Discussion on the Characteristics of Berachain Ecosystem and Overview of Core Projects Before Coin Issuance

Introduction

Berachain is a Layer 1 network that features the PoL( Proof of Liquidity) consensus mechanism, aligning the interests of validators, liquidity providers, and the protocol. Currently, Berachain is conducting its second testnet "bArtio Testnet" to address issues found in the first testnet.

Many ecological protocols have already been deployed on the bArtio Testnet version. As of January 2nd, according to the Berachain official website, there are a total of 234 protocols participating in the bArtio Testnet, and the cumulative number of wallets participating in testing Berachain's PoL mechanism has exceeded 2.38 million. Although this is only in the testnet phase, these data show that the market's attention to Berachain and its ecosystem is quite high.

Starting from the end of 2024, Smokey The Bera, the founder of Berachain, pushed for the "Q5 launch of the mainnet" and recently introduced Boyco through a tweet, hinting that "Q5 will happen before April," indicating that the mainnet launch is imminent. This has also attracted both new and old users to join the Berachain ecosystem.

However, to participate in the Berachain ecosystem, it is essential to understand their PoL mechanism. Before the mainnet launch, the various complex financial products introduced between protocols to gain an advantage in the PoL mechanism have, instead, created a significant entry barrier for new users.

This article aims to explore various fields of the Berachain ecosystem to effectively lower the barriers to user participation. We will discuss projects that have performed prominently in various areas and elaborate on how each protocol utilizes the PoL mechanism.

DEX

Berachain has a native DEX called BEX, which will be launched on the mainnet as BeraSwap. BeraSwap will support smooth liquidity trading within the ecosystem and ensure the effective operation of the PoL mechanism. Given the existence of BEX, other DEXs that are preparing to launch on Berachain are also preparing various more convenient and efficient services and strategies to compete effectively with BEX, in order to attract users and liquidity.

2.1. Kodiak

Kodiak is a DEX that stands out from Berachain's incubation project "Build a Bera". In addition to supporting BEX's Uniswap v2-style functionality, which averages liquidity distribution across the entire price range (, Kodiak also offers CLAMM ) concentrated liquidity automated market maker ( features similar to Uniswap v3, allowing liquidity providers to set and concentrate liquidity within a specific range.

Users can provide liquidity within a narrow range through the CLAMM pool to farm $BGT more effectively. Additionally, Kodiak offers an Island feature that helps users automatically reset and balance the CLAMM range, reducing the hassle of managing liquidity supply positions. This feature utilizes BEX to rebalance liquidity, thereby establishing a complementary rather than competitive relationship.

Moreover, due to the customizability of liquidity ranges, the tokens of CLAMM liquidity positions are often difficult to be utilized by other protocols. However, Kodiak standardizes users' CLAMM liquidity positions through the Island feature, enabling these LP tokens to be used in other protocols, thereby promoting more flexible and diverse ecological gameplay.

Before the mainnet launch, Kodiak has collaborated with many projects in the Berachain ecosystem, establishing its position as a core infrastructure. They also operate their own Berachain nodes as validating nodes, and as of January 3, they have received the second highest BGT authorization in the bArtio Testnet.

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) 2.2. Honeypot Finance

Honeypot Finance is a protocol that supports all aspects of the token lifecycle, from issuing to providing liquidity and effective trading, consisting of the following sub-protocols:

• Henlo DEX: A DEX specifically designed to protect users from MEV attacks, offering limit orders and Batch-A2MM functionality, capable of collecting user orders within a specific period and executing them at the same price.

• Dreampad: A Launchpad protocol that provides incubation and financing opportunities for projects preparing to launch on Berachain, while ensuring fair token issuance and distribution.

• Pot2Pump: A meme coin issuance platform that provides a safer environment for meme coin issuance and trading, featuring functions such as preventing bot sniping and refunding participating users in case the fundraising target is not reached within 24 hours.

Like Kodiak, Honeypot Finance also plans to operate as a validator after the mainnet launch, providing its governance token $HPOT as delegation rewards to users who delegate $BGT.

In addition, Honeypot Finance releases accumulated $BGT to the $HPOT liquidity pool, thereby enhancing the liquidity of $HPOT. The protocol also plans to increase the token value by using the income from node operations to purchase and burn $HPOT, while retaining the reward value paid to $BGT delegators, further consolidating the liquidity of $HPOT.

In addition to the aforementioned Kodiak and Honeypot Finance, there are also other protocols advocating for efficient and convenient trading functions preparing for the Berachain mainnet, including BurrBear, which supports capital-efficient trading by aggregating more than three price-similar underlying assets ### similar to Curve Finance (, liquidity aggregator OogaBooga, and cross-chain abstract trading protocol Shogun.

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Liquidity Staking

In a typical PoS network, network rewards are distributed to validators who hold a certain amount of tokens and operate nodes. Therefore, if the network itself does not have an authorization structure for native tokens, general users who do not operate nodes cannot obtain network rewards.

To address this issue, liquidity staking protocols distribute rewards by accepting native token staking and delegating node operations, allowing general users to participate in network staking. These protocols also issue LP tokens to stakers as proof of how many native tokens they hold, thereby enhancing the liquidity of the ecosystem. Through these functionalities, liquidity staking protocols have also become a core infrastructure of PoS networks.

