Discussion on the Characteristics of the Berachain Ecosystem and Overview of Core Projects Before Coin Issuance

Introduction

Berachain is a Layer 1 network featuring the PoL(Proof of Liquidity) consensus mechanism, aligning the interests of validators, liquidity providers, and the protocol. Currently, Berachain is conducting its second test network, "bArtio Testnet," to address the issues identified in the first test network.

Many ecological protocols have already been deployed on the bArtio Testnet version. 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 testing Berachain's PoL mechanism has exceeded 2.38 million. Although it is still in the test network phase, these figures indicate a high level of market interest in Berachain and its ecosystem.

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

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

This article aims to explore various areas of the Berachain ecosystem to effectively lower the barriers to user participation. We will discuss projects that have outstanding performance 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. BeraSwap will support smooth liquidity trading within the ecosystem and ensure the effective operation of the PoL mechanism. Given the existence of BEX, other DEXs preparing to launch on Berachain are also gearing up with 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 Berachain incubation project "Build a Bera". In addition to supporting BEX's Uniswap v2-style functionality, which averages liquidity distribution across the entire price range (, Kodiak also offers a CLAMM ) concentrated liquidity automated market maker ( function similar to Uniswap v3, 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 that helps users automatically reset and balance the CLAMM range, reducing the hassle of managing liquidity supply positions. This feature utilizes BEX to rebalance liquidity, thereby establishing a complementary rather than competitive relationship.

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

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

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)# 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, which can collect user orders within a specific period and execute them at the same price.

• Dreampad: a Launchpad protocol that provides incubation and financing opportunities for projects ready 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 functions such as preventing bot sniping and refunding participating users if the 24-hour fundraising target is not reached.

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 who delegate $BGT.

In addition, Honeypot Finance releases the accumulated $BGT to the $HPOT liquidity pool to enhance the liquidity of $HPOT. The protocol also plans to increase the value of the token by using node operation revenue to buy and burn $HPOT, 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 also other protocols advocating for efficient and convenient trading functions preparing for the Berachain mainnet, including BurrBear, which supports capital-efficient trading by aggregating more than three underlying assets with similar prices similar to Curve Finance, liquidity aggregator OogaBooga, and cross-chain abstract trading protocol Shogun.

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) 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 coin authorization structure, general users who do not operate nodes will not be able to receive network rewards.

To address this issue, 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 a core infrastructure of PoS networks.

In contrast, while the operation of nodes in Berachain requires 69,420 $BERA, its structure allows liquidity providers to earn network rewards calculated in $BGT as well as 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 built liquidity staking into the network protocol.

Although the operation of nodes on the Berachain mainnet requires 250,000 $BERA, the structure of Berachain is designed to distribute $BGT rewards and interest to liquidity providers. Therefore, apart from the different methods and sequences, Berachain essentially builds liquidity staking into the network protocol.

However, in Berachain, existing protocols can only provide rewards and obtain voting rights by collaborating with validators, or by operating their own nodes like Kodiak and Honeypot Finance 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 decide 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.

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)# 3.1. Infrared

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

The Infrared-operated vaults can accept LP tokens from the liquidity pool, generating $BGT interest rates while running network nodes. When users deposit LP tokens into these vaults, Infrared will use these tokens to generate $BGT, and users can claim $iBGT( that has been liquidated, proportional to the LP tokens they deposited.

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

• Stake in Infrared to receive rewards generated by the nodes.

• Use in other DeFi protocols

• Sell for profit

Therefore, Infrared centralizes and distributes the rewards generated by the PoL mechanism to fewer $iBGT stakers by converting $BGT into a liquid token, while also helping other protocols in the Berachain ecosystem to incorporate $iBGT into their protocols, allowing their platforms to provide higher returns for their users. Additionally, 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 feature is Kodiak's Island Pool, which we also introduced slightly in the aforementioned DEX field. After the mainnet launch, the Infrared plan to launch Kodiak's Island Pool ) has been operating 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.

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

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

(# 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 liquidity pools registered with BeraPaw, and issue $LBGT as the settlement token for $BGT.

The governance token of BeraPaw is $PAW, and users can use the $BGT they hold from BeraPaw to vote on which liquidity pools should receive $BGT. Node operators distribute the reward income generated from staking $BGT to 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. 1) receives rewards and 2( votes for the $BGT emission pool. Through 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 about to officially launch on Berachain. While these protocols not only allow for more derivative products but also provide users with more ways to engage, they also make the ecosystem more complex. In the Berachain network, the power and status of nodes will be proportional to the amount of $BGT delegated, and the liquidity staking protocols that provide $BGT liquidation functions are expected to be adopted by many users and protocols, becoming core infrastructure.

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) lending

Berachain also has a native lending protocol called BEND, which offers 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 earn interest, but will generate $BGT rewards when borrowing $HONEY.

Through this structure, BEND strengthens Berachain's tri-token economic structure, generating basic interest for $HONEY while increasing lending through $BGT.