1. Let's First Discuss the PoL Consensus Mechanism
In fact, the operational logic of PoL is both simple and interesting, integrating the PoS consensus mechanism, liquidity mining, and the veCRV liquidity game model introduced by Curve, constructing a new paradigm for on-chain governance and incentive distribution.
Berachain currently designs two core native on-chain assets:
- BGT: Serving as the primary governance token and incentive distribution asset;
- BERA: Functioning as the staking asset for validators and also handling on-chain Gas fees.
Meanwhile, the main participant roles in the PoL model include: on-chain protocols on Berachain, network validators, and liquidity providers (LPs).
In this mechanism, any protocol or DApp hoping to obtain BGT incentives must first apply to join the PoL reward Treasury whitelist pool and provide sufficiently attractive bribes to attract BGT allocation from validators. Berachain validators are block-producing roles in the network (requiring BERA token staking to become a validator), and when a validator successfully produces a block, the system provides BGT token rewards, comprising two parts:
- One part is the basic block production reward for validators,
- The other part is called a "variable quantity reward", where the system allocates different amounts of BGT tokens to validators based on their "Boost" value (calculated as the percentage of $BGT delegated to a validator relative to the total $BGT delegation across all validators). The "Boost" value determines the BGT token reward, which peaks and then decays to ensure fair BGT distribution.
After successful block production and reward, validators will allocate most of this variable reward to the whitelisted PoL pools approved by governance through the BeraChef contract. In fact, when validators distribute variable BGT rewards to Reward Vaults, they also receive incentives according to the rate set by the vault owner, such as HONEY, USDC, or the vault's yield.
Protocols that can provide higher yields for LPs will bring better returns for validators, so validators tend to allocate more BGT rewards to PoL pools offering higher protocol incentives.
After receiving BGT rewards, protocol PoL pools distribute them to LP users. Thus, becoming an LP in some Berachain project PoL pools not only provides regular farming rewards (fee sharing, protocol governance token rewards, etc.) but also natively receives BGT token incentives, typically resulting in high APY.
For BGT stakers, they can delegate BGT tokens to validators to help improve the validator's "Boost" value, and in return, validators will periodically distribute the protocol bribes according to a predetermined proportion to BGT delegates supporting them.
Therefore, we observe in the PoL model:
First, protocols typically form long-term game dynamics to continuously attract liquidity through yields. This "yield arms race" will provide Berachain with a better liquidity foundation.
Second, validators are also engaged in competition, hoping to attract more BGT holders to support them, gain better "Boost" values and potential returns, thus continuously helping optimize network liquidity.
Third, those who provide more liquidity will gain more discourse power and economic benefits, continuously forming a growth flywheel integrating liquidity, security, and incentive distribution.
(Translation continues in the same manner for the rest of the text)In other words, although BERA rewards are indeed being issued on-chain, this is not an arbitrary inflation like other PoS networks, as it is backed by real funds, similar to the network selling the "right to issue tokens" and then distributing the realized income to stakers.
Berachain's article actually provides a good example that I find quite compelling
If ETH and BERA both issue $100M in tokens annually:
ETH directly distributes $100M to stakers;
Berachain sells inflation through a bribery mechanism, and if the efficiency is 80%, it will obtain an additional ~$80M in real yield.
The result is: with the same inflation, Berachain can achieve $180M in on-chain value flow, while ETH only has $100M.
Therefore, BERA's staking yield belongs to "protocol-layer real yield", which is not only more sustainable but also provides long-term value support for its native staking scenario.
Institutional Friendliness
Another aspect is the institutional friendliness mentioned by Berachain.
Previously, we mentioned that Berachain's PoL v2 model transforms inflation into protocol real income, constructing a clear and traceable on-chain real yield model for BERA, which does not rely on third-party protocols or secondary market speculation, but entirely derives from real bribery expenditures on the chain and is converted into traceable incentive funds through auctions.
The yields produced by this model can be directly packaged, split, and distributed in a CEX custody environment, giving BERA's staking the potential to be packaged by institutions into financial products, custody protocols, and structured yield tools. This effectively addresses the pain point of difficulty in directly reaching institutional users.
On the other hand, I'm reminded of the recently much-discussed Clarity Act, which establishes a more clear compliance framework for crypto assets. Therefore, the launch of PoL v2 is timely, binding yields to real economic activities at the mechanism level. On-chain financial instruments should have clear income sources, a transparently auditable underlying structure, and asset attributes that are custodial and explainable to holders - a direction advocated by the Clarity Act.
If BERA launches a Digital Asset Treasury in the future, it will also provide institutions and even listed companies with a compliant, custodial on-chain yield path with continuous cash flow characteristics.
So overall, the launch of v2 is not just about accelerating the ecosystem's flywheel, but also carries a deeper and more far-reaching strategic significance for ecosystem development.
