Exploring the Characteristics and Core Projects of the Berachain Ecosystem

Berachain is a Layer 1 network characterized by its PoL( Proof of Liquidity) consensus mechanism, aimed at aligning the interests of validators, liquidity providers, and protocols. Currently, Berachain is conducting its second testnet "bArtio Testnet" to address the issues identified in the first testnet.

As of January 2, 234 protocols have been deployed on the bArtio Testnet, and the total number of wallets participating in testing the PoL mechanism has exceeded 2.38 million. These figures indicate a high level of market interest in Berachain and its ecosystem.

The founder of Berachain, Smokey The Bera, recently hinted that the mainnet will be launched before April, attracting both new and old users to join the ecosystem. However, participating in the Berachain ecosystem requires an understanding of its PoL mechanism, and prior to the mainnet launch, the complex financial products introduced by protocols to gain an advantage in the PoL mechanism have created a high entry barrier for new users.

This article will explore various areas of the Berachain ecosystem, discuss outstanding projects, and elaborate on how each protocol utilizes the PoL mechanism to lower the barriers to user participation.

DEX

Berachain has a native DEX called BEX, which will be launched as BeraSwap when the mainnet goes live. Other DEXs preparing to launch on Berachain are developing various convenient and efficient services and strategies to attract users and liquidity.

Kodiak

Kodiak is a DEX that stands out from the Berachain incubated project "Build a Bera". In addition to supporting the Uniswap v2 features of BEX, Kodiak also offers CLAMM functionality similar to Uniswap v3, allowing liquidity providers to set and concentrate liquidity within a specific range.

Users can provide liquidity in a narrow range through the CLAMM pool, effectively farming $BGT. Kodiak's Island feature helps to automatically reset and balance the CLAMM range, reducing the hassle of managing liquidity supply positions. This feature utilizes BEX to rebalance liquidity, establishing a complementary rather than competitive relationship.

Kodiak standardizes CLAMM liquidity positions through the Island feature, allowing LP tokens to be used in other protocols and promoting more flexible and diverse ecological gameplay.

Kodiak has collaborated with multiple projects in the Berachain ecosystem, establishing a core infrastructure position. It also operates its own Berachain validation node and has received the second highest BGT authorization in the bArtio Testnet as of January 3.

Honeypot Finance

Honeypot Finance is a protocol that supports all aspects of the token lifecycle, including the following sub-protocols:

• Henlo DEX: A DEX specifically designed to protect users from MEV attacks, offering limit orders and Batch-A2MM functionality.

• Dreampad: A Launchpad protocol that provides incubation and financing opportunities for projects preparing to launch on Berachain.

• Pot2Pump: A platform that provides a safer environment for meme coin launches and trading.

Honeypot Finance plans to operate as a validator after the mainnet launch, providing $HPOT as rewards to users who delegate $BGT. The protocol utilizes accumulated $BGT to release into the $HPOT liquidity pool, enhancing the liquidity of $HPOT. There are also plans to enhance the token value by purchasing and burning $HPOT using income from node operations.

Liquidity Staking

The structure of Berachain is such that when liquidity providers deposit the liquidity tokens obtained from the ecological protocol, they receive network rewards and liquidity provision interest calculated in $BGT. Therefore, Berachain has essentially built liquidity staking into the network protocol.

In Berachain, existing protocols can only provide rewards and gain voting rights by collaborating with validators or by operating nodes themselves to establish a self-sustaining flywheel model. The liquid staking protocol will provide the redemption function for $BGT, making it easier for ecological protocols to adopt structures that closely integrate the PoL mechanism.

Infrared

Infrared is a liquidity staking protocol co-incubated with Kodiak through Berachain's "Build a Bera" program.

The Infrared-operated vaults can accept LP tokens from liquidity pools, generating $BGT interest rates while running network nodes. When users deposit LP tokens into these vaults, Infrared will use these tokens to generate $BGT, and users can claim $iBGT( in proportion to the deposited LP tokens that have been liquidated for $BGT).

Users can utilize $iBGT in the following ways:

• In Infrared staking, receive rewards generated by the nodes.
• Used in other DeFi protocols
• Sell for profit

Infrared converts $BGT into a liquid token, concentrating and distributing the rewards generated by the PoL mechanism to fewer $iBGT stakers, while also assisting other protocols in the ecosystem to incorporate $iBGT into their protocols, providing users with higher returns. Infrared also plans to introduce new features that will allow it to receive and settle the $BERA required for node operation while running nodes and distributing profits.

Kodiak's Island Pool is the best example of effectively utilizing the Infrared functionality. After the mainnet launch, Infrared plans to introduce Kodiak's Island Pool, allowing users to use Kodiak's CLAMM for more efficient $iBGT farming, and the received $iBGT can be restaked in Infrared or re-deposited into Kodiak's $iBGT/$BERA Island Pool for more $iBGT farming.

Based on the interconnectivity of the protocol and effective ecological gameplay, Infrared accepts the most $BGT delegation in the bArtio Testnet. Many ecological projects have partnered with Infrared, planning to launch various derivative products, indicating that Infrared will become the most important infrastructure after the mainnet launch.

