If you’ve been around decentralized finance (DeFi) for more than a cycle, you’ve probably wondered the same thing I did the first time I read the whitepaper: what is Berachain crypto actually doing differently? Most “new L1” pitches feel like reskinned Ethereum forks chasing the same yield narrative. Berachain (BERA) is one of the rare projects where the consensus mechanism itself was redesigned to fix a specific economic problem—the constant tug-of-war between staking your assets and using them in DeFi.
I’ve been tracking this one since mainnet launch in February 2025. I held a small position through the post-launch price collapse, journaled every emotion of it, and I’m going to give you the unvarnished version: what Berachain is, how Proof of Liquidity works, why the three-token model matters, and what the critics are getting right.
Quick Answer: What Is Berachain?
Berachain is an EVM-identical Layer 1 blockchain technology built on the Cosmos SDK that replaces standard Proof of Stake with Proof of Liquidity (PoL)—a consensus model where the security of the chain is funded by DeFi liquidity provision instead of locked, idle staking. It uses a three-token system: BERA (gas + validator stake), BGT (non-transferable governance), and HONEY (native stablecoin). Mainnet went live February 6, 2025.
The Problem Berachain Was Built to Solve
Before we get into the mechanics, let’s talk about why anyone built this in the first place. Because Berachain isn’t a vanity project—it’s an answer to a real, structural flaw in how most L1 blockchains work today.
Why Proof of Stake Creates an Incentive War
On a standard Proof of Stake chain like Ethereum, users have to lock their assets to secure the network. Validators stake ETH, earn issuance rewards, and call it a day. The chain stays safe, but those staked assets are functionally dead—they’re not earning anywhere else.
And here’s where it gets messy. Those same assets could be productively deployed in DeFi protocols: providing liquidity, lending, farming. So users have to choose. Stake for network security, or deploy for higher DeFi yields. That’s an incentive war the chain itself doesn’t try to resolve.
Staking vs. DeFi: The Liquidity Tug-of-War
When I blew up my first trading account back in my retail days—well before sobriety, well before any of this made sense to me—I learned the hard way that capital sitting idle is capital working against you. Inflation, opportunity cost, all of it. Blockchains have the exact same problem at the protocol level.
When users stake instead of LP, protocols drain liquidity. When users LP instead of stake, network security weakens. Berachain’s Proof of Liquidity was specifically designed to end this conflict by making liquidity provision be the security mechanism itself.
What Is Proof of Liquidity (PoL)?
This is the part that took me three reads to fully internalize, so I’ll break it down the way I wish someone had broken it down for me.
How PoL Works: The Flywheel in Plain English
Here’s the loop:
- Validators stake BERA to produce blocks (minimum 250,000 BERA to run a validator).
- Block production earns BGT emissions for validators—a non-transferable governance token.
- Validators direct those BGT emissions to ecosystem reward vaults of their choosing.
- Protocols compete for BGT allocations by offering incentives back to validators—creating a real, market-driven liquidity layer.
- Users deposit assets into those reward vaults (which are basically allowlisted liquidity pools) and earn BGT directly.
The chain’s security and the chain’s DeFi liquidity are the same flywheel. As the official Proof of Liquidity official documentation puts it:
“Proof-of-Liquidity radically changes the way L1 economics are structured, prioritizing users and applications over validator rewards at baseline.”
The BGT Incentive Marketplace
This is the part I find genuinely interesting. Validators on Berachain don’t just decide which vaults get rewards based on raw economics—they’re in an open marketplace where protocols actively bribe them (above board, on-chain, with disclosed terms) for BGT allocations.
A protocol like Kodiak might say: “Direct your BGT emissions to our ETH/HONEY pool, and we’ll give you 40% of our protocol fees in return.” The validator does the math. The protocol gets liquidity. Users earn BGT. Everyone wins—when the music’s playing.
Why This Is Different From Liquid Staking
People mix this up constantly, so let me be crisp: PoL is not liquid staking. PoL is the underlying consensus mechanism. Liquid staking (which Infrared Finance offers on top of Berachain) is a separate product layer built on top of PoL. PoL is to Berachain what regular staking is to Ethereum. Infrared is to Berachain what Lido is to Ethereum.
