Berachain: A Deep Dive Into the EVM-Identical Layer 1 Blockchain Using Proof-of-Liquidity

Berachain is an EVM-identical Layer 1 blockchain network built with the Cosmos SDK. It runs on the Proof-of-Liquidity (POL) consensus mechanism.

Berachain is a blockchain network that uses Proof-of-Liquidity (PoL) to separate gas tokens from governance tokens. This allows users to stake assets on Berachain while still being able to use those assets in DeFi protocols.

Berachain is also EVM-identical, which means that any EVM (Ethereum Virtual Machine) applications can be deployed on the Berachain network ‘as-is’. Berachain is built with BeaconKit – a modular framework that enables the creation of L1 and L2 chains. As a result, this means Berachain can also support the improvements in the upcoming Dencun upgrade.

Here's a deeper look at how Berachain works:

* **Execution Layer: EVM-Identical**

Berachain offers an EVM-identical execution environment that allows developers on Ethereum and other EVM networks to port their applications to the networks without making any changes to their code base. Compared to EVM-equivalent and EVM-compatible execution layers, which may require developers to make changes before deploying their apps on these chains, Berachain mirrors the execution environment on Ethereum. This also means that when the EVM is upgraded, Berachain can easily adopt the latest version.

* **Consensus Layer: Proof-of-Liquidity (PoL)**

Berachain's approach to solving the on-chain liquidity is its novel Proof-of-Liquidity (PoL) consensus mechanism. PoL is an adaptation of the established PoS consensus mechanism with a significant modification in the staking process, asset management, and reward distribution.

For one, it introduces a multi-token structure to separate the security and governance systems. It also aims to support the network's economy while building a sufficient value layer for the consensus system.

In the Berachain network, two types of tokens are used for gas fees and on-chain governance, respectively. BERA is the gas token, while BGT is the governance token. Both tokens are non-transferable and are obtained by staking BERA and other supported assets in the reward vaults. BERA is used to pay for regular and smart contract transactions, while BGT is used to participate in the network's governance. Stakers can choose to stake either BERA or other assets, such as LP tokens, in the reward vaults.

The BGT emissions are then allocated to the reward vaults chosen by the validators based on the incentives offered by the DeFi protocols. These protocols typically offer an exchange rate between the BGT emitted to the vault and another token. For example, a DEX may offer 10 of its native tokens for every 1 BGT emitted to its vault.

After the BGT emissions are allocated to the vaults, users can lock their assets in the vaults to earn a share of the BGT emissions. The portion of BGT emissions that each user receives is determined by the amount of their assets locked in the vault relative to the total assets in the vault. For example, if a user locks 100,000 BERA in a vault that receives 1,000 BGT emissions, the user will earn 100 BGT.

Once the BGT emissions are distributed to the users, they can use their BGT to participate in the network's governance by voting on improvement proposals. BGT holders can also choose to delegate their voting powers to any other address.

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