For the past couple of weeks, I have been reading whatever tweets/threads/articles I could find on berachain. I took notes as I did. This article is simply a compilation of everything I have read (and written in my notes) about the chain, and does not in any way serve as investment (or research) advice.
With that out of the way, let's get to it.
Where is Berachain being built on ?
Bera is built on cosmos SDK. Think of cosmos as the blockchain of blockchains. The cosmos SDK is a layer 0 protocol upon which separate (but interconnected blockchains) can be built. Bera is one sort chain.
Berachain:
Bera aims to solve mercenary liquidity (where we have people rotate funds into a chain, grab as much liquidity as they can, and then move on). Berachain does so with the innovative POL (Proof of Liquidity consensus mechanism). This is in contrast to traditional proof of stake chains where instead of securing the chain with a single primary token, you can effectively do so with a mix of tokens. This is in attempt to hold on to as much liquidity/capital that enters the ecosystem as possible. (refer to this as sticky capital. I.e capital that remains) Liquidity providers are paid $Bera as rewards for staking.
However, one cannot just “stake” any coin/token they so wish. These tokens have to approved (whitelisted). At the moment, the power of convening the “whitelist status” on tokens solely reside with the team. This is presumed to change on launch.
As with every other LP provision, staked assets are susceptible to impermanent loss.. however, this loss will be mitigated by a leverage long position on the bera perps platform. (I must admit I do not yet understand the mechanics of this, but here's a tweet explaining it. Also, if you're a giga-brain and are able to break that down to an understandable level, do leave a comment).
Berachain's Token Structure:
The chain operates a tripatite token structure:
We've got $Bera, which is:
°the "gas paying" token.
°is emmited at 10% PA.
°Gas fees from bera are burnt (this would help balance out the inflation from emission).
We've got $BGT which is effectively a soulbound governance token that doubles as a "receipt of stake" on the chain. All benefits accruing to Bera LP holders/stakers are paid out to holders of BGT (keep in mind that BGT is simply a receipt/evidence of a "stake" or LP on the berachain, and is by it's very nature un-tradeable.)
Then there is the honey token which is effectively the ecosystem's stablecoin. Honey is pegged to the US dollars, and maintains its peg through:
°controlled interest rates.
°it is by its very nature an over-collaterized stable.
°the Honey AMO helps keep the peg in check as well. (This honey suddenly tastes like FRAX).
Here are a couple more things I know about the Honey Token:
It can only be minted with staked collateral.
It is used to:
Spot trade. (obviously)
Leverage trade. (Again, obviously).
Leverage stake. (Same as leverage trading but for staking instead).
Serves as the base liquidity layer for the AMM.
Additional Notes:
As at the time of writing this, the Berachain official docs and tokenomics details are yet to be released (so forgive whatever contradictory information you may find upon their release).
Also, here's a twitter list I use to keep up with the ecosystem.
Concluding thoughts:
Ughhh.. that “sticky capital” is some good stuff.