Introduction

Berachain is one of the most talked-about emerging Layer-1 blockchains at present. With its unique Proof of Liquidity (PoL) consensus mechanism and tri-token economic model, it is committed to optimizing liquidity utilization and enhancing network security. Within its ecosystem, DeFi protocols such as Infrared Finance, BEX, and Dolomite play crucial roles in driving the rapid development of Berachain.

Berachain’s unique architecture allows it to demonstrate distinctive advantages in areas such as decentralized exchanges (DEX), lending markets, and stablecoins. This article will explore in detail the core protocols of Berachain’s DeFi ecosystem and assess its potential advantages in competing with mainstream blockchains such as Arbitrum and Solana.

The Origins and Team Behind Berachain

Berachain originated from an NFT culture community, with the team adopting a “bear” theme and a humorous style that attracted many early supporters. The project team remains highly anonymous, interacting with the community only through social media. This “decentralized” team management approach maintains a sense of mystery while also stimulating high community engagement.

Berachain started in 2023 through the NFT ecosystem and gradually evolved into an independent Layer-1 blockchain. Its core innovation lies in the Proof of Liquidity (PoL) consensus mechanism, which quickly garnered attention in the DeFi space. As its infrastructure continues to improve, the ecosystem has steadily attracted numerous decentralized finance (DeFi) projects, helping it become a representative of the next generation of PoL-based public blockchains.

Berachain Ecosystem Timeline：

• August 2021: Berachain originated as a meme chain from the Smoking Bear NFTs, tracing back to the launch of the BongBears NFT collection in August 2021. The NFT later rebased into new collections including Boo Bears, Baby Bears, Band Bears, and Bit Bears. After experiencing both bull and bear markets in crypto, the core members of the Berachain team realized the crucial importance of liquidity in DeFi. Compared to decentralization, scalability, security, and interoperability, liquidity serves as the foundation for all of these. The team decided to design its own Layer-1 blockchain, drawing strengths from successful DeFi projects while avoiding their weaknesses—this led to the creation of Berachain. The team later designed the Proof of Liquidity consensus mechanism, laying the groundwork for Berachain’s tri-token model.
• October 2021: BongBears NFTs underwent their first rebase.
• November 2021: Berachain was mentioned for the first time.
• March 2022: Olympus DAO’s OIP-87 proposal regarding Berachain’s seed round funding was approved. Berachain would receive $0.5M in funding from Olympus at a $50M valuation.
• April 2023: Berachain announced a $42M funding round led by Polychain.
• November 28, 2023: Berachain launched its closed beta. The Berachain ecosystem was initiated, rooted in its NFT cultural community.
• January 11, 2024: On the same day the Bitcoin spot ETF was approved, Berachain officially launched its public testnet, “Artio.” According to official sources, over 30 native protocols were under development, and protocols from other networks such as Pendle, Redacted, Sudoswap, and Abracadabra also planned to deploy on Berachain’s testnet and mainnet.
• February 2025: Berachain launched its mainnet and deployed cross-chain bridges to support liquidity across more on-chain assets. Arbitrum Nitro underwent an upgrade and optimization.

Team Background：

Berachain boasts a powerhouse team with deep expertise across blockchain, fintech, and software engineering:

• Co-founder Smokey drives the development process of Berachain.
• Co-founder and CTO Dev Bear previously worked at Apple and has engineering experience from one of the world’s top tech companies.
• CTO Grizzly Bera is a technical leader who drives the core technical architecture of Berachain.
• Head of Developer Relations Camila Ramos previously served as Head of Developer Relations at Fuel Labs and was a software engineer at PayPal. She is well-versed in building blockchain developer ecosystems.
• Head of DeFi Jack Melnick was previously Head of DeFi at Polygon, Vice President of Research at The Tie, and gained rich experience in the financial industry at UBS, with a deep focus on decentralized finance.
• APAC Business Development Lead Leslie Song is the co-founder of Crypto J, and formerly served as Head of Business Growth for AAVE in the Asia-Pacific region, as well as Community Manager at Origin Protocol. She specializes in marketing operations, financial advisory (FA), and business development, helping to drive Berachain’s rapid growth in the APAC market.

Source: Berachain Project Introduction, Team, Financing and News_RootData

Investors and Fundraising Highlights

Berachain has made a strong impression on the fundraising front. According to RootData, the project secured $42 million in its Series A round and an additional $100 million in Series B funding. Major backers include Polychain Capital, Hack VC, Framework Ventures, Brevan Howard Digital, OKX Ventures, Robot Ventures, and several other prominent venture capital firms. This robust financial support has provided a strong foundation for Berachain’s ecosystem growth and has boosted confidence in its long-term potential across the market.

