Berachain itself is a distinctive Layer1 blockchain project, with its most recognizable innovation being the adoption of the PoL (Proof of Liquidity) block reward distribution mechanism. This mechanism transforms the chain's block rewards into a protocol's internal economic mechanism that drives ecological growth by distributing the vast majority of rewards directly to users and liquidity providers within the ecosystem, thereby driving application growth and accumulating on-chain liquidity.
In this model, all ecological assets participating in staking will directly provide on-chain liquidity support for Berachain. The rewards generated from PoL liquidity mining come from the chain's native incentive mechanism, which aims to create a more capital-efficient and incentive-oriented underlying structure.
Recently, Berachain upgraded its PoL consensus mechanism and officially released the brand new V2 version. This primarily introduces a new token economic model, further endowing the $BERA token with clearer rights to revenue and value support.
1. Let's first talk about the PoL consensus mechanism.
In fact, the operational logic of PoL is both simple and interesting. It combines the PoS consensus mechanism, liquidity mining, and the liquidity game model introduced by Curve's veCRV, creating a new paradigm for on-chain governance and incentive distribution.
Berachain currently designs two core types of on-chain native assets:
BGT: as the native governance token and the leading asset for incentive distribution;
BERA: as the staking asset for validators while also bearing the on-chain gas fee functionality.
At the same time, the main participant roles in the PoL model include: on-chain protocols on Berachain, validators in the network, and liquidity providers (LPs).
In this mechanism, any protocol or DApp wishing to obtain BGT incentives must first apply to join the PoL rewards treasury whitelist pool and provide sufficiently attractive bribes to attract BGT allocation from validators. Berachain's validators are the block-producing roles in the network (to become a validator, one must stake BERA tokens). When validators successfully produce a block, the system will provide them with BGT token rewards that include two parts:
One part is the basic block reward for validators,
The other part is referred to as the 'variable quantity reward', meaning the system allocates different amounts of BGT tokens to validators based on their 'Boost' values (calculated as the percentage of $BGT delegated to the validator out of the total delegated $BGT across all validators).
After successfully producing a block and receiving rewards, validators will distribute most of this variable reward according to their own strategies through the BeraChef contract to the approved whitelist PoL pools. In fact, for validators, when distributing variable BGT rewards to Reward Vaults, they will also receive incentives according to the rate set by the vault owner, such as HONEY, USDC, or the yields provided by the vault.
Generally, protocols that can offer higher returns to LPs tend to provide better returns to validators. Therefore, validators usually prefer to allocate more BGT rewards to PoL pools that can offer higher protocol incentives.
The PoL pool of the protocol will allocate BGT rewards to LP users after receiving them. Therefore, you will see that in some PoL pools on Berachain, becoming an LP not only yields regular farming rewards (transaction fee sharing, governance token rewards, etc.) but also earns native BGT token incentives from the core protocol, usually resulting in a high APY.
For BGT stakers, they can delegate BGT tokens to validators to help validators increase their 'Boost' value. In return, validators will periodically distribute the aforementioned protocol bribes they have received to the BGT delegators who support them according to a predetermined ratio.
Therefore, we see that under the PoL model:
Firstly, protocols usually form long-term games to obtain better circulation, continuously attracting liquidity through revenue. This 'revenue arms race' will bring better liquidity foundations to Berachain.
Secondly, validators are also competing with each other. They hope to attract more BGT holders to support them in order to achieve better 'Boost' values and potential returns. Thus, validators are continuously helping optimize network liquidity.
Thus, thirdly, whoever can provide more liquidity can master more voice and economic benefits, continuously forming a growth flywheel that combines liquidity, security, and incentive distribution.
2. What does POL v2 bring?
In fact, in Berachain v1, the BGT token, which has both governance and incentive functions, has been deeply integrated into Berachain's economic circulation system. As an incentive asset with inflation attributes, BGT has clear native use cases at the chain's underlying level and has sustainable income capabilities.
In contrast, the other core token BERA had a relatively weak economic role in the v1 stage. Aside from bearing gas fees and serving as a staking asset for validators, users were nearly unable to obtain on-chain revenue from BERA in a native way. Therefore, most BERA holders could only rely on third-party DeFi protocols, such as participating in LP farming supporting BERA or its wrapped assets in PoL pools to indirectly obtain yields, but these paths often have high thresholds, cumbersome operations, and poor user experience.
Similarly, under the current increasingly stringent global compliance environment, BERA and other native PoS assets on chains face similar issues, namely a lack of compliance-friendly revenue models, making it difficult for institutional users to adopt or incorporate them into the traditional financial system, thus limiting market expansion.
Therefore, the most intuitive change of v2 for Berachain lies in the introduction of the BERA incentive module, which allows BERA to better integrate into the Berachain economic ecosystem and empower the ecosystem without significantly altering the original economic ecological system.
