Berachain Launches Proof of Liquidity Mechanism with Token Surge
In a major milestone for the network, Berachain, a bear-themed layer-1 blockchain, went live with rewards for its proof of liquidity consensus mechanism on Monday. A day after the launch, the BERA token has gained 14%, according to CoinGecko, and broken into the top 100 cryptocurrencies by market capitalization.
Proof of liquidity is a variation of the proof of stake consensus mechanism used on Ethereum. It uses two tokens in BERA for gas and network security as well as BGT for governance and rewards. Validators stake BERA so they can propose blocks and earn rewards in BGT, which then get distributed to reward vaults.
Validators supply the liquidity to these reward vaults so that other users can stake assets, like BERA, and earn BGT rewards. For supplying the liquidity, validators are provided with a receipt token which can also be staked into reward vaults—thus creating aligned incentives to secure the network via staking. This feature went live on Monday, opening 37 reward vaults and starting the distribution of BGT across the ecosystem.
BGT, the governance token, can be used to vote on proposals.
Later this week, a second batch of reward vault whitelist requests will be voted on. The network claims the first batch were selected based on “economic value, security, and alignment with Berachain’s ecosystem.”
Clearly, the market reacted well to the news as the BERA token climbed 14% on the day and 30% on the week, according to CoinGecko data. That pushed the token as high as $8.03 earlier this morning. As of this writing, BERA is changing hands for $7.89 and still the 100th largest cryptocurrency by market cap at $858 million.
“This marks a major step in Berachain’s governance evolution,” pseudonymous Berachain founder Homme Bera wrote in a blog post. “[As we are] moving from a limited launch within native BEX pools to a more open, application-first ecosystem where projects can now drive sustainable growth through [proof of liquidity].”
Berachain launched its mainnet in February, air dropping $1.17 billion worth of BERA tokens to users who participated in its pre-launch initiatives. However, this was a fairly limited launch with only its Berachain native decentralized exchange (also referred to as BEX) liquidity pools available to deposit assets into.
The launch of the first batch of reward vaults is a significant step in what the network is branding as the official launch of proof of liquidity.
“This is just the beginning,” Homme Bera said, explaining that by the end of the week a second batch of reward vaults will have been reviewed. “With [proof of liquidity] live and governance scaling, dapps now have a permissionless way to attract liquidity and users, while BGT holders ultimately dictate where incentives flow.”
Edited by Stacy Elliott.