In contrast, although the operation of Berachain's nodes requires 69,420 $BERA, its structure is such that when liquidity providers deposit liquidity tokens obtained from the ecological protocol into Berachain, they will receive network rewards calculated in $BGT as well as interest on provided liquidity. Therefore, apart from the different methods and sequences, Berachain has essentially built liquidity staking into the network protocol.

Although the operation of nodes on the Berachain main network requires 250,000 $BERA, the structure of Berachain is designed to distribute $BGT rewards and interest to liquidity providers. Therefore, although the methods and sequences differ, Berachain essentially integrates liquidity staking into the network protocol.

However, in Berachain, existing protocols can only provide rewards and gain voting rights by collaborating with validators, or by establishing a self-sustaining flywheel model to launch their liquidity pools, as demonstrated by Kodiak and Honeypot Finance, by operating their own nodes.

In this context, Berachain's liquid staking protocol will provide the $BGT) voting rights to determine emissions and the redemption function of (. This allows Berachain ecosystem projects to incorporate the liquidated $BGT into their protocol mechanisms without the need to negotiate with validators or nodes. In other words, this makes it easier for ecosystem protocols to adopt a structure that closely integrates the PoL mechanism.

) 3.1. Infrared

Infrared is a liquidity staking protocol co-incubated with Kodiak through Berachain's "Build a Bera" program.

The Infrared-operated vaults can accept LP tokens from the liquidity pool, generating $BGT interest rates while running network nodes. When users deposit LP tokens into these vaults, Infrared will use these tokens to generate $BGT, and users can claim $iBGT### that has been liquidated, proportional to the LP tokens they deposited, which is $BGT(.

Users can utilize the received $iBGT in the following ways:

• Stake in Infrared to receive rewards generated by the nodes

• Use in other DeFi protocols

• Sell for profit

Thus, Infrared concentrates and distributes the rewards generated by the PoL mechanism by converting $BGT into a liquid token, benefiting the fewer $iBGT stakers, while also assisting other protocols in the Berachain ecosystem to incorporate $iBGT into their protocols, enabling their platforms to provide higher returns for their users. In addition, Infrared plans to launch new features that allow them to receive and settle the $BERA required for node operation while running nodes and distributing profits.

The best example of effectively utilizing the Infrared feature is Kodiak's Island Pool, which we have also briefly introduced in the aforementioned DEX field. After the mainnet launch, the Infrared project plans to launch Kodiak's Island Pool ), which has been operating on the testnet (, allowing users to use Kodiak's CLAMM for more efficient $iBGT farming, and the $iBGT received can be restaked in Infrared, or re-deposited into Kodiak's $iBGT/$BERA Island Pool for more $iBGT farming. Of course, users can also choose other gameplay within the ecosystem.

Based on the interconnectivity of the protocol and effective ecological gameplay, Infrared has garnered the attention of many users, currently accepting the most $BGT delegation in the bArtio Testnet. Additionally, many ecological projects have also partnered with Infrared and plan to launch various derivative products, indicating that Infrared will become the most important infrastructure after the mainnet launch.

At the same time, specific details on how Infrared will use delegated $BGT to select the $BGT's Emission have not been made public. Therefore, it will be quite important to closely monitor whether Infrared will implement these processes in a decentralized manner, and to whom the voting rights of its held $BGT will be provided.

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) 3.2. BeraPaw

BeraPaw is also a liquid staking protocol, but they do not run their own nodes; instead, they operate a treasury between different nodes and liquidity pools registered in BeraPaw, issuing $LBGT as the $BGT settlement token.

The governance token of BeraPaw is $PAW. Users can vote on which liquidity pools should receive $BGT using the $BGT they hold in BeraPaw. Node operators distribute the rewards generated from staking $BGT to $LBGT holders through this method.

The structure adopted by BeraPaw divides the use of the $BGT token into two types of tokens: $LBGT and $PAW. 1### receives rewards and 2) votes for the $BGT emission pool. Through this structure, users and protocols using the $PAW token for $BGT Emission voting can exercise more voting power with relatively less capital. Therefore, protocols seeking initial liquidity in the Berachain ecosystem are expected to actively utilize $PAW to generate $BGT rewards for their liquidity pools.

The above are two liquidity staking protocols that are set to officially launch on Berachain. While these protocols not only allow for more derivative products but also provide users with more ways to engage, they also complicate the ecosystem. In the Berachain network, the power and status of nodes will be proportional to the amount of delegated $BGT, and the liquidity staking protocols that provide $BGT liquidation functionality are expected to be adopted by many users and protocols, becoming core infrastructure.

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Lending

Berachain also has a native lending protocol BEND, which provides the following functions:

• Use $WBTC, $WETH as collateral to borrow $HONEY

• Deposit $HONEY

Unlike typical lending protocols, BEND has two notable features: 1) $HONEY cannot be used as collateral, and deposits of 2) $WBTC and $WETH do not earn interest, but borrowing $HONEY will generate $BGT rewards.

Through this structure, BEND strengthens the triple-token economic structure of Berachain, generating basic interest for $HONEY while increasing lending demand through $BGT and enriching the liquidity of the ecosystem. Users can also execute $BGT leveraged farming by repeatedly swapping borrowed $HONEY back to $WETH, $WBTC, and depositing it into BEND.

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