Discussion of Berachain Ecosystem Features and Overview of Core Projects Before Issuing Coins

Introduction

Berachain is a Layer 1 network characterized by the PoL (Proof of Liquidity) consensus mechanism, aligning the interests of validators, liquidity providers, and the protocol. The second testnet "bArtio Testnet" is currently underway to address the issues identified in the first testnet.

Many ecological protocols have been deployed on the bArtio Testnet. As of January 2nd, according to the Berachain official website, a total of 234 protocols are participating in the bArtio Testnet, and the cumulative number of wallets participating in the testing of Berachain's PoL mechanism has exceeded 2.38 million, indicating a high level of market attention to Berachain and its ecosystem.

Starting from the end of 2024, the founder of Berachain, Smokey The Bera, has recently introduced Boyco through a tweet, hinting that "Q5 will happen before April," indicating that the mainnet launch is imminent. This has also attracted new and old users to join the ecosystem.

However, to participate in the Berachain ecosystem, one must understand their PoL mechanism. Before the mainnet launch, the various complex financial products launched by protocols to gain an advantage in the PoL mechanism have created a significant entry barrier for new users.

This article aims to explore various fields of the Berachain ecosystem to effectively lower the barriers to user participation. We will discuss projects that have excelled in various fields and detail how each protocol utilizes the PoL mechanism.

DEX

Berachain has a native DEX called BEX, which will be launched on the mainnet as BeraSwap. It supports smooth liquidity trading within the ecosystem and ensures the effective operation of the PoL mechanism. In light of the existence of BEX, other DEXs that are preparing to launch on Berachain are also preparing various more convenient and efficient services and strategies to effectively compete with BEX in order to attract users and liquidity.

2.1. Kodiak

Kodiak is a DEX that stands out from the incubation project "Build a Bera" of Berachain. In addition to supporting BEX's Uniswap v2 style feature ( that averages liquidity distribution across the entire price range ), Kodiak also offers a feature similar to Uniswap v3's CLAMM ( concentrated liquidity automated market maker ), allowing liquidity providers to set and concentrate liquidity within a specific range.

Users can provide liquidity in a narrow range through the CLAMM pool to farm $BGT more effectively. Additionally, Kodiak also offers an Island feature to help users automatically reset and balance CLAMM ranges, reducing the hassle of managing liquidity supply positions. This feature uses BEX to rebalance liquidity, thus establishing a complementary rather than competitive relationship.

Moreover, due to the customizability of liquidity ranges, the tokens of CLAMM liquidity positions are often difficult to use by other protocols. However, Kodiak standardizes users' CLAMM liquidity positions through the Island feature, allowing these LP tokens to be used in other protocols, promoting more flexible and diverse ecological gameplay.

Before the mainnet launch, Kodiak has collaborated with many projects in the Berachain ecosystem, establishing itself as a core infrastructure. They also operate their own Berachain nodes as validation nodes, and as of January 3, they have received the second highest BGT authorization in the bArtio Testnet.

2.2. Honeypot Finance

Honeypot Finance is a protocol that supports all aspects of the token lifecycle, from issuing to providing liquidity and effective trading, composed of the following sub-protocols:

• Henlo DEX: A DEX specifically designed to protect users from MEV attacks, offering limit orders and Batch-A2MM functionality, capable of collecting user orders within a specific period and executing them at the same price.

• Dreampad: a Launchpad protocol that provides incubation and financing opportunities for projects preparing to launch on Berachain, while ensuring fair token issuance and distribution.

• Pot2Pump: A meme coin issuance platform that provides a safer environment for meme coin issuance and trading, featuring functionalities such as preventing bot sniping and refunding participating users if the fundraising goal is not met within 24 hours.

Like Kodiak, Honeypot Finance also plans to operate as a validator after the mainnet launch, offering its governance coin $HPOT as a delegation reward to users delegating $BGT.

In addition, Honeypot Finance utilizes the accumulated $BGT to release to the $HPOT liquidity pool, thereby enhancing the liquidity of $HPOT. The protocol also plans to increase the token value by purchasing and burning $HPOT with the income from node operations, while retaining the reward value paid to $BGT delegators, further solidifying the liquidity of $HPOT.

In addition to the aforementioned Kodiak and Honeypot Finance, there are other protocols advocating for efficient and convenient trading functions that are preparing for the Berachain mainnet, including BurrBear, which supports capital-efficient trading by aggregating more than three similar underlying assets ( similar to Curve Finance ), the liquidity aggregator OogaBooga, and the cross-chain abstract trading protocol Shogun.

Liquidity Staking

In a typical PoS network, network rewards are distributed to validators who hold a certain amount of tokens and operate nodes. Therefore, if the network itself does not have a native token authorization structure, general users who do not operate nodes will not be able to receive network rewards.

To solve this problem, liquidity staking protocols distribute rewards by accepting the staking of native tokens and operating delegated nodes, allowing general users to participate in network staking. These protocols also issue LP tokens to stakers as proof of how many native tokens they hold, thereby enhancing the liquidity of the ecosystem. Through these functions, liquidity staking protocols have also become core infrastructure of PoS networks.

