In the current competition among public chains, most Layer1 projects' incentive models still remain within the traditional PoS (Proof of Stake) paradigm: issuing new tokens and distributing them to validators and delegators based on staking ratios. Although the model is simple, this 'pure inflation' token issuance logic lacks refined economic direction, easily leading to incentive misalignment and low capital efficiency.
Berachain has taken a different path in this regard—its PoL (Proof of Liquidity) consensus mechanism has directly bound block rewards to on-chain liquidity since its inception, forming a unique ecological growth flywheel. Recently, Berachain officially launched PoL v2, and this upgrade is not only an optimization of the economic model but also a step towards institutional-level, sustainable yield pathways.
One, The Core Logic of PoL: Transforming Consensus Incentives into Liquidity Competition
The core idea of PoL can be summarized in one sentence: whoever can bring more liquidity can earn more network rewards and influence.
On Berachain, there are two native assets crucial for economic operation:
BGT: The central token for governance and incentive distribution.
BERA: The Gas token on-chain.
There are three types of core participants in the operating mechanism: validators, protocol parties, and liquidity providers (LP).
Protocols that want to gain BGT incentives must 'bribe' validators (by providing stablecoins, protocol tokens, etc.).
When validators distribute BGT, they will prioritize protocols with higher yields, thus forming a liquidity competition.
LPs supporting these protocols can earn additional BGT incentives alongside regular yields.
This mechanism has several effects:
A long-term game is formed between protocols, continuously increasing LP yields and attracting liquidity.
Validators will also actively optimize liquidity allocation to enhance the 'Boost' value.
The liquidity, security, and economic incentives of the entire network form a positive feedback loop.
PoL v1 has already proven the powerful effect of this model in attracting liquidity to the on-chain ecosystem, but it has also exposed a problem—BERA's position in the economic cycle is insufficient.
Two, Shortcomings of POL v1: The 'Absence' Role of BERA
Under the v1 model, BGT serves as an active economic medium in the ecosystem, with both inflation issuance and clear distribution mechanisms and yield scenarios. In contrast, BERA's function is singular:
For validator staking
For paying Gas
Ordinary users can hardly obtain native yields directly from holding BERA unless they participate in complex LP farming through third-party DeFi protocols. This not only raises the participation threshold but also limits the capital utilization rate of BERA as a core PoS asset.
The more realistic challenge is that, under the backdrop of tightening global regulation, PoS assets like BERA, which lack compliant and friendly yield models, are difficult for institutions to adopt or incorporate into the traditional financial system.
Three, Core Changes in PoL v2: BERA Incentive Module
The biggest highlight of v2 is that it introduces native staking yield for BERA.
Users can now directly stake BERA or WBERA on Berahub to receive the voucher token sWBERA (similar to Lido's stETH). This voucher can continue to be used in the DeFi ecosystem, enabling multiple utilizations of funds.
The source of revenue has also undergone key transformations:
33% of the protocol bribes received by validators in the PoL mechanism will be repurchased as WBERA
These WBERA are distributed proportionately to BERA stakers
The yield is not pure inflation, but rather a conversion of real protocol income
This model essentially redirects part of the revenue that would originally flow to validators into the BERA staking system, transforming BERA from a 'network operational cost token' into an 'on-chain real yield certificate'.
Four, Real Yield and Capital Efficiency: Why v2 is More Sustainable
The yield model of PoL v2 has two notable characteristics:
Real cash flow support
The revenue comes from the bribes paid by the protocol to compete for BGT, which are sourced from the protocol treasury, rather than being generated from thin air through inflation.
Realized through 'auctioning off the right to issue tokens', and then redistributed to stakers.
Under equal inflation conditions, Berachain's capital return efficiency is higher than that of traditional PoS chains.
Improved capital efficiency
sWBERA can serve as LST to capture yields again in the ecosystem.
Users do not need to participate in complex LP or delegation processes, making the staking path simpler and safer.
Currently, the annualized yield for on-chain staking is as high as approximately 103%, significantly outperforming the 60%-90% offered by CEX earning functions.
Five, Institutional Perspective: From Crypto Incentives to Compliant Yield Products
Another value of PoL v2 lies in its natural adaptation to the logic of institutional participation:
The sources of yield are clear and auditable, and can be directly incorporated into the compliance financial reporting system.
The flow of funds is transparent and does not rely on secondary market speculation.
The yield model can be packaged in a custodial environment as structured financial products, digital asset bonds, etc.
This is highly aligned with the recent regulatory direction proposed by the Clarity Act: the yields from on-chain assets should be subject to transparent audits, linked to real economic activities, and capable of custodial distribution. In the future, BERA has the opportunity to become part of institutional digital asset portfolios, and even form standardized products for on-chain 'Digital Asset Treasuries'.
Six, Conclusion: v2 is an accelerator for a growth flywheel
PoL v1 solved the problem of matching incentives with liquidity, allowing Berachain to form a liquidity-driven consensus network. PoL v2 further addresses the issue of the core asset BERA lacking yield, upgrading it from a network operational cost token to an on-chain real yield certificate, and incorporating institutional-friendly attributes.
This will not only accelerate the capital circulation within the ecosystem but may also open up pathways for Berachain to extend into traditional finance and institutional investment. In other words, PoL v2 is not just an upgrade of token economics, but a key step for Berachain from being a 'liquidity engine on-chain' to becoming an 'on-chain yield infrastructure'.
