings rich industry resources and experience. Investment institutions recommend quality projects and partners for Berachain, helping it expand its business scope, while industry veterans provide valuable advice and guidance for Berachain’s strategic decision-making and technological development, empowering Berachain to grow rapidly in the competitive blockchain market.

4. Market Performance and Investment Analysis

4.1 Token Economic Model and Market Performance

4.1.1 Issuance and Circulation of BERA Tokens

The BERA token is the core economic element of the Berachain ecosystem. Its initial issuance is set at 5 billion tokens, a determination made by the project team after considering various factors such as market demand, ecosystem development goals, and long-term development plans. Setting a relatively large initial issuance aims to provide sufficient financial support for the early development of the project, attract more participants to enter the ecosystem, and lay the foundation for future market circulation and application scenarios.

In terms of distribution, the allocation ratio of each part has clear strategic significance.

1. 13.1% is reserved for future community incentive plans. This measure aims to continuously stimulate the enthusiasm and participation of community members, encourage community members to contribute to the development of the ecosystem through reward mechanisms, such as active participation in project promotion, technological innovation, community governance, and other activities.
2. 15.8% is allocated for community airdrops, which is an important means for the project team to give back to early supporters and attract new users. Through airdrops, the project can quickly expand its user base, increase the project’s visibility and market influence, and enhance the community members’ sense of identity and belonging to the project.
3. 16.8% is allocated to Big Bera Labs as a reward for core development and contributors, which helps incentivize the development team to continue investing in innovation and technological upgrades, ensuring that the project can continuously adapt to market changes and user needs, maintaining technological leadership. 20% is used for ecosystem research and development, providing technical support and innovative power for the long-term development of the project, supporting the team in exploring new application scenarios, optimizing existing technical architecture to enhance the performance and competitiveness of the entire ecosystem.
4. 34.3% is allocated to institutional investors, attracting professional investment institutions to participate, bringing the project sufficient funds, abundant industry resources, and professional investment advice, helping the project to obtain more favorable development conditions in the market competition.

As of April 11, 2025, according to Gate.io data, the market circulation of the BERA token is 107.48M BERA, accounting for 21.50% of the initial total supply. A lower circulation ratio means that the number of BERA tokens available for trading in the market is relatively limited, which may to some extent affect the token’s market liquidity. However, from another perspective, it also brings a certain expectation of scarcity to the market. With the development of the project, if more tokens enter the circulation market in the future, market liquidity will improve, but it may also put some pressure on the token price. If the project ecosystem can continue to thrive and the demand for BERA tokens keeps increasing, even if the circulation increases, the token price may be maintained stable or even driven up through the balance of supply and demand.

4.1.2 Market Price Trends and Influencing Factors

From the historical price trend, the BERA token has shown significant volatility since its launch. In the early stages of listing, due to the high market attention to the Berachain project and activities such as airdrops attracting a large number of participants, the market demand was strong, driving the rapid rise of BERA prices. However, a significant correction in prices followed. This is mainly because the market’s valuation of the project gradually returned to rationality, while factors such as high inflation rates and market selling pressure from the high proportion of private placement began to emerge.

High inflation rate is one of the important factors affecting the price of BERA. The annual inflation rate of BERA tokens is as high as 10% of the total supply, which means that the number of BERA tokens in the market will significantly increase every year. In the case where market demand does not grow synchronously, a large amount of additional token supply will put downward pressure on prices. Especially in the early stages of the project, when the circulation is relatively low, the impact of inflation is more significant, causing investors’ expectations of the value of BERA tokens to decrease, leading to a price decline.

High private placement allocation also brings continuous selling pressure to the market. More than 35% of BERA tokens were allocated to private placement investors, who may sell based on their investment strategy and market conditions after receiving the tokens. When there is a large amount of selling pressure in the market, the situation of oversupply can lead to price declines. The selling behavior of private placement investors not only directly affects the market price of BERA but also triggers concerns about the project’s future development in the market, further weakening investors’ confidence.

The incomplete launch of the PoL mechanism is also a key factor affecting the price of BERA. The PoL mechanism is the core competitiveness of Berachain, aiming to attract more liquidity providers to participate in the network and enhance the vitality and security of the ecosystem through a unique liquidity incentive mechanism. However, before the complete launch of the PoL mechanism, Berachain’s competitiveness in the market is relatively weak, unable to fully demonstrate its unique value. This has led to investor doubts about the project’s prospects, reducing the willingness to purchase BERA tokens, thereby negatively impacting the price. Once the PoL mechanism is successfully launched and operates effectively, it is expected to attract more users and funds into the ecosystem, increase the demand for BERA tokens, and drive up the price.

