What is Berachain?

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Berachain is emerging as one of the most innovative blockchains in the decentralized finance (DeFi) space, capturing attention with its unique architecture, community-driven origins, and groundbreaking consensus mechanism. Built on the CosmosSDK and leveraging Tendermint’s high-performance consensus engine, Berachain introduces a novel approach to liquidity, governance, and capital efficiency. This article explores what sets Berachain apart, how it works, and why it's generating significant buzz in 2025.

Origins of Berachain: From NFTs to Blockchain

Berachain traces its roots back to the Bong Bears NFT collection, launched around August 2021. What began as a meme-inspired digital art project has evolved into a full-fledged blockchain protocol. The transition from an NFT community to a DeFi ecosystem reflects a growing trend where strong online communities leverage their influence to build sustainable decentralized platforms.

Following the success of multiple NFT drops—including Baby Bears, Band Bears, Boo Bears, and Bit Bears—the team behind Bong Bears announced plans to launch a native blockchain protocol. This move mirrors strategies used by popular meme coins like Dogecoin and Shiba Inu, which harnessed cultural momentum to cultivate robust user bases and expand into broader financial ecosystems.

👉 Discover how blockchain innovation is reshaping digital communities today.

Why Is Berachain Gaining Hype in 2025?

One key driver behind Berachain’s rising prominence is its strategic partnership with Olympus DAO, a major decentralized autonomous organization known for treasury-backed protocols. Olympus plans to invest $500,000 from its treasury into Berachain’s initial round, securing 1% of the network’s stake. An additional 1% will be granted through strategic collaboration, giving Olympus a total of 2% ownership.

This endorsement signals strong confidence in Berachain’s long-term viability and technological foundation. It also highlights the protocol’s appeal to established players in the DeFi world who are seeking next-generation solutions for liquidity management and capital efficiency.

How Does Berachain Work?

Berachain operates using the CosmosSDK, a modular framework for building scalable and interoperable blockchains. It uses Tendermint as its native consensus engine—a battle-tested proof-of-stake mechanism known for fast finality and high throughput.

What truly differentiates Berachain is its Proof-of-Liquidity (PoL) consensus model. Unlike traditional proof-of-stake systems that require staking a chain’s native token, PoL allows users to stake high-quality assets such as blue-chip DeFi tokens and Layer 1 stablecoins directly with validators. These deposits are held in consensus vaults, which determine validator voting power and reward distribution.

This system not only enhances security but also aligns incentives across users, validators, and applications—creating a more resilient and capital-efficient network.

Solving Fragmented Liquidity

A major challenge in DeFi is fragmented liquidity, where capital is spread thin across multiple platforms and tokens, reducing efficiency and increasing slippage. Berachain tackles this issue head-on through two core innovations:

These components work together to create a self-sustaining economy that rewards participation while maintaining stability and scalability.

The Tri-Token Architecture

Berachain employs a three-token model, a departure from conventional single or dual-token blockchains like Ethereum or Terra. Each token serves a distinct economic function, ensuring separation of concerns and promoting fair governance.

1. $BERA – The Gas Token

$BERA functions as Berachain’s native gas token, used for transaction fees and block rewards. Like other Layer 1 tokens, BERA is inflationary, with an estimated annual issuance rate of 10% post-launch.

The key innovation lies in how BERA interacts with governance: users can stake BERA to earn $BGT, the non-transferable governance token. There are two staking options—pure BERA staking or yield-bearing BERA derived from other staked assets.

Importantly, all collected gas fees are burned, creating deflationary pressure that may counterbalance inflation over time.

2. $BGT – The Governance Token

$BGT (Bera Governance Token) is a non-transferable NFT awarded to long-term participants who stake BERA. This design prevents governance centralization by wealthy actors and ensures that decision-making power remains with active contributors.

Holders of $BGT participate in key network decisions, including:

Additionally, BGT holders earn protocol-generated fees paid out in $HONEY, the native stablecoin—adding tangible value to governance participation.

3. $HONEY – The Native Stablecoin

$HONEY is Berachain’s overcollateralized stablecoin, pegged to the US dollar. Users generate HONEY by depositing various assets as collateral through DeFi activities.

HONEY plays several critical roles:

To maintain its peg, HONEY relies on consistent demand and adjustable interest rates during minting. Its integration into core financial operations ensures ongoing utility and stability.

Proof-of-Liquidity: A New Consensus Paradigm

Berachain’s Proof-of-Liquidity (PoL) is a Sybil-resistant mechanism that replaces traditional token-based staking with asset-backed liquidity provision.

Here’s how it works:

Because PoL doesn’t require staking native tokens (like BERA or HONEY), it lowers barriers to entry and encourages broader participation. Validators are incentivized to attract high-quality liquidity, fostering a competitive yet secure environment.

This model also supports cross-chain interoperability via Cosmos’ IBC protocol, enabling seamless asset transfers between chains.

👉 See how next-gen consensus models are redefining blockchain security.

Governance Model: Power to Active Participants

Berachain’s governance revolves around $BGT, ensuring that only committed users shape the network’s future. Since BGT cannot be bought or sold—it must be earned through staking—it resists manipulation by short-term speculators.

Decisions made via BGT voting include:

By tying governance rights to sustained engagement rather than wealth accumulation, Berachain promotes a healthier, more democratic ecosystem.

The Growing Berachain Ecosystem

Even before mainnet launch, Berachain has attracted a vibrant ecosystem of DeFi projects:

These partnerships signal strong developer interest and position Berachain as a hub for advanced DeFi innovation.

Berachain V2: Scaling Performance and Security

On June 13, 2024, Berachain unveiled Berachain V2, a major upgrade enhancing performance, scalability, and economic security.

Key Enhancements in V2

V2 maintains the core tri-token model and Proof-of-Liquidity mechanism while reinforcing BERA’s utility and BGT’s economic role.

👉 Learn how modular blockchain upgrades are accelerating DeFi evolution.

Frequently Asked Questions (FAQ)

Q: Is Berachain an EVM-compatible blockchain?
A: Yes, Berachain supports EVM-compatible smart contracts, allowing developers to easily port dApps from Ethereum and other EVM chains.

Q: Can I buy $BGT directly on exchanges?
A: No. $BGT is a non-transferable NFT earned solely by staking $BERA—it cannot be purchased or traded.

Q: What makes Proof-of-Liquidity different from Proof-of-Stake?
A: While PoS requires staking native tokens, PoL allows users to stake high-value external assets like ETH or stablecoins, improving capital efficiency and lowering entry barriers.

Q: How does Berachain handle scalability?
A: Through CosmosSDK modularity, increased validator count (256 in V2), and optimized execution client diversity, Berachain achieves high throughput and low latency.

Q: Is HONEY a decentralized stablecoin?
A: Yes, HONEY is overcollateralized and minted through user-driven DeFi interactions, making it fully decentralized and resistant to centralized manipulation.

Q: When will Berachain mainnet launch?
A: Mainnet is expected within several months from mid-2024, with testnet already active and ecosystem projects preparing for deployment.

Conclusion

Berachain represents a bold step forward in blockchain design—combining community roots with cutting-edge technology. Its tri-token economy, Proof-of-Liquidity consensus, and strong ecosystem partnerships position it as a serious contender in the future of DeFi.

With the launch of Berachain V2, the network demonstrates a clear commitment to scalability, fairness, and long-term sustainability. As development progresses and mainnet approaches, Berachain could redefine how we think about liquidity, governance, and capital efficiency in decentralized systems.