Discussion on Berachain Ecological Characteristics and Overview of Core Projects Before Issuing Coins

Introduction

Berachain is a Layer 1 network characterized by the PoL (Proof of Liquidity) consensus mechanism, aligning the interests of validators, liquidity providers, and the protocol. The second testnet "bArtio Testnet" is currently underway to address issues discovered 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 the PoL mechanism has exceeded 2.38 million. These data show that the market's attention to Berachain and its ecosystem is quite high.

The founder of Berachain, Smokey The Bera, recently hinted through a tweet on X that "Q5 will happen before April," indicating that the mainnet launch is imminent. This has also attracted new and old users to join the ecosystem.

However, to participate in the Berachain ecosystem, one must understand its PoL mechanism. Before the mainnet launch, various complex financial products were introduced between protocols to gain advantages in the PoL mechanism, causing a significant entry barrier for new users.

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

DEX

Berachain has a native DEX called BEX, which will be launched as BeraSwap on the mainnet, supporting smooth liquidity trading within the ecosystem and ensuring the effective operation of the PoL mechanism. Other DEXs preparing to launch on Berachain are working on various convenient and efficient services and strategies to attract users and liquidity.

Kodiak

Kodiak is a DEX that stands out from the Berachain incubated project "Build a Bera". In addition to supporting the Uniswap v2-style features of BEX, it also offers CLAMM functionality similar to Uniswap v3, allowing liquidity providers to set and concentrate liquidity within a specific range.

Users can provide liquidity in a narrow range through the CLAMM pool, more effectively farming $BGT. Kodiak also offers the Island feature, which helps users automatically reset and balance the CLAMM range, reducing the hassle of managing liquidity supply positions. This feature utilizes BEX to rebalance liquidity, establishing complementary rather than competitive relationships.

Kodiak standardizes CLAMM liquidity positions through the Island feature, enabling LP tokens to be used in other protocols, promoting more flexible and diverse ecological gameplay.

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

Honeypot Finance

Honeypot Finance is a protocol that supports all aspects of the token lifecycle, consisting of the following sub-protocols:

• Henlo DEX: A DEX specifically designed to protect users from MEV attacks, providing limit orders and Batch-A2MM functionality.

• Dreampad: Launchpad protocol that provides incubation and financing opportunities for projects preparing to launch on Berachain.

• Pot2Pump: A platform that provides a safer environment for meme coin issuance and trading.

Honeypot Finance plans to operate validation nodes after the mainnet launch, providing $HPOT as delegation rewards. The protocol utilizes accumulated $BGT to release into the $HPOT liquidity pool, enhancing $HPOT liquidity. It also plans to increase the token value by using node operation revenue to buy and burn $HPOT.

Other DEXs that are ready to launch on the Berachain mainnet include BurrBear, OogaBooga, and Shogun.

Liquidity Staking

The structure of Berachain allows liquidity providers to receive network rewards calculated in $BGT and liquidity provision interest when they deposit liquidity tokens obtained from ecological protocols. Therefore, although the methods and sequences are different, Berachain has essentially built liquidity staking into the network protocol.

In Berachain, existing protocols can only provide rewards and gain voting rights by collaborating with validators or by operating nodes themselves to establish a self-sustaining flywheel model. The liquid staking protocol will provide a redemption function for $BGT, making it easier for ecological protocols to adopt structures that closely integrate the PoL mechanism.

Infrared

Infrared is a liquid staking protocol incubated in collaboration with Kodiak through the "Build a Bera" program.

The Infrared-operated vaults can accept LP tokens from the liquidity pools, 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 receive $iBGT (liquidated $BGT) proportional to the LP tokens they deposited.

Users can utilize $iBGT in the following ways:

• Stake in Infrared to receive rewards generated by the node.
• Use in other DeFi protocols
• Sell for profit

Infrared focuses on converting $BGT into a liquid token, centralizing and distributing rewards generated by the PoL mechanism to $iBGT stakers, while also assisting other protocols in incorporating $iBGT into their systems. Infrared also plans to launch new features that allow them to receive and settle the $BERA required for node operations while running nodes and distributing profits.

Kodiak's Island Pool is the best example of effectively utilizing Infrared features. After the mainnet launch, the Infrared plan will launch Kodiak's Island Pool, allowing users to use Kodiak's CLAMM for more efficient $iBGT farming, and the received $iBGT can be restaked in Infrared or deposited into Kodiak's $iBGT/$BERA Island Pool for more $iBGT farming.