Berachain Financing Overview (Source: Berachain Project Introduction, Team, Financing and News_RootData)

Berachain’s Innovative Architecture

Tri-Token System

Berachain adopts a three-token system consisting of BERA, HONEY, and BGT, each serving distinct functions and working together to ensure efficient ecosystem operations:

• BERA: The native token, with a total supply of 500 million. It is primarily used to pay gas fees and for transactions within the ecosystem.
• HONEY: A stablecoin pegged to the US dollar, providing a stable store of value and settlement tool for the DeFi ecosystem.
• BGT (Bera Governance Token): The governance token. Holders can participate in platform governance and help determine the direction of ecosystem development.

BERA Token Distribution Chart (Source: Berachain Tokenomics | Berachain Core Docs)

HONEY Minting Flowchart (Source: $HONEY | Berachain Core Docs)

Proof of Liquidity (PoL) Consensus Mechanism

The PoL consensus mechanism ensures network security and capital efficiency by incentivizing liquidity providers. Users receive PoL rewards after depositing assets into liquidity pools, thereby effectively increasing capital utilization within DeFi protocols. This innovative mechanism gives Berachain better capital efficiency compared to traditional Proof of Stake (PoS) blockchains. Unlike PoS, which relies on staking a single native asset, PoL enhances network security through diversified liquidity pools.

Comparison: PoL vs. PoS Mechanism

PoL vs. PoS comparison table

In addition, the operational flow of the PoL mechanism is as follows:

1. Users deposit liquidity assets: Users deposit LP tokens or other accepted assets into liquidity pools.
2. Consensus layer incentives: The system calculates PoL rewards based on the value of the provided liquidity and distributes them to liquidity providers.
3. Security enhancement: Broader asset participation in liquidity proof helps improve decentralization of the consensus mechanism.
4. Capital efficiency optimization: Deposited assets can still be used for DeFi lending, trading, etc., improving overall ecosystem capital utilization.

This innovative mechanism gives Berachain better capital efficiency than traditional PoS and integrates with the DeFi ecosystem, forming a positive feedback loop between consensus and liquidity incentives.

Key DeFi Protocols in the Berachain Ecosystem

Infrared Finance (Liquid Staking)

Impact: As the largest liquid staking protocol on Berachain, Infrared Finance holds a crucial position within the ecosystem. According to DefiLlama data, as of March 18, 2025, its total value locked (TVL) exceeded $1.937 billion.

Functionality: Built on the PoL mechanism, Infrared Finance offers liquid staking solutions. Users can stake iBGT and iBERA assets to earn PoL rewards. It also supports the staking of LP receipt tokens from Berachain’s official DEX, BEX.

Infrared homepage screenshot (Source: Infrared Finance)

BEX (Decentralized Exchange)

Impact: BEX is the core DEX of the Berachain ecosystem, supported by the official team. As of March 18, 2025, its total value locked (TVL) reached $873 million, ranking first in trading volume within the Berachain ecosystem.

Functionality: BEX adopts an Automated Market Maker (AMM) model and incorporates the PoL incentive mechanism to ensure low slippage and high liquidity. In addition, the platform is deeply integrated with Berachain’s tri-token system, offering additional rewards to liquidity providers.

BEX exchange interface (Source: BeraHub)

Dolomite (Lending and Leverage Trading)

Impact: As the lending protocol within the Berachain ecosystem, Dolomite has surpassed $1 billion in TVL, with total borrowing reaching $68.35 million.

Functionality: Integrated with the PoL mechanism, Dolomite offers users diversified financial services such as intelligent lending, leveraged trading, and idle capital utilization. Its innovative design allows users to deploy assets efficiently within the DeFi ecosystem, enhancing capital operation efficiency.

Dolomite homepage (Source: dolomite.io)

HONEY (Stablecoin)

Background: HONEY is the official stablecoin of the Berachain ecosystem, pegged 1:1 to the US dollar.

Impact: HONEY plays a vital role in the DeFi ecosystem, including liquidity provision, payments, and cross-border settlement. Its deep integration with the Berachain ecosystem makes it a core stable asset in DEXs, lending markets, and other DeFi products.

Functionality: As a stablecoin, HONEY primarily supports trading pair liquidity, and is also used for payments and settlements, enhancing the utility of Berachain’s DeFi ecosystem.

HoneySwap interface (Source: Honey)

Other DeFi Protocols in the Berachain Ecosystem

In addition to the core protocols mentioned above, Berachain also hosts several other important DeFi protocols, such as:

Forge Finance: Offers decentralized derivatives trading services.

BearSwap: A decentralized exchange aggregator built on Berachain.

HoneyBank: An innovative DeFi lending platform that supports multi-asset collateral.

Berachain’s Development Potential in DEX, Lending, and Stablecoins

Berachain’s unique design gives it great development potential in decentralized exchanges (DEXs), lending, and stablecoins.

Efficient Liquidity Management: Leveraging the PoL mechanism, Berachain enables more efficient liquidity management, improves capital utilization, and provides additional rewards for liquidity providers.