Berachain’s Three-Token Economy
This is where the tokenomics get distinct. Most L1s bundle gas, security, and governance into one token. Berachain separates those functions across three.
BERA — Gas and Network Security
BERA is the gas token. You pay transaction fees in BERA. Validators must stake a minimum of 250,000 BERA to produce blocks. BERA is freely transferable and trades on major exchanges. Think of it as the “ETH equivalent” of the Berachain ecosystem.
BGT — The Non-Transferable Governance Token
BGT is where it gets weird in a good way. BGT cannot be bought. It is non-transferable. The only way to acquire it is to deposit assets into allowlisted reward vaults and earn it as emissions. This is the chain’s way of forcing governance power into the hands of people who actually contribute liquidity.
BGT can be burned 1:1 for BERA in a one-way conversion—the only mechanism by which new BERA enters liquid circulation through governance. You can also delegate BGT to validators in exchange for a share of the fees they earn from protocols competing for their allocations.
HONEY — The Native Stablecoin
HONEY is Berachain’s native overcollateralized stablecoin, backed by USDC, USDT, and pyUSD. It’s minted through the HoneySwap dApp. Having a native stablecoin built into the chain is a big deal—most ecosystems are at the mercy of bridged USDC. Berachain has its own stablecoins sitting at the center of every pool.
How Berachain Stacks Up Against Ethereum and Solana
EVM-Identical Architecture — What That Actually Means
Berachain is EVM-identical, not just EVM-compatible. That’s a meaningful distinction. Ethereum developers can deploy existing Solidity contracts on Berachain without modification. No re-audits for syntax differences. No code rewrites. Tooling like Foundry and Hardhat just works.
And quick note for the confused: Berachain is an L1, not an L2 like Arbitrum or Optimism. If you want a refresher on the difference, our breakdown of Layer 2 scaling solutions walks through it.
Built on Cosmos SDK and BeaconKit
Under the hood, Berachain uses BeaconKit—a modular consensus framework built on the Cosmos SDK. That gives it fast finality and a path to future interoperability with other Cosmos-based chains. While Solana goes monolithic and high-throughput with its own non-EVM stack, Berachain targets Ethereum’s developer base while building DeFi incentives directly into consensus.
The Berachain DeFi Ecosystem: What’s Actually Built Here
An L1 without applications is just a database with a token. So what’s actually deployed on Berachain?
Infrared Finance — The Liquid Staking Hub Controlling 60% of TVL
Infrared Finance is the liquid staking protocol that was incubated by the Berachain Foundation itself. It holds over $1.5 billion in TVL—roughly 60% of Berachain’s total ecosystem total value locked (TVL). Infrared issues iBGT (liquid BGT, since native BGT is non-transferable) and iBERA (liquid staked BERA). It is, functionally, Berachain’s Lido Finance equivalent.
Kodiak — The Native DEX and Liquidity Hub
Kodiak is Berachain’s native decentralized exchange. It’s deeply integrated with PoL and supports decentralized stop-loss and take-profit orders through the Orbs dSLTP protocol—something most DEXs still can’t offer.
Other Core Protocols (BeraBorrow, Bend, Berps)
- BeraBorrow: CDP protocol for borrowing against BERA
- Bend: Native lending protocol
- Berps: On-chain perpetual futures (in development)
Peak ecosystem TVL hit $3.2 billion (per DeFiLlama TVL data), making Berachain the 6th largest blockchain by TVL within weeks of mainnet launch.
Berachain’s Origins: From Bear Memes to a $100M Blockchain
The Bit Bears NFT Community That Spawned a Chain
I love this origin story. Berachain wasn’t founded in a Stanford garage. It was founded by four pseudonymous developers—Man Bera, Papa Bear, Dev Bear, and Smokey The Bera—who started out making a bear-themed NFT community called Bit Bears. It’s one of the few crypto projects that genuinely emerged from a community before becoming infrastructure.