BeraPaw

BeraPaw is a liquidity staking protocol that does not run its own nodes, but operates a treasury between different nodes and liquidity pools registered with BeraPaw, issuing $LBGT as the $BGT settlement token.

The governance token of BeraPaw is $PAW. Users can vote using the $BGT held in BeraPaw to decide which liquidity pools should receive $BGT. Node operators distribute the rewards generated from staking $BGT to $LBGT holders through this method.

The structure adopted by BeraPaw divides the use of the $BGT token into two types of tokens: $LBGT and $PAW, with 1) receiving rewards and 2) voting for the $BGT emission pool. Through this structure, users and protocols voting for $BGT Emission with $PAW tokens can exercise more voting power with less capital. Therefore, protocols seeking initial liquidity in the ecosystem are expected to actively utilize $PAW to generate $BGT rewards for their liquidity pools.

Lending

Berachain has a native lending protocol called BEND, offering the following features:

• Use $WBTC and $WETH as collateral to borrow $HONEY
• Deposit $HONEY

BEND has two notable features: 1)$HONEY cannot be used as collateral, while 2)$WBTC and $WETH deposits do not earn interest, but borrowing $HONEY will generate $BGT rewards.

Through this structure, BEND strengthens Berachain's triple-token economic model, generating basic interest for $HONEY while increasing lending demand through $BGT, enriching the ecosystem's liquidity. Users can also execute $BGT leveraged farming by repeatedly swapping borrowed $HONEY back to $WETH, $WBTC, and depositing it into BEND.

BeraBorrow

BeraBorrow is an over-collateralized stablecoin issuance protocol that allows users to mint $NECT stablecoins. It permits ordinary assets such as $BERA and $HONEY, as well as BEX and Berps LP tokens and Infrared's $iBGT to be used as collateral. The $NECT minted against the collateral can be deposited into BeraBorrow's liquidity stability pool, where depositors can collect borrowing fees and liquidation fees from $NECT borrowers.

In addition to $NECT, BeraBorrow has a governance token $POLLEN, which can serve as an incentive token in the following aspects:

• Liquidity pool used for rewards in obtaining $BGT Emission
• Encourage staking deposits into the liquidity pool of up to $NECT debt
• Distributed as rewards to depositors of the liquidity stability pool

Depositing LP tokens into BeraBorrow will automatically deposit them into Infrared to generate $iBGT rewards and will automatically re-deposit into Infrared to generate compound interest. Users can borrow $NECT to provide liquidity in other protocols and re-deposit the received LP tokens into BeraBorrow to establish leveraged positions.

BeraBorrow also plans to allocate $BGT to the DEX liquidity pool for $NECT and $iBGT trading, enhancing the demand for $NECT and market liquidity, while providing high deposit yields for liquidity providers.

Gummi

Gummi is a lending protocol incubated through "Build a Bera" that operates without oracles, allowing anyone to create lending pools without restrictions. Gummi plans to use any assets from Berachain to provide users with the ability to establish 100x leveraged positions.

Gummi has partnered with core infrastructure such as Infrared and Kodiak, planning to support the leveraged farming position feature for various LP tokens of $iBGT and Kodiak.

Derivative Protocol

Berachain will launch the native Perp DEX Berps, where users can establish 100x leveraged positions on various assets using $HONEY, or deposit $HONEY to provide liquidity for traders' positions and earn trading fees, funding fees, and $BGT as rewards.

SMILEE

SMILEE is an options protocol that can provide position creation for hedging positions in DEX liquidity. The options created by SMILEE have a unique structure that can generate more profit during significant price fluctuations, creating effects completely opposite to the impermanent loss (IL).

Users must pay the premium to establish an options position in SMILEE, with three types of options positions available:

• 牛(Bull): Bet on a significant price increase volatility
• 熊(Bear): The betting price has significantly decreased volatility.
• 微笑(Smile): The betting price fluctuates significantly upwards or downwards.

Users can also provide liquidity for options positions established by option traders and earn the option fees paid by the traders. SMILEE reduces the impermanent loss for liquidity providers by dynamically rebalancing the liquidity provision positions.

Exponents

Exponents are leveraging positions that will not be liquidated on all assets through the self-developed reverse asset issuance protocol IBC( and the reverse Bonding Curve ).

IBC adopts a reverse Bonding Curve, which is contrary to the traditional Bonding Curve. IBC realizes reverse assets, where the price decreases as demand increases, and the number of receivable assets increases due to more collateral assets being deposited.

Exponents use the IBC mechanism to implement long and short positions for all assets without the need for an oracle. By adjusting the parameters of the IBC mechanism, the slope of the Bonding Curve can be made steeper, thereby providing leveraged positions without liquidation.

Other Featured Projects

Goldilocks

Goldilocks is a DAO and platform that develops the DeFi infrastructure exclusive to Berachain, consisting of the following sub-protocols:

• Goldiswap: Includes FSL pools that guarantee the minimum price of $LOCKS and PSL pools for exchanging $HONEY and $LOCKS.

• Goldilend: The NFT collateral lending protocol of the Berachain ecosystem.

• Goldivaults: Utilize assets with time locks stored in Berachain's DeFi protocol.