4.2 Financing Situation and Investor Confidence

Berachain has achieved significant results in its financing process, attracting participation from many well-known investment institutions. On April 20, 2023, Berachain completed a $42 million financing round led by Polychain Capital, with participation from OKX Ventures, Hack VC, Dao5, Tribe Capital, Shima Capital, Robot Ventures, Goldentree Asset Management, and many other institutions. At that time, the project was valued at $4.2 billion. This round of financing fully demonstrates the market’s recognition of the potential of the Berachain project. As the lead investor, Polychain Capital’s rich experience and professional vision in the blockchain investment field provide important reference signals for other investors, attracting many institutions to participate. This funding provides strong financial support for Berachain’s technological research and development, market promotion, and ecosystem development, driving the project’s rapid development in the early stages.

On April 12, 2024, the B round financing of Berachain increased to $100 million, led by Brevan Howard Digital and Framework Ventures. Existing investors such as Polychain Capital, Hack VC, and Tribe Capital continued to participate, bringing the project’s valuation to $1.5 billion. This round of financing further demonstrates Berachain’s growing attractiveness in the market. The new lead investors bring additional resources and strategic support to the project. Brevan Howard Digital and Framework Ventures, with their deep background in finance and blockchain, are expected to help Berachain expand its business scope and enhance its market influence. The continued follow-up investment from existing investors also demonstrates their strong confidence in the project’s development, believing that Berachain will achieve greater value growth in the future.

In the process of project development, investor confidence is not always stable. After the mainnet went live, a series of issues have impacted investor confidence. The high inflation rate makes investors worried that the actual value of the tokens will be continuously diluted, affecting investment returns. The high proportion of private placement allocation brings market selling pressure, leading to significant token price fluctuations, increasing investment risks. The staking mechanism was announced late and lacked transparency, triggering investors’ doubts about the project’s operational norms. The PoL mechanism is not fully live, which hinders the full display of the project’s core competitiveness, reducing investors’ expectations for the project’s future development. These issues have raised doubts among some investors about the prospects of Berachain, leading them to even choose to sell off their tokens, causing a decline in market prices.

As the project team actively takes measures to address issues, such as accelerating the development and launch progress of the PoL mechanism, strengthening communication with the community, and increasing the transparency of project operations, investor confidence is gradually being restored. The project continues to advance ecological construction, attracting more DApps to settle in, demonstrating good development potential, and providing strong support for the recovery of investor confidence.

4.3 Investment Risks and Opportunities

4.3.1 Risk Analysis

High inflation rate is one of the important risks faced by Berachain investment. With a 10% high inflation rate per year for the BERA token, it means that the token supply in the market will continue to increase rapidly. In the case of slow or stagnant market demand growth, a large amount of newly added token supply may lead to a situation of oversupply, thereby exerting severe downward pressure on the price of BERA. The value of BERA tokens held by investors may continue to shrink with the sustained inflation, and investment returns face greater uncertainty.

Private placement pressure is also a risk factor that cannot be ignored. Since over 35% of the BERA tokens are allocated to private placement investors, they may sell a large amount of tokens in the market for reasons such as capital recovery and investment strategy adjustments. This large-scale selling behavior will significantly increase the supply of BERA tokens in the market, disrupt the market supply and demand balance, trigger a sharp price drop. Private placement pressure may also trigger market panic, causing other investors to follow suit and sell off, further exacerbating the price decline, resulting in significant losses for investors.

Technical risks also exist. Although Berachain adopts innovative PoL consensus mechanism and advanced technologies based on Cosmos SDK, blockchain technology is still in a stage of continuous development and improvement. Various technical issues may arise in the actual operation of the PoL mechanism, such as security vulnerabilities, performance bottlenecks, etc. Once these issues occur, they will not only affect the normal operation of the Berachain ecosystem but also may lead to user asset losses, reduce user trust in the project, thereby affecting the project’s development prospects and the value of the BERA token. Interoperability with other blockchains may also be a concern for Berachain, which could limit its development potential within a larger blockchain ecosystem.

