What is BeraChain?
While everyone analyzes every dollar that flows through ETF funds, let’s take a break from Bitcoin and check what project has recently appeared on the market. We are talking about BeraChain, which launched its test network. Why is this project interesting? What does it offer, how does it work, and why is there great interest among many?
Let’s start by answering where all the enthusiasm surrounding this project comes from.
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Of course, this is about a potential airdrop. The BeraChain project collected as much as USD 42 million in funding in April 2023, at a valuation of USD 420.69 million. The launch of the test network, which took place on January 11, immediately attracted hundreds of thousands of addresses (not “users”) and a massive spam of transactions from people counting on the drop of tokens to reach those testing the network.
Although this may be the case, it is worth knowing that BeraChain is also a project of the Cosmos ecosystem, built using the Cosmos SDK, which means that perhaps some of the tokens from a possible airdrop will go to those staking various tokens in this ecosystem.
Additionally, there are four anonymous creators behind the project, three of whom created the Bong Bears “rebase NFT” project in 2021 and subsequent collections whose tokens went to the owners of the primary collection. The airdrop, if any, will probably also go essentially to holders of these non-fungible tokens.
The article does not constitute investment advice. Always research the project and be aware of the risks, especially for new and unproven projects.
What is BearChain?
BeraChain is an Ethereum Virtual Machine (EVM)-compatible layer-one chain project built using Cosmos SDK tools.
What distinguishes this chain from other L1 projects is the Proof of Liquidity consensus mechanism it uses, which is similar in its operation to the DeFi project – Curve Finance.
The project focuses on DeFi solutions and wants to solve some problems noticed by the team with its ideas. Another matter is whether they will solve anything, whether these problems exist, and whether new ones will appear in BeraChain.
Three Bera tokens
BeraChain will have two different tokens, separating the staking and fee-covering functions. The network’s native stablecoin will also appear immediately.
I will describe the relationships between these tokens in the next section, but let’s mention what tokens they are:
- BERA is a token used to cover network fees.
- BGT is a non-transferable management token delegated to validators (can be burned at a 1:1 ratio for BERA).
- HONEY – stablecoin loosely tied to the price of $1.
Proof of Liquidity
The consensus BeraChain uses is CometBFT (a fork of Tendermint), used extensively in Cosmos, but its mechanism differs from Proof of Stake, which is used in this ecosystem.
Proof of Liquidity is also about staking and delegation, so it is Proof of Stake but with slightly different rules. These other rules include the previously mentioned tokens responsible for network security, gas fees, and implementing systems known from Curve.
How does this mechanism work?
Users delegate BGT tokens to validators. They can only be obtained through specific activities supporting the Bera ecosystem’s fluidity. These activities include providing liquidity to the pool of the network’s native AMM exchange called BEX and lending to HONEY.
The amount of tokens that go into each pool varies, which is decided by validators, who allocate the BGT emission they receive to the pool, proportional to their stake.
Each pool is used to exchange tokens, so it generates some profits. Liquidity providers earn these fees and BGT issuance.
Since validators allocate BGT inflation to pools, which can differ for each pool, there is a bribery system here, similar to those from Curve.
The validator with the highest voting power (i.e., with the highest number of delegated BGTs) has the most significant influence on the issuance of rewards. This means that to attract more users, he may offer bribes to his delegates in the form of additional rewards.
These additional rewards come from other protocols, which can bribe the validator to allocate all (or most) of the BGT inflation to a specific pool.
Therefore, BGT is used throughout the delegation and rewards process, while the BERA token will perform transaction fees and other “financial” activities.
BGT can be burned in a 1:1 ratio to obtain BERA, but remember this is a one-way mechanism. You cannot burn BERA to get BGT! BGT goes into circulation as a reward for validators and liquidity providers.
Tokenomics
The tokenomics have not been published yet, so we do not know what the initial supply, distribution, and inflation rate will look like. As soon as we find out, the article will be updated.
Summary
BeraChain promises to be another high-profile project, which may launch offering high airdrop. However, it is worth remembering that there are no guarantees here, and a lot of time spent on the test network may not be worth it.
The project’s structure is interesting, but it should be treated as an experiment and test, even after launching the mainnet and approaching with appropriate caution.
