BlockBeats ｜ 2025-02-11 14:10
Merely holding $BERA is not a good idea, but participating in PoL could be very worthwhile.
Written by: Ericonomic, Three Sigma author.
Translated by: Ashley, BlockBeats.
Editor's note: As one of the most discussed Layer 1s recently, Berachain's PoL mechanism has attracted a large number of developers and investors. However, with the launch of the Berachain mainnet, issues such as inflation, private distribution, and changes in staking rules have also sparked controversy. The author combines personal research to deeply analyze the current state of Berachain, exploring its potential risks and development prospects.
The following is the original content (for ease of reading and understanding, the original content has been reorganized):
Some thoughts on the current state of Berachain.
Many friends know that I have been active in the Berachain ecosystem and have invested a lot of time and energy. After going through all of this, I feel the need to share my honest views on the launch of Berachain, its current state, and its future development.
I will first mention some aspects that I am not very satisfied with:
$BERA Inflation Issues.
This is my biggest concern because it will directly affect price performance.
The annual inflation rate of BGT is 10% of the total supply (total supply = 500 million; first-year inflation = 50 million).
The circulating supply in the first year is approximately 21.5% (110 million tokens) + 2% released by Boyco within 30–90 days. In this case, an inflation of 50 million means that if all BGT were destroyed (although it won't happen in reality), the first-year inflation rate would be close to 50%. By the end of the first year, the circulating tokens will reach about 170 million.
Inflation situation in the second year: BGT will maintain an inflation rate of 10% (55 million), plus 196 million tokens released by different distribution methods (the largest portion comes from private investors). This means that by the end of the second year, the circulating supply will reach 418 million, with an inflation rate of about 150%.
Although most L1s have high inflation in their early stages, Berachain's inflation rate is much higher than that of other projects. Moreover, this comparison is not favorable to Berachain, as the price performance (PA) of many projects has been severely affected by high inflation. Therefore, it cannot be used as a reasonable excuse for Berachain's high inflation.
$BERA Private Investors.
Berachain sold over 35% of its token supply to private investors (I previously thought it was only 20%).
Seed Round: 50M FDV
Second Round: 420M FDV
Final Round: 1.5B FDV
This means there is a large number of tokens in the market coming from private financing.
Most projects have a private placement ratio of about 20%, and I already think this ratio is too high and detrimental to project development. Berachain's private financing ratio is even higher, combined with a long vesting period, leading to continuous selling pressure in the market, which usually keeps the token price in a long-term downward trend, especially in cases of high FDV and low circulating supply (high FDV, low circulation).
$BERA Staking (for private investors).
Although this is not an extremely negative factor (but to be honest, I don't like it), it should be explained better.
Private investors can stake $BERA to earn liquidity rewards and then sell it (in other words, they can stake $BERA to get more $BERA).
15% of the annual inflation of BGT (7.5 million BGT) will be allocated to validators, most of which will flow to stakers. If all 500 million in supply is staked, the annualized yield (APY) would be about 1.6%, but in reality, it is impossible to stake everything.
The actual staking rate may be around 60%, so the APY is approximately between 2.8% and 3.2%.
Many people compare Berachain with Celestia, but Celestia's early APY was about 20%, so this comparison is not very reasonable. At the same time, while anyone can stake $BERA to earn yields, thereby diluting the APY of private investors, this staking mechanism will still increase selling pressure.
Temporary changes + poor whitepaper.
What I am most dissatisfied with is that the $BERA staking mechanism was only made public a few weeks ago, and even now, if you want to find relevant information, it takes a lot of time to find meaningful information.
This mechanism is crucial for market sentiment, especially against the backdrop of the current market environment and rising anti-VC sentiment; it should have been announced earlier and more transparently, and detailed in the official documentation on the first day.
It wasn't until Jack posted an explanation that the community learned about this issue, leading to FUD and disappointing the OGs about Berachain, making them unwilling to hear any news about Berachain.
To be honest, this makes me very angry because it feels like they intentionally announced this staking mechanism at the last minute (otherwise, why not write it in the official documentation?). However, after understanding the situation, I found out that the APY is only 3%, which feels more like a communication error rather than a malicious concealment.
Currently, there is no PoL.
The core product of Berachain is PoL; if PoL is not launched, then Berachain is just another PoS fork, and that is indeed the current situation.
I believe this will not last long (hopefully), but since BGT does not have a real use yet, many people feel disappointed and may not even try to understand Berachain's design in the future.
As far as I understand, this is a necessary step to ensure Berachain can operate stably before fully deploying PoL, and I do not know if there is a better solution. But the problem is that they must complete the PoL deployment as soon as possible and cannot delay for too long.
DevBear is selling tokens.
DevBear, the co-founder of Berachain, is selling tokens at a real-name address. He obtained about 200,000 $BERA from the airdrop (which is not very reasonable since the airdrop rules were set by them), and then he exchanged part of the tokens for assets like WBTC, ETH, BYUSD, etc.
Even if he hadn’t sold, it’s still not ideal for core team members to receive so many airdrops.
He might be testing the product or providing liquidity, but in any case, this issue should be clarified immediately.
Berachain still has its highlights.
The Berachain community is strong.
The Berachain community is one of the strongest in the entire industry. Having been in this industry for many years, I can confirm this. Even when the project has issues, the community and developers will still do their best to support the growth of Berachain.
The Dapp ecosystem is vast.
The developer ecosystem of Berachain is very active, having built, tested, and deployed numerous Dapps, which will be launched in the coming weeks.
Every public chain needs a strong application ecosystem to succeed, and Berachain has these Dapps in its early stages, which is the main reason I remain bullish on its mid-term development.
Great emphasis on security.
In the development of new mechanisms and new public chains, security is often a major concern. For a completely new project like Berachain, the importance of security is even magnified. One thing I appreciate is that the Berachain Foundation takes security issues very seriously; they pay attention to every detail and choose a robust and secure way to advance the network's launch and decentralization.
Although most people do not like slow progress, I think this is a positive expectation approach.
PoL Mechanism.
I still believe that PoL is a very interesting mechanism, and once it is fully deployed and the flywheel effect is initiated, we will see an extremely attractive APY that will attract a large number of liquidity miners into the Berachain ecosystem.
Conclusion.
I am quite sure that merely holding $BERA is not a good idea, due to the various factors I mentioned earlier. But at the same time, I am also confident that participating in the PoL liquidity proof mechanism will be a very worthwhile choice.
I prefer to view Berachain as a yield chain rather than a chain where one simply holds non-productive tokens. You need to provide liquidity, recycle, lend, research the best strategies to earn BGT, and conduct due diligence on each validator to see who to delegate your BGT to, or whether it is more worthwhile to burn BGT for automatic compounding. In Berachain, you must actively participate rather than merely hold tokens.
In my view, the most critical thing is to introduce liquidity and kickstart the flywheel effect. If this step is successful, Berachain can succeed.
Before ending this reflection, I want to say that I have always believed Berachain is a refreshing stream with cultural and moral values in an industry filled with scams. Therefore, seeing it go through this 'less than ideal' launch and some 'ambiguous' adjustments (such as changes to the BERA staking rules) does disappoint me a bit. That said, if the foundation and developers can continue to work hard like they have in the past few years, Berachain still has a chance to become the most yield-generating chain, far surpassing other similar projects.