High Composability: With modular smart contract architecture, it supports the integration of complex DeFi operations. This high composability allows complex DeFi strategies to be packaged into single products, improving user experience and capital efficiency.

Tri-Token Incentive System: Berachain’s tri-token model (BERA, HONEY, and BGT), along with the PoL mechanism, offers strong incentives for liquidity provision, further advancing the development of DeFi protocols. This contributes to long-term ecosystem growth and enhances user retention.

Competitive Landscape with Arbitrum, Solana, and Other Platforms

Ecosystem Comparison

Ecosystem comparison table

Although Berachain is still in its early development stage, its PoL mechanism and tri-token system give it notable competitive advantages, positioning it to compete with established platforms like Arbitrum and Solana in the DeFi space.

Technical Architecture & Performance

• Solana: High-performance, low-latency chain capable of handling many transactions per second, making it ideal for DEXs and DeFi applications.
• Arbitrum: An Ethereum Layer-2 solution using Optimistic Rollups to improve throughput and reduce gas costs.
• Berachain: Built on the PoL mechanism, it enhances liquidity management and increases capital efficiency.

User Base & Market Share

• Solana ranks 5th among public chains in total value locked (TVL).
• Arbitrum, as an Ethereum Layer-2, has seen rapid user growth.
• Berachain is still in its expansion phase, but the PoL mechanism is expected to attract a large number of DeFi users.

Compared to platforms like Arbitrum and Solana, Berachain offers a differentiated value proposition through its innovative consensus mechanism and tokenomic design. By combining PoL with its tri-token system, Berachain creates a unique approach that sets it apart from mainstream Layer-1 and Layer-2 solutions. While Arbitrum and Solana have already established strong ecosystems, Berachain’s design gives it an edge in liquidity efficiency and user incentives. However, as it remains early, Berachain still needs to achieve broader mainnet adoption and scale its user base before it can truly challenge these mature platforms.

Ecosystem Risk Analysis

Although Berachain shows unique advantages through its PoL mechanism and tri-token system, the ecosystem still faces certain risk challenges, including the cold start risk of a new public chain and the potential depegging risk of its stablecoin HONEY.

Cold Start Risk for Early-Stage Public Chains

Emerging blockchains often face issues such as underdeveloped ecosystems and unstable infrastructure in their early stages, and Berachain is no exception. Take Solana as an example—it experienced several large-scale outages during 2021–2022 due to:

• Excessive network load: Its high-TPS design led to overloaded transaction requests, affecting on-chain stability.
• Over-reliance on a few nodes: A lack of decentralization meant that the failure of a few nodes could crash the entire network.

Although Berachain’s PoL mechanism is theoretically capable of improving liquidity efficiency and enhancing network security, it depends heavily on the participation of liquidity providers. If early-stage funding and developer engagement are insufficient, it could result in shallow trading depth, high gas fees, and a poor user experience. Additionally, the complexity of the PoL model may introduce potential technical bugs and consensus security risks—similar to challenges Solana faced in its early days. Therefore, Berachain needs to focus on infrastructure optimization during the initial mainnet launch, ensure stable network operations, and attract more developers to build DApps to boost user stickiness.

Depegging Risk of the HONEY Stablecoin

As the native stablecoin in the Berachain ecosystem, HONEY is deeply tied to BERA and BGT and is widely used in DeFi applications. However, the value-pegging mechanism of stablecoins has always been a potential risk factor in DeFi ecosystems. Berachain may face the following challenges regarding HONEY:

• Reserve transparency and audit risk: The project has not yet provided a detailed audit report of HONEY’s reserve assets. Without trustworthy transparency, the market may question the token’s price stability.
• Liquidity bank run risk: If market confidence declines, mass selling of HONEY may occur, causing its price to deviate from its 1:1 peg—similar to Terra UST’s depegging incident in 2022.
• Over-reliance on internal liquidity: Since HONEY mainly circulates within the Berachain ecosystem, a drop in Berachain’s TVL may affect its stability.

To mitigate these risks, the author believes Berachain should:

• Provide regular and transparent audits of HONEY’s reserve assets to build trust.
• Improve HONEY’s liquidity management—such as using more decentralized and external reserve assets (e.g., BTC, ETH), instead of relying solely on internal protocol assets.
• Integrate with external liquidity markets by partnering with major DeFi platforms like Aave or Curve to enhance HONEY’s market adaptability.

Conclusion

Through its innovative consensus mechanism and token economic model, Berachain has built a highly promising DeFi ecosystem. The successful operation of core protocols such as Infrared Finance, BEX, and Dolomite has further solidified its influence in areas like DEXs, lending, and stablecoins. Despite facing competition from platforms like Arbitrum and Solana, Berachain is gradually establishing its market position through its unique liquidity management and incentive mechanisms.

If Berachain can continue attracting developers and capital into its ecosystem and optimizing its technical architecture, it is expected to become a major contender in the DeFi space.