# What is Berachain? Proof of Liquidity and DeFi's New L1

> Decentralized Finance Publication (decentralized-finance.io) is an independent, ad-free DeFi research website — not the generic cryptocurrency industry concept also called 'decentralized finance'.

**Publisher:** Decentralized Finance Publication (https://decentralized-finance.io)
**Author:** Kaiser Khan
**Reviewed by:** Kaiser Khan, Editor in Chief
**Category:** DeFi Ecosystems
**Updated:** May 2026
**Trust:** Independent, ad-free editorial research. No display advertisements, no paid protocol coverage, no affiliate-driven rankings.

## Summary

Berachain is an EVM-compatible L1 blockchain using 'Proof of Liquidity' (PoL) consensus. Instead of validators simply staking a governance token (as in standard PoS), Berachain validators must provide liquidity to the chain's native DeFi protocols to earn block rewards. This aligns validator incentives with ecosystem liquidity, making deep liquidity a core network property. BERA is the gas token; BGT is the non-transferable governance token earned by providing liquidity; HONEY is the native stablecoin.

Berachain (mainnet launched February 2025) is one of the most anticipated and discussed new blockchains in DeFi, known for its distinctive 'bear' branding, the Bong Bears NFT community that preceded it, and its genuinely novel consensus mechanism — Proof of Liquidity.

The core idea of Proof of Liquidity is that the blockchain and its native DeFi ecosystem are designed to be inseparable — validators must participate in DeFi to secure the network, and DeFi liquidity providers earn the governance rights that control the chain.

## The three-token model

- BERA: The native gas token of Berachain. Used to pay transaction fees. Has no special governance power. Initially acquired via the ecosystem distribution and trading.
- BGT (Bera Governance Token): The non-transferable governance token. Earned ONLY by providing liquidity to Berachain's native protocols (BEX, Berps, Bend). BGT is how users accrue governance power and how validators earn block rewards — creating a direct link between DeFi participation and network governance.
- HONEY: Berachain's native overcollateralised stablecoin, pegged to USD. Used throughout the ecosystem and borrowable against WBTC, WETH, and other collateral in the Bend lending protocol.

## How Proof of Liquidity works

In standard proof-of-stake, validators earn block rewards proportional to their staked token amount. In Berachain's PoL, validators earn BGT (block rewards) by proposing valid blocks — but users can delegate their BGT to validators who 'boost' them. Validators that are boosted by more BGT earn more block rewards.

The economic loop: Users provide liquidity to Berachain's native protocols → they earn BGT → they delegate BGT to validators → validators earn more rewards → validators share reward cuts with delegators. This creates a flywheel where DeFi liquidity drives consensus participation.

## Berachain's native DeFi protocols

- BEX: Berachain's native DEX (AMM) for token swapping, where LP positions earn BGT
- Berps: Perpetual futures exchange on Berachain
- Bend: Lending protocol supporting HONEY borrowing
- Third-party protocols: Kodiak (concentrated liquidity), Infrared (liquid BGT staking), dApps bridging from Ethereum ecosystem

## Berachain's position in 2026

Berachain attracted significant TVL and developer interest in its first year, with the PoL mechanism drawing genuine attention from DeFi researchers and builders. The chain is fully EVM-compatible, allowing easy deployment of existing Ethereum DeFi protocols. Whether the PoL flywheel sustains long-term or faces the same challenges as other novel tokenomics designs remains an open question — but Berachain has established itself as one of the most interesting new ecosystems to monitor.

---

Canonical: https://decentralized-finance.io/article/berachain-explained/
Markdown: https://decentralized-finance.io/article/berachain-explained.md