Infrared has garnered the attention of many users and is currently accepting the most $BGT delegation in the bArtio Testnet. Many ecological projects have also partnered with Infrared to launch various derivative products.

BeraPaw

BeraPaw is a liquidity staking protocol that does not run its own nodes but operates a treasury between different nodes and liquidity pools registered in BeraPaw, issuing $LBGT as a liquidation token for $BGT.

The governance token of BeraPaw is $PAW, and users can vote on which liquidity pools should receive $BGT using the $BGT held by BeraPaw. Node operators distribute the reward income generated from staking $BGT to the holders of $LBGT through this method.

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

Lending

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

• Use $WBTC and $WETH as collateral to borrow $HONEY
• Deposit $HONEY

Unlike typical lending agreements, 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 Berachain's triple-token economic structure, generating basic interest for $HONEY while increasing lending demand through $BGT and enriching the ecosystem's liquidity. Users can also perform $BGT leveraged farming by repeatedly exchanging borrowed $HONEY for $WETH, $WBTC, and depositing them into BEND.

BeraBorrow

BeraBorrow is an over-collateralized stablecoin issuance protocol that allows users to mint $NECT stablecoins. It accepts common assets such as $BERA and $HONEY, as well as BEX and Berps LP tokens and Infrared's $iBGT as collateral assets. The $NECT minted against collateral assets can be deposited into BeraBorrow's liquidity stable pool, where depositors can collect borrowing fees and liquidation fees from $NECT borrowers.

In addition to $NECT, BeraBorrow also has a governance token $POLLEN, which can serve as an incentive token in the following aspects:

• Used for rewarding liquidity pools that obtain $BGT Emission
• Encourage collateral deposits into the liquidity pool for up to $NECT debt
• Distributed as rewards to depositors in the liquidity stability pool

Depositing LP coins into BeraBorrow will automatically deposit into Infrared to earn $iBGT rewards and will automatically reinvest into Infrared for compound interest. Users can borrow $NECT to provide liquidity in other protocols and re-deposit the received LP coins back into BeraBorrow to establish leveraged positions.

BeraBorrow also plans to allocate $BGT to the DEX liquidity pool for the use of $NECT and $iBGT trading, strengthening the demand for $NECT and market liquidity, while providing high deposit yields for liquidity providers.

With the support of various demand mechanisms, $NECT is expected to become a core native stablecoin in the Berachain ecosystem alongside $HONEY.

Gummi

Gummi is a lending protocol incubated through "Build a Bera" that operates without oracles, allowing anyone to create lending pools without restrictions. Gummi plans to utilize any assets from Berachain to provide users with the ability to establish 100x leveraged positions.

Before the mainnet launch, Gummi has established partnerships with core infrastructures such as Infrared and Kodiak, and plans to support leverage farming position functionalities for various LP tokens of $iBGT and Kodiak.

Derivative Protocol

Currently, various derivative protocols utilizing the PoL mechanism in different ways are also preparing to launch on Berachain. The basic infrastructure includes Berps, which is the native Perp DEX that the Berachain team will launch alongside BEX and BEND.

In Berps, users can use $HONEY to establish 100x leveraged positions on various assets or deposit $HONEY to provide the liquidity needed for traders' positions and earn trading fees, funding fees, and $BGT as rewards.

Through this structure, Berps gives $HONEY a clear use case as the underlying asset of Berachain's native Perp DEX, while also providing a simple yet effective entry point for $BGT Farming.

SMILEE

SMILEE is an options protocol that enables the creation of hedging positions for DEX liquidity provision. The options created within SMILEE have a unique structure that can generate more profit during significant price fluctuations, creating an effect that is completely opposite to the impermanent loss (IL).

Users must pay a premium to establish an options position in SMILEE, and there are three types of options positions to choose from:

• Bull: Bet on a significant price increase until expiration.
• Bear: Bet on a significant decline in price volatility until expiration.
• Smile: Bet on significant upward or downward fluctuations in price until expiration.

In addition to options trading, users can also provide liquidity for the options positions established by options traders and collect the option fees paid by the traders. SMILEE reduces the impermanent loss for liquidity providers by dynamically rebalancing the liquidity provision positions.

Exponents