Berachain is a novel blockchain created to solve consensus mechanism incentive misalignment. For traditional Proof of Stake (PoS) blockchains, users have to lock their assets in order to participate in the security model and earn staking rewards. This results in incentive misalignment as the projects building on these blockchains want activity and volumes – this competes with the native security mechanism of staking which requires assets to be locked up. In an efficient market, users are less likely to use the financial applications built on the blockchain if they can earn more, with less risk, by staking.
Berachain aims to solve this with their consensus mechanism, Proof of Liquidity (PoL). PoL is an extension of PoS with restructured incentives mechanisms to incentivize DeFi activity over asset lockup, while simultaneously adding security and decentralization to the network.
Use Cases and Incentive Mechanisms
Berachain is launching with three native assets; $BERA, $BGT, and $HONEY, which can collectively enable opportunities for Berachain participants. BERA is the gas token, BGT is the governance token (which is non-transferable and can be redeemed 1:1 for BERA), and HONEY is the native stablecoin.
In traditional PoS, validators earn rewards directly emitted by the blockchain as they validate transactions, and delegators to these validators will also earn a percentage of total rewards based on how much they stake. In Berachain the validators earn BGT, but where Berachain differs is validators have to direct most of the BGT to an application’s reward vault rather than to themselves (validators do still keep 0.5 BGT per block). This creates an incentive mechanism where applications will compete to bribe validators – the more attractive the bribe, the more likely validators will direct their BGT to that application (the bribe will often be in the form of an application’s native asset, but can be any token).
The other side of this incentive mechanism is the end user. Users can, for example, provide liquidity (LP) to the HONEY–USDC liquidity pool on the native DEX (BEX) to earn LP fees. That user would then receive LP tokens representing their position, which they could deposit into the BEX HONEY–USDC reward vault to earn BGT on top of their LP fees.
Users also have the option to delegate BGT or stake BERA to a validator. For BGT delegation, validators can actively or passively decide which reward vaults to direct their BGT emissions towards based on the application bribes. Delegators can evaluate validators’ strategies, and choose to delegate to a validator based on the expected bribes the validator would earn for its delegates. For BERA staking, stakers contribute towards a validator’s self-bond and will therefore earn a portion of both the BGT and BERA earned by the validator.
Fireblocks Customers: What You Need to Know
Fireblocks will support Berachain at mainnet launch, enabling Fireblocks customers to participate in all of the above opportunities.
Custody Native Assets:
Fireblocks will enable wallet creation and direct custody for assets on Berachain, including BGT, BERA, and HONEY. To add additional Berachain asset wallets, select ‘Add Asset Wallet’ and paste the token contract address.
DeFi Access:
Fireblocks will support DeFi and dapp connectivity via the Fireblocks DeFi browser extension, WalletConnect, and DeFi API. This includes native Berachain dapps like BEX, BEND, and BERPS.
Staking:
Fireblocks will support BERA staking and BGT delegation with our staking partners, Figment and Kiln.
Interested in learning more? Reach out to your account team or request a demo today.
About Us
Fireblocks is an easy-to-use platform to create new blockchain based products, and manage day-to-day digital asset operations. Exchanges, banks, PSPs, lending desks, custodians, trading desks, and hedge funds can securely scale their digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. Fireblocks serves thousands of organizations in the financial, payments, and web3 space, has secured the transfer of over $6 trillion in digital assets and has a unique insurance policy that covers assets in storage & transit. Find out why CISOs and Ops Teams love Fireblocks at fireblocks.com/.