Funding, Investors, and the Pseudonymous Team
In April 2024, Berachain raised $100 million in a Series B led by Brevan Howard Digital and Framework Ventures. Other backers include Polychain Capital, Hack VC, Tribe Capital, Samsung Next, and Hashkey Capital. Angels include Sandeep Nailwal (Polygon co-founder) and Yat Siu (Animoca Brands Chairman). Bloomberg’s coverage of Berachain’s $100M raise has the full details.
Real Risks: What the BERA Critics Are Getting Right
Now the part nobody wants to write. I’m going to be transparent because the alternative is the same hopium that cost me my first portfolio.
Token Inflation and the BGT Flywheel Risk
BERA launched around $13 at mainnet. By mid-2026 it’s trading near $0.39. That’s one of the sharpest post-launch L1 declines I’ve tracked. Critics argue the incentive flywheel is structurally circular—protocols earn BGT emissions to attract liquidity, but if emissions inflate token supply faster than demand grows, token value erodes. The flywheel can reverse.
My Personal Risk Framework
I don’t bet the farm on speculative L1s. For Berachain specifically, I sized this position the way I size every asymmetric L1 thesis: small enough that a -90% drawdown wouldn’t shake my discipline, large enough that a 10x would meaningfully matter. If you don’t have a system for position sizing on bets like this, build one before you ape in. Not financial advice—just hard-won pattern recognition.
Developer Activity and the TVL Retention Problem
There were reported developer departures throughout 2025, and the Foundation publicly shifted focus toward “cash-flow businesses” to sustain TVL. The mechanism is novel; the execution risk is real. Whether the incentive equilibrium holds long-term is, in my view, still genuinely unproven.
How to Get Started with Berachain
Setting Up a Wallet and Bridging to Berachain
- Set up MetaMask (or any EVM-compatible wallet).
- Add the Berachain mainnet manually or via Chainlist.
- Bridge ETH, USDC, or other supported assets via the canonical Berachain bridge or a third-party bridge.
Earning BGT: Where to Start
- Easiest path: Deposit into Infrared Finance vaults using iBERA or iBGT strategies.
- More active: Provide liquidity in allowlisted pools on Kodiak DEX to earn BGT directly. Functionally, this is yield farming with extra governance weight.
- Optimization play: Monitor BGT emissions and validator boost markets. Treat your BGT position like an active DeFi allocation, not a passive stake.
Frequently Asked Questions
Is BERA a good investment?
I don’t give buy/sell advice. What I’ll say is that BERA has experienced a severe post-launch drawdown, the mechanism is genuinely novel, and the long-term test is whether PoL holds its incentive equilibrium. Size accordingly.
Can I buy BGT directly?
No. BGT is non-transferable by design. The only way to acquire BGT is to deposit assets into allowlisted reward vaults and earn it as emissions, or to receive it as part of validator delegation rewards.
Is Berachain a fork of Ethereum?
No, but it’s EVM-identical—meaning Ethereum contracts deploy on Berachain without modification. It uses a different consensus mechanism (Proof of Liquidity) and is built on the Cosmos SDK with BeaconKit, not Ethereum’s execution layer.
How is Berachain different from Solana?
Solana is a monolithic, non-EVM chain optimized for raw throughput. Berachain is EVM-identical and targets the Ethereum developer base, with DeFi-native incentives baked into consensus. Different audiences, different architectural bets.
The Bottom Line
Berachain is one of the more intellectually honest L1 experiments of this cycle. Proof of Liquidity solves a real economic problem at the protocol level. The three-token system separates functions that other chains awkwardly bundle. The Bit Bears community origin gives it cultural authenticity most VC-incubated chains lack.
But the price action and developer churn tell you the second half of the story: novel mechanism, unproven equilibrium, real execution risk. Treat it as a speculative position, not a core holding, until the flywheel proves it can spin in both directions of a cycle.
If you’re researching the broader L1 landscape, I’d suggest reading our breakdowns on what is Solana crypto and what is Cosmos crypto next—both give critical context for how Berachain’s architectural choices fit into the bigger picture. And before you put any capital into a speculative L1, run through our guide on how to research crypto projects. Better to spend an hour reading now than a year recovering from a position you should have sized smaller. That’s not advice—that’s experience talking.