BERA incentive module
In v2, Berachain further introduced the BERA incentive module, allowing users to stake BERA tokens directly in a single-coin manner via Berahub to earn native revenue from the chain ecosystem.
In fact, the BERA incentive module itself is similar to a staking method. If users natively stake BERA tokens, the system will first convert them into wrapped tokens WBERA, and after staking them in the network, feedback a voucher token sWBERA. Additionally, users can also directly stake WBERA tokens, and the system will similarly provide them with a feedback voucher token sWBERA.
Similar to Lido's stETH, the sWBERA token is akin to an LST, serving as a voucher asset while also expected to capture additional yields in Berachain's DeFi protocols, enhancing capital utilization and achieving multiple returns.
In v1, BGT holders delegated BGT to validator roles to help validators increase their 'Boost' value.
When users stake BERA tokens, they stake directly into the Berachain contract. The user experience is similar to single-coin staking in PoS, rather than delegating to validators. However, it is important to note that redeeming sWBERA for BERA requires a 7-day unlocking period.
From a revenue source perspective, in v1, the income for BGT staking users comes from the bribe income obtained by validators after providing incentives for specific PoL pools (additional incentives obtained from the treasury or related protocols). After deducting delegation fees, the majority is distributed to BGT stakers. In v2, this portion of bribe income will use 33% to repurchase WBERA, which is then distributed to BERA stakers (reinvestment). The amount of staking income users receive depends on their proportion of staked BERA tokens relative to the overall share.
We see that in v2, the threshold for users to earn income from BERA has been significantly lowered, as they can directly stake at the chain's underlying level with higher safety and reliability, and users no longer need to go through third-party protocols to become LPs or delegated types of staking.
From a revenue perspective, the current yield for single-sided staking of BERA can reach 103% (the highest single-coin staking yield for Layer1), which is indeed a very considerable yield state. Although CEX also offers a BERA earning feature, the overall yield is around 60% to 90%, making it more cost-effective to stake directly on-chain, that is, on Berahub (https://hub.berachain.com/stake/).
BERA staking rewards have a source of real revenue
In fact, the native staking of BERA does not rely on inflation to 'distribute tokens'; its mechanism itself is supported by real revenue.
This point is actually quite understandable. In Berachain's PoL model, protocols initiate 'bribes' to validators to compete for BGT rewards. Most of these bribe funds come from the protocol's own treasury and are paid in stablecoins, mainstream assets, or protocol tokens. These funds are not directly given to validators but are instead collected by the system, which takes a 33% fee and auctions them off as WBERA through the network, ultimately distributing them proportionally to users staking BERA.
In other words, although BERA rewards are indeed issued on-chain, this is not inflation created out of nothing like other PoS networks. I have real funds as support behind this, and the process is similar to the network selling the 'right to issue tokens' and then distributing this monetized income to stakers.
In this regard, Berachain's article presented a good example that I think is quite nice.
If both ETH and BERA issue $100M of tokens annually:
ETH directly issues $100M to stakers;
Berachain sells inflation through a bribery mechanism. If the efficiency is 80%, it will receive an additional ~$80M in real revenue.
The result is that with the same inflation, Berachain can achieve $180M of on-chain value return, whereas ETH only achieves $100M.
Thus, the staking rewards of BERA belong to 'real revenue at the protocol level', which is not only more sustainable but also provides long-term value support for its native staking scenario.
Institutional friendliness
Another aspect is the institutional friendliness mentioned by Berachain.
Previously, we mentioned that the Berachain PoL v2 model monetizes inflation into real revenue for the protocol, constructing a clear and identifiable on-chain real revenue model that does not rely on third-party protocols or secondary market speculation and completely comes from the real bribe expenditures of the on-chain protocol, which are transformed into traceable incentive funds through auctions.
The revenue produced by this model can be directly packaged, split, and distributed in a unified manner within a CEX custodial environment, allowing BERA's staking to have the potential to be packaged by institutions as financial products, custodial agreements, and structured income tools. This effectively addresses a pain point of being difficult to reach institutional users directly.
On the other hand, I am reminded of the recent attention-grabbing (Clarity Act), which establishes a more explicit compliance framework for crypto assets. Thus, the launch of PoL v2 is timely, binding revenue to real economic behavior through mechanism layers. On-chain financial tools should have clear sources of income, underlying structures that can withstand audits, and asset attributes that are custodial and interpretable for holders. This is one of the directions advocated by the Clarity Act.
If BERA launches a Digital Asset Treasury in the future, it will also provide a compliant, custodial on-chain revenue path with sustainable cash flow characteristics for institutions and even publicly listed companies.