In comparison, although Berachain's node operation requires 69,420 $BERA, its structure allows liquidity providers to earn network rewards calculated in $BGT and liquidity provision interest when they deposit the liquidity tokens obtained from the ecological protocol into Berachain. Therefore, aside from the different methods and sequences, Berachain has essentially integrated liquidity staking into the network protocol.

However, in Berachain, existing protocols can only provide rewards and gain voting rights by collaborating with validators, or, as demonstrated by Kodiak and Honeypot Finance, by operating their own nodes to establish a self-sustaining flywheel model to kickstart their liquidity pools.

In this context, Berachain's liquid staking protocol will provide the voting rights to determine the Emission of $BGT( and the redemption function of ). This allows Berachain ecosystem projects to incorporate the liquidated $BGT into their protocol mechanisms without needing to negotiate with validators or nodes. In other words, this makes it easier for ecosystem protocols to adopt a structure that closely integrates the PoL mechanism.

3.1. Infrared

Infrared is a liquidity staking protocol co-incubated with Kodiak through Berachain's "Build a Bera" program.

The storage pool operated by Infrared can accept LP tokens from the liquidity pool, generating $BGT interest rates while running network nodes. When users deposit LP tokens into these storage pools, Infrared will use these tokens to generate $BGT, and users can claim $iBGT( liquidated $BGT) proportional to their deposited LP tokens.

Users can utilize the received $iBGT in the following ways:

• Stake in Infrared to receive rewards generated by the node
• Use in other DeFi protocols
• Sell for profit

Therefore, Infrared concentrates and distributes the rewards generated by the PoL mechanism by converting $BGT into a liquid token, benefiting fewer $iBGT stakers, while also helping other protocols in the Berachain ecosystem to incorporate $iBGT into their protocols, allowing their platforms to offer higher returns to their users. In addition, Infrared plans to launch new features that will enable them to receive and liquidate the $BERA needed for node operation while running nodes and distributing profits.

The best example of effectively utilizing the Infrared function is Kodiak's Island Pool, which we briefly introduced in the aforementioned DEX field. After the mainnet launch, the Infrared plan to launch Kodiak's Island Pool( has been operational on the testnet), allowing users to use Kodiak's CLAMM for more efficient $iBGT farming, and the received $iBGT can be restaked in Infrared or re-deposited into Kodiak's $iBGT/$BERA Island Pool for more $iBGT farming. Of course, users can also choose other gameplay within the ecosystem.

With the interconnectivity of this protocol and effective ecological gameplay, Infrared has garnered significant attention from many users, currently accepting the most $BGT delegation in the bArtio Testnet. Additionally, many ecological projects have also partnered with Infrared and plan to launch various derivative products, indicating that Infrared will become the most important infrastructure after the mainnet launch.

Meanwhile, the specific details regarding how Infrared will use delegated $BGT to select the Emission of $BGT have not been made public. Therefore, it will be quite important to closely monitor whether Infrared will implement these processes in a decentralized manner and to whom it will grant voting rights for its held $BGT.

3.2. BeraPaw

BeraPaw is also a liquidity staking protocol, but they do not run their own nodes; instead, they operate a treasury between different nodes and the liquidity pools registered in BeraPaw, issuing $LBGT as the settlement token for $BGT.

The governance token of BeraPaw is $PAW. Users can vote on which liquidity pools should receive $BGT using the $BGT held by BeraPaw. Node operators distribute the reward income generated from staking $BGT to the holders of $LBGT through this method.

The structure adopted by BeraPaw divides the use of the $BGT token into two types of tokens: $LBGT and $PAW, where 1) receives rewards and 2) votes for the $BGT emission pool. With this structure, users and protocols using $PAW tokens for $BGT Emission voting can exercise more voting power with relatively less capital. Therefore, protocols seeking initial liquidity in the Berachain ecosystem are expected to actively utilize $PAW to generate $BGT rewards for their liquidity pools.

The above are two liquidity staking protocols that are set to officially launch on Berachain. While these protocols not only allow for more derivative products but also provide users with more gameplay options, they also make the ecosystem more complex. In the Berachain network, the power and status of nodes will be proportional to the amount of delegated $BGT, and the liquidity staking protocols that provide $BGT liquidation functions are expected to be adopted by many users and protocols, becoming core infrastructure.

Lending

Berachain also has a native lending protocol BEND, offering the following features:

• Use $WBTC and $WETH as collateral to borrow $HONEY
• Deposit $HONEY

Unlike typical lending protocols, BEND has two notable features: 1) $HONEY cannot be used as collateral, and deposits of 2) $WBTC and $WETH do not accrue interest, but borrowing $HONEY will generate $BGT rewards.

Through this structure, BEND strengthens Berachain's triple token economic structure, generating basic interest for $HONEY while increasing lending demand through $BGT, enriching the liquidity of the ecosystem. Users can also execute $BGT leveraged farming by repeatedly exchanging borrowed $HONEY back to $WETH, $WBTC, and depositing them into BEND.

Next, we will take a detailed look at several major lending protocols that are set to launch on Berachain and the features offered by each platform.

4.1. BeraBorrow

BeraBorrow is an over-collateralized stablecoin issuance protocol that allows users to mint $NECT stablecoins. It not only permits common assets such as $BERA and $HONEY, but also allows BEX and Berps LP tokens as well as Infrared's $iBGT as collateral.