Citizen DeFi Play: Berachain Mainnet

BM, henlo, and furthermore, ooga booga.

Bong Bears, a collection of 100 cannabis-themed bear NFTs, were deployed to Ethereum 41 months ago, and since then, the project’s associated Berachain has become one of crypto’s most hotly anticipated alt L1 launches! The chain raised $42M from top venture capital firms in 2023, and followed it up with another $100M round just last April.

At long last, Berachain has finally arrived, so today, we’re giving you a first look at the live network and unpacking everything you need to know about the BERA opportunity. 👇

🪙 Tokenomics

The most important aspect of any L1 blockchain is its native token(s). Berachain has a total of three, and early ecosystem participants were just airdropped a 15.8% share of BERA, Berachain’s gas and network validation token.

BERA rewards were distributed in recognition of community members’ pre-launch contributions. The eligibility criteria for this airdrop encompassed a wide range of interactions, including: testnet interactions, Boyco pre-launch deposits, social engagement, holding ecosystem NFTs, and more.

• Holders of Berachain’s official NFTs (the Bong Bears and all rebases), are slated to receive 6.9% of the total BERA supply in the initial airdrop. While they can claim 72% of this airdrop after bridging their NFTs to Berachain to claim BERA, unlike all other airdrop recipients who can claim their full airdrop upon token generation, Berachain NFT holders must retain their JPEGs for a three-year vesting period to claim their allocation in its entirety.
• Berachain’s “Ecosystem and R&D” fund will receive 20% of the BERA supply to support future network development (with 47.5% of which is unlocked on day one), and 13.1% of all BERA has been set aside to fund future community initiative programs.
• Rounding out the distribution, Berachain’s investors and initial core contributors are scheduled to receive a total of 51.1% of the BERA supply.

After an initial one-year lock period, 1/6th of the Ecosystem and R&D, Community Initiative, Investor, and Core Contributor allocations will unlock, with the remainder vesting linearly over the following two years.

BERA has a total supply of 500M at genesis, and it is estimated that token will inflate at 10% per year on the redemption of BGT – Berachain’s non-transferable governance token which is used for block rewards and to incentivize DeFi application interactions, and can be converted 1:1 into BERA (subject to governance changes).

By taking DeFi deposit receipts (i.e.; LP tokens) from onchain opportunities that have been whitelisted by BGT governance and depositing them into a rewards vault, Berachain DeFi users can enhance their yield with BGT emissions.

The Berachain-native HONEY stablecoin can be minted on HoneySwap against crypto asset collateral that has been whitelisted by network governance, and all mint/redemption fees on the token – this is currently set at 0.2%, but can be changed at any time by governance – will be distributed as rewards to BGT holders.

🖥️ Top Applications

Core to Berachain are its native applications, which provide the basic functionality needed to promote its BGT incentive program, and like any other L1, Berachain also comes equipped with third-party apps.

As mentioned above, HoneySwap can be used to mint and redeem the Berachain-native HONEY stablecoin, which can then be paired with other tokens and deposited as liquidity into BeraSwap, the Berachain-native exchange that directs a portion of its fees back to BGT holders.

Berachain’s DeFi users can then stake their liquidity deposit receipts from applications on the Rewards Hub to receive additional BGT incentives, assuming a Berachain validator with BGT stake has voted to offer emissions on the asset.

The Berachain ecosystem combines a slew of new applications, many of which come armed with airdrop promises and fresh design takes optimized for BGT incentives, with a number of existing DeFi projects, like money market Dolomite, that have already expanded to Berachain.

Protocols like InfraredFinance, BeraPaw, and BGT Market offer multiple different liquid staked BERA and BGT solutions, meanwhile, Beradrome is looking to outdo the success of Base’s popular Aerodrome exchange by tapping Berachain’s unique tokenomics to enhance depositor yields with BGT emissions.

🧐 Conclusion

Berachain’s BERA was sitting at a $4B fully diluted valuation at the time of writing, ranking it competitively with niche L1s like Near and Aptos, but multiples below many of crypto’s older/more reputable networks, such as Ethereum, Solana, Sui, and Cardano.

While past DeFi-centric L1s – like public infrastructure-oriented Canto – have come and flopped, Berachain’s tri-token model and enshrined BGT emissions program provides it with a unique incentives model that should enhance users’ yields and attract deposits to the network.

Rational BGT participants will aim to maximize the dollar value of their holdings when making network governance decisions, meaning they are likely to structure BGT incentives in a manner that encourages Berachain users to hold BERA (the redemption token for BGT) and HONEY (the stablecoin that channels fees to BGT holders). Additionally, BGT voting exposure could become a desirable asset to accumulate for Berachain protocols that wish to direct emissions in support of end-user yields.

No other crypto L1 in existence has enshrined rewards for DeFi liquidity providers.

Although the results of novel crypto economic structures are never guaranteed, if Berachain succeeds in attracting capital through superior yields, it could trigger an incentive-driven flywheel, potentially making BERA’s current valuation a bargain basement buy in retrospect while cementing the network as a standout among competitors!