Overall, the launch of v2 is not only about accelerating the flywheel within the ecosystem but also has deeper and long-term strategic significance for ecological development. Berachain itself is a distinctive Layer1 blockchain project, with its most recognizable innovation being the adoption of the PoL (Proof of Liquidity) block reward distribution mechanism. This mechanism transforms the chain's block rewards into a protocol's internal economic mechanism that drives ecological growth by distributing the vast majority of rewards directly to users and liquidity providers within the ecosystem, thereby driving application growth and accumulating on-chain liquidity.
In this model, all ecological assets participating in staking will directly provide on-chain liquidity support for Berachain. The rewards generated from PoL liquidity mining come from the chain's native incentive mechanism, which aims to create a more capital-efficient and incentive-oriented underlying structure.
Recently, Berachain upgraded its PoL consensus mechanism and officially released the brand new V2 version. This primarily introduces a new token economic model, further endowing the $BERA token with clearer rights to revenue and value support.
1. Let's first talk about the PoL consensus mechanism.
In fact, the operational logic of PoL is both simple and interesting. It combines the PoS consensus mechanism, liquidity mining, and the liquidity game model introduced by Curve's veCRV, creating a new paradigm for on-chain governance and incentive distribution.
Berachain currently designs two core types of on-chain native assets:
BGT: as the native governance token and the leading asset for incentive distribution;
BERA: as the staking asset for validators while also bearing the on-chain gas fee functionality.
At the same time, the main participant roles in the PoL model include: on-chain protocols on Berachain, validators in the network, and liquidity providers (LPs).
In this mechanism, any protocol or DApp wishing to obtain BGT incentives must first apply to join the PoL rewards treasury whitelist pool and provide sufficiently attractive bribes to attract BGT allocation from validators. Berachain's validators are the block-producing roles in the network (to become a validator, one must stake BERA tokens). When validators successfully produce a block, the system will provide them with BGT token rewards that include two parts:
A portion is the basic block reward for validators,
Another portion is called 'variable quantity reward', meaning the system allocates different amounts of BGT tokens to validators based on their 'Boost' values (calculated as the percentage of $BGT delegated to the validator out of the total delegated $BGT across all validators) — the higher the 'Boost' value, the more BGT token rewards this portion yields, which will decay after reaching a peak, ensuring fair distribution of BGT.
After successfully producing a block and receiving rewards, validators will distribute most of this variable reward according to their own strategies through the BeraChef contract to the approved whitelist PoL pools. In fact, for validators, when distributing variable BGT rewards to Reward Vaults, they will also receive incentives according to the rate set by the vault owner, such as HONEY, USDC, or the yields provided by the vault.
Generally, protocols that can offer higher returns to LPs tend to provide better returns to validators. Therefore, validators usually prefer to allocate more BGT rewards to PoL pools that can offer higher protocol incentives.
The PoL pool of the protocol will allocate BGT rewards to LP users after receiving them. Therefore, you will see that in some PoL pools on Berachain, becoming an LP not only yields regular farming rewards (transaction fee sharing, governance token rewards, etc.) but also earns native BGT token incentives from the core protocol, usually resulting in a high APY.
For BGT stakers, they can delegate BGT tokens to validators to help validators increase their 'Boost' value. In return, validators will periodically distribute the aforementioned protocol bribes they have received to the BGT delegators who support them according to a predetermined ratio.
Therefore, we see that under the PoL model:
Firstly, protocols usually form long-term games to obtain better circulation, continuously attracting liquidity through revenue. This 'revenue arms race' will bring better liquidity foundations to Berachain.
Secondly, validators are also competing with each other. They hope to attract more BGT holders to support them in order to achieve better 'Boost' values and potential returns. Thus, validators are continuously helping optimize network liquidity.
Thus, thirdly, whoever can provide more liquidity can master more voice and economic benefits, continuously forming a growth flywheel that combines liquidity, security, and incentive distribution.
2. What does POL v2 bring?
In fact, in Berachain v1, the BGT token, which has both governance and incentive functions, has been deeply integrated into Berachain's economic circulation system. As an incentive asset with inflation attributes, BGT has clear native use cases at the chain's underlying level and has sustainable income capabilities.
In contrast, the other core token BERA had a relatively weak economic role in the v1 stage. Aside from bearing gas fees and serving as a staking asset for validators, users were nearly unable to obtain on-chain revenue from BERA in a native way. Therefore, most BERA holders could only rely on third-party DeFi protocols, such as participating in LP farming supporting BERA or its wrapped assets in PoL pools to indirectly obtain yields, but these paths often have high thresholds, cumbersome operations, and poor user experience.
Similarly, under the current increasingly stringent global compliance environment, BERA and other native PoS assets on chains face similar issues, namely a lack of compliance-friendly revenue models, making it difficult for institutional users to adopt or incorporate them into the traditional financial system, thus limiting market expansion.
Therefore, the most intuitive change of v2 for Berachain lies in the introduction of the BERA incentive module, which allows BERA to better integrate into the Berachain economic ecosystem and empower the ecosystem without significantly altering the original economic ecological system.
