Gate Research Institute: Berachain and its Consensus Mechanism -- Who is still paying for the public chain narrative

Gate Research Institute's latest release, "Berachain and Its Consensus Mechanism - Who Still Believes in the Public Blockchain Narrative?", systematically analyzes the rise of the innovative public chain Berachain. The report centers around the PoL (Proof of Liquidity) consensus mechanism and comprehensively dissects how Berachain reshapes its security model and governance logic by incentivizing liquidity providers, from multiple dimensions including technical architecture, token economics, TVL growth, ecological applications, and on-chain data. The report also reveals its structural contradictions and potential risks during rapid expansion, and conducts an in-depth assessment of whether it can build a sustainable economic flywheel and advance towards a new generation of public chain paradigm.

Key Points Summary

• Market Background: Since 2020, the crypto market has experienced several rounds of bull and bear transitions, with TVL and on-chain innovations becoming the core focus of the new cycle. In early 2025, the Berachain mainnet went live, rapidly rising with its innovative consensus mechanism and strong capital attractiveness, becoming the sixth largest public chain by TVL within just one month, attracting widespread attention from the market.
• Technical Evolution: Berachain is built on the Cosmos SDK, utilizing a modular architecture with BeaconKit and Polaris EVM, achieving complete compatibility with the Ethereum toolchain, and supports interaction between custom modules and Cosmos modules, paving the way for multi-chain development and enhancing DeFi composability and flexibility.
• Consensus Mechanism Innovation: The PoL (Proof of Liquidity) mechanism links on-chain security with liquidity providers, differing from traditional PoS's "staking means locking up", encouraging active assets to participate in network construction. By soul-binding the governance token $BGT, it incentivizes LPs and validators to form cooperative relationships, addressing the liquidity lock-up and centralization issues of PoS.
• Token Economic Design: Three-token system ($BERA, $BGT, $HONEY) with clear functions and mutual checks to avoid centralization of governance power. $BGT can only be obtained by providing liquidity and cannot be purchased; the voting mechanism is embedded in the incentive loop, forming a DeFi incentive flywheel.
• Ecological Explosiveness: At the initial launch stage, the TVL quickly surpassed $3 billion, with native protocols such as BEX, Bend, Berps, and Infrared leading the capital accumulation. Protocols like Kodiak, Gummi, and Beradrome provide diversified functionalities, enhancing ecological depth and stickiness.
• Centralization Risk: TVL is highly concentrated in a few protocols (Top 3 account for over 60%), and the early ecosystem exhibits a pattern of "whale dominance + low protocol density." The PoL incentive mechanism may reinforce oligopoly advantages, forming a potential cartel.
• Inflation Concerns: $BGT's daily issuance is stable, but the destruction ratio is relatively low, with an annualized inflation rate of about 8.6%. If ecological growth fails to cover the issuance, it may fall into a subsidy spiral, affecting the stability of governance token value and long-term user retention.
• Future Outlook: If Berachain can convert liquidity accumulation into real demand and achieve a prosperous dApps ecosystem, it is expected to define a new "liquidity-driven" public chain paradigm. Otherwise, it may fall into a short-term bubble due to uncontrolled inflation and lack of innovation. Ecological expansion, optimization of incentive mechanisms, and decentralized governance will be key battlegrounds in the future.

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