Regulatory risk is also a factor that Berachain needs to consider. The regulatory policies for the blockchain industry vary globally, and the regulatory environment is constantly changing. Some countries and regions may adopt strict regulatory measures on cryptocurrencies, such as restricting transactions and prohibiting issuance. If the regulatory policies in the region where the Berachain project is located or its main markets are unfavorable to blockchain projects, it may lead to operational restrictions, reduced user participation, and subsequently impact the project’s development and investment value. The uncertainty of regulatory policies also increases the difficulty for investors to predict future returns, thereby increasing investment risk.

4.3.2 Opportunity Analysis

The PoL mechanism will bring significant opportunities to Berachain. As the core innovation point of Berachain, once the PoL mechanism is successfully launched and effectively operated, it is expected to attract a large number of liquidity providers to participate. Under the PoL mechanism, liquidity providers can earn BGT governance tokens as rewards by providing liquidity, which can be used not only for on-chain governance but also for additional income by delegating to validators. This incentive mechanism can effectively stimulate the enthusiasm of market participants, injecting a large amount of liquidity into the ecosystem. With the increase in liquidity, various DeFi applications will be able to operate more efficiently, attracting more users and projects to join, and promoting the prosperity and development of the ecosystem. The prosperity of the ecosystem will further increase the demand for the BERA token, driving its price up and bringing lucrative returns to investors.

The ecological development is also an important opportunity for investment in Berachain. Currently, Berachain has an active community and a thriving DApp ecosystem. The active community provides strong support for the project, with community members actively participating in project promotion, testing, and feedback, helping the project continuously improve and perfect. The entry of numerous DApps brings rich application scenarios to the ecosystem, covering multiple fields such as DeFi, NFT, games, etc. The continuous expansion and improvement of these application scenarios will attract more users to use the Berachain platform, increasing the platform’s user stickiness and activity. As the ecosystem continues to grow, Berachain’s competitiveness in the blockchain market will continue to increase, and the value of the BERA token will also increase, providing investors with good investment opportunities.

The growing market demand also brings opportunities for Berachain. With the continuous popularization and application of blockchain technology, the market’s demand for blockchain platforms with high performance, high security, and low transaction costs is increasing. With its unique technical architecture and innovative concepts, Berachain can meet some of the market’s demands for blockchain platforms. In the DeFi field, Berachain’s high transaction processing speed, low transaction costs, and unique liquidity incentive mechanism enable it to provide users with better services. With the continuous increase in market demand for such services, Berachain is expected to stand out in the market competition, gain more market share, achieve rapid development, and thus create more value for investors.

5. Competitive Landscape Analysis

5.1 Analysis of main competitors

5.1.1 Ethereum (Ethereum)

As the most well-known EVM blockchain, Ethereum has a wide ecosystem of smart contracts and decentralized applications (DApps), making it a significant competitor to Berachain in the blockchain field. In terms of performance, Ethereum adopts a Proof of Stake (PoS) consensus mechanism, resulting in relatively slow transaction processing speed with limited transactions per second (TPS). During network congestion, transaction confirmation times are longer, and transaction fees (Gas fees) are higher. On the other hand, Berachain is built on a Proof of Liquidity (PoL) consensus mechanism, aiming to attract more liquidity providers to participate in the network through a unique liquidity incentive mechanism. In theory, this can improve transaction processing speed, reduce transaction costs, and enhance network performance.

From an ecological perspective, Ethereum has accumulated a large developer community and rich application resources after years of development, covering multiple fields such as finance, gaming, social, and identity verification. It has many well-known DApps, such as Uniswap and OpenSea. The maturity and diversity of its ecosystem are currently unmatched by Berachain. Although Berachain has attracted a lot of attention in a short period of time, with an active community and a certain number of DApps, there is still significant room for development in terms of the breadth and depth of its ecosystem.

In terms of application scenarios, Ethereum, with its first-mover advantage and wide recognition, occupies an important position in various application scenarios, especially in the DeFi field, being the preferred platform for many projects. Berachain also regards DeFi as a key development direction, attempting to build a unique competitive advantage in the DeFi field through innovative mechanism design to attract more DeFi projects and users. However, there is still a gap in the richness of its application scenarios and user base compared to Ethereum.

5.1.2 Binance Smart Chain (BSC)

Binance Smart Chain is a blockchain compatible with EVM, known for providing low-cost transactions and smart contract functionality, and is also a strong competitor of Berachain. In terms of transaction costs, BSC’s transaction fees are relatively low, which can attract users and projects sensitive to transaction costs. Although Berachain aims to reduce transaction costs through the PoL mechanism, in actual operation, its transaction costs are affected by various factors, such as network congestion, token economic models, etc. Currently, compared with BSC, it does not have a clear advantage in transaction cost.