BERA incentive module
In v2, Berachain further introduced the BERA incentive module, allowing users to stake BERA tokens directly in a single-coin manner via Berahub to earn native revenue from the chain ecosystem.
In fact, the BERA incentive module itself is similar to a staking method. If users natively stake BERA tokens, the system will first convert them into wrapped tokens WBERA, and after staking them in the network, feedback a voucher token sWBERA. Additionally, users can also directly stake WBERA tokens, and the system will similarly provide them with a feedback voucher token sWBERA.
Similar to Lido's stETH, the sWBERA token is akin to an LST, serving as a voucher asset while also expected to capture additional yields in Berachain's DeFi protocols, enhancing capital utilization and achieving multiple returns.
In v1, BGT holders delegated BGT to validator roles to help validators increase their 'Boost' value.
When users stake BERA tokens, they stake directly into the Berachain contract. The user experience is similar to single-coin staking in PoS, rather than delegating to validators. However, it is important to note that redeeming sWBERA for BERA requires a 7-day unlocking period.
From a revenue source perspective, in v1, the income for BGT staking users comes from the bribe income obtained by validators after providing incentives for specific PoL pools (additional incentives obtained from the treasury or related protocols). After deducting delegation fees, the majority is distributed to BGT stakers. In v2, this portion of bribe income will use 33% to repurchase WBERA, which is then distributed to BERA stakers (reinvestment). The amount of staking income users receive depends on their proportion of staked BERA tokens relative to the overall share.
We see that in v2, the threshold for users to earn income from BERA has been significantly lowered, as they can directly stake at the chain's underlying level with higher safety and reliability, and users no longer need to go through third-party protocols to become LPs or delegated types of staking.
From a revenue perspective, the current yield for single-sided staking of BERA can reach 103% (the highest single-coin staking yield for Layer1), which is indeed a very considerable yield state. Although CEX also offers a BERA earning feature, the overall yield is around 60% to 90%, making it more cost-effective to stake directly on-chain, that is, on Berahub (https://hub.berachain.com/stake/).
BERA staking rewards have a source of real revenue
In fact, the native staking of BERA does not rely on inflation to 'distribute tokens'; its mechanism itself is supported by real revenue.
This point is actually quite understandable. In Berachain's PoL model, protocols initiate 'bribes' to validators to compete for BGT rewards. Most of these bribe funds come from the protocol's own treasury and are paid in stablecoins, mainstream assets, or protocol tokens. These funds are not directly given to validators but are instead collected by the system, which takes a 33% fee and auctions them off as WBERA through the network, ultimately distributing them proportionally to users staking BERA.
In other words, although BERA rewards are indeed issued on-chain, this is not inflation created out of nothing like other PoS networks. I have real funds as support behind this, and the process is similar to the network selling the 'right to issue tokens' and then distributing this monetized income to stakers.
In this regard, Berachain's article presented a good example that I think is quite nice.
If both ETH and BERA issue $100M of tokens annually:
ETH directly issues $100M to stakers;
Berachain sells inflation through a bribery mechanism. If the efficiency is 80%, it will receive an additional ~$80M in real revenue.
The result is that with the same inflation, Berachain can achieve $180M of on-chain value return, whereas ETH only achieves $100M.
Thus, the staking rewards of BERA belong to 'real revenue at the protocol level', which is not only more sustainable but also provides long-term value support for its native staking scenario.
Institutional friendliness
Another aspect is the institutional friendliness mentioned by Berachain.
Previously, we mentioned that the Berachain PoL v2 model monetizes inflation into real revenue for the protocol, constructing a clear and identifiable on-chain real revenue model for BERA that does not rely on third-party protocols or secondary market speculation, completely coming from the real bribe expenses of the on-chain protocol, which are transformed into traceable incentive funds through auctions.
The revenue produced by this model can be directly packaged, split, and distributed in a unified manner within a CEX custodial environment, allowing BERA's staking to have the potential to be packaged by institutions as financial products, custodial agreements, and structured income tools. This effectively addresses a pain point of being difficult to reach institutional users directly.
On the other hand, I am reminded of the recent attention-grabbing (Clarity Act), which establishes a more explicit compliance framework for crypto assets. Thus, the launch of PoL v2 is timely, binding revenue to real economic behavior through mechanism layers. On-chain financial tools should have clear sources of income, underlying structures that can withstand audits, and asset attributes that are custodial and interpretable for holders. This is one of the directions advocated by the Clarity Act.
If BERA launches a Digital Asset Treasury in the future, it will also provide a compliant, custodial on-chain revenue path with sustainable cash flow characteristics for institutions and even publicly listed companies.
Overall, the launch of v2 is not only about accelerating the flywheel within the ecosystem but also has deeper and long-term strategic significance for ecological development.