In terms of smart contract functionality, BSC is compatible with EVM, allowing developers to reuse Ethereum’s development tools and smart contract libraries, reducing the development threshold. Berachain has also achieved EVM compatibility based on Polaris EVM, providing a similar smart contract development and execution environment as BSC. However, in terms of smart contract use cases and developer community size, due to its strong resources and wide influence relying on Binance exchange, BSC has more application projects and developers. Berachain needs to further expand its developer community, increase smart contract application scenarios, to enhance its competitiveness in this aspect.

5.1.3 Avalanche (AVAX)

Avalanche is a high-performance platform that supports EVM compatibility and custom subnets, competing with Berachain in the blockchain market. In terms of scalability, Avalanche adopts a unique consensus mechanism and subnet architecture, enabling high throughput and fast transaction confirmation, and has strong scalability. Berachain, built on the Cosmos SDK, is also striving to improve its scalability through the PoL consensus mechanism and modular design, but it still needs time to verify and improve its actual performance and market recognition compared to Avalanche.

In terms of EVM compatibility, Avalanche supports EVM, allowing developers to deploy Ethereum smart contracts on its platform, with a certain level of interaction with the Ethereum ecosystem. Berachain also achieves EVM compatibility through Polaris EVM, enabling the execution of Ethereum smart contracts. However, Avalanche may have certain advantages in the depth and breadth of EVM compatibility, as well as the integration with the Ethereum ecosystem. Berachain needs to continuously optimize its EVM compatibility, strengthen interaction with the Ethereum ecosystem, in order to attract more projects and developers based on Ethereum.

5.1.4 Polygon (MATIC)

Polygon is a Layer 2 solution that provides scalability and interoperability, supporting the Ethereum ecosystem and competing with Berachain in the field of Layer 2 blockchain. In terms of Layer 2 solutions, Polygon achieves high throughput and low transaction costs through technologies such as sidechains, Plasma, and ZK Rollups, effectively alleviating the congestion issues on the Ethereum mainnet and providing strong scalability support for the Ethereum ecosystem. While Berachain is a Layer 1 blockchain that also considers scalability in its design, it differs from the specialized Layer 2 solution Polygon in the way and effectiveness of enhancing the scalability of the Ethereum ecosystem.

In terms of interoperability, Polygon is committed to achieving interoperability with Ethereum and other blockchains. Through its technical architecture, it can realize the transfer and sharing of assets and data between different blockchains. Berachain, built on Cosmos SDK, has certain potential for cross-chain interoperability and can interact with other Cosmos SDK-based blockchains through the IBC protocol. However, in terms of interoperability with the Ethereum ecosystem and other mainstream blockchains, Polygon has achieved some results and has a wider range of partners and use cases. Berachain needs to further strengthen its interoperability development to enhance its competitiveness in this area.

5.2 The competitive advantages and differentiation of Berachain

Berachain has various competitive advantages and differentiated features. Its innovative PoL consensus mechanism is a major core advantage, effectively resolving the conflict between staking and liquidity in traditional PoS consensus mechanisms by combining liquidity with network security, attracting more liquidity providers to participate in the network, enhancing the vitality and security of the ecosystem, a unique mechanism that other competitors do not possess.

Berachain’s third-generation token model is also innovative, separating the gas token (BERA), governance token (BGT), and stablecoin (HONEY), each with different functions. This enhances the fairness and transparency of governance, provides a stable trading medium for the ecosystem, strengthens the stability and sustainability of the ecosystem, and differs from the common single-token or dual-token models of other blockchain projects.

Berachain’s unique community culture is also one of its competitive advantages. The project originated from the Bong Bears NFT project and has attracted a lot of attention from cryptocurrency users through its unique community building approach, forming an active and highly loyal community. Community members actively participate in the development and promotion of the project, providing strong support, and this community-driven development model has a certain uniqueness in the blockchain field.

Conclusion

As an emerging Layer 1 blockchain, Berachain has a unique technical architecture and innovative mechanism. Based on the Cosmos SDK, it adopts the PoL consensus mechanism and a three-generation token model, aiming to address liquidity, security, and governance issues in the blockchain field, providing a potential platform for DeFi applications. Berachain has an active community and a continuously developing DApp ecosystem, which has also gained certain attention and investment in the market.