Discussion of Berachain Ecosystem Features and Overview of Core Projects Before Coin Issuance

Introduction

Berachain is a Layer 1 network characterized by the PoL (Proof of Liquidity) consensus mechanism, designed to coordinate the interests of validators, liquidity providers, and protocols. The second testnet, "bArtio Testnet," is currently underway. As of January 2, 234 protocols have participated in the testing, with over 2.38 million participating wallets, demonstrating high market interest in Berachain and its ecosystem.

The founder of Berachain, Smokey The Bera, recently hinted that the mainnet might 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 the complex financial products launched by protocols to gain an advantage before the mainnet launch pose a significant entry barrier for new users.

This article aims to explore various fields of the Berachain ecosystem and lower the participation threshold for users. We will discuss outstanding projects in each field and detail how each protocol utilizes the PoL mechanism.

DEX

Berachain has a native DEX BEX, which will be launched on the mainnet as BeraSwap, supporting smooth liquidity trading within the ecosystem and ensuring the effective operation of the PoL mechanism. Other DEXs preparing to launch on Berachain are also preparing various convenient and efficient services and strategies to attract users and liquidity.

Kodiak

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

Users can provide liquidity within a narrow range through the CLAMM pool, effectively farming $BGT. Kodiak also offers the Island feature, which helps users automatically reset and balance the CLAMM range, reducing the hassle of managing liquidity supply positions. This feature utilizes BEX to rebalance liquidity and establish a complementary relationship.

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

Kodiak has collaborated with multiple projects in the Berachain ecosystem to establish a core infrastructure position. They also operate their own validation nodes, and as of January 3, have received the second highest BGT authorization in the bArtio Testnet.

Honeypot Finance

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

• Henlo DEX: A DEX specifically designed to protect users from MEV attacks, offering limit orders and Batch-A2MM features.
• 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 the issuance and trading of meme coins.

Honeypot Finance plans to operate as a validator after the mainnet launch, providing $HPOT as delegation rewards. In addition, it will release accumulated $BGT to the $HPOT liquidity pool to enhance $HPOT liquidity. The protocol also plans to increase the token's value by purchasing and burning $HPOT using node operation income.

Liquidity Staking

The structure of Berachain is such that when liquidity providers deposit the liquidity tokens obtained from the ecological protocol, they will receive network rewards calculated in $BGT as well as liquidity provision interest. 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 independently to establish a self-sustaining flywheel model. The liquid staking protocol will provide the cash-out 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 the liquidity pool, generating $BGT interest rates while running network nodes. When users deposit LP tokens into these vaults, Infrared will use these tokens to produce $BGT, and users can receive $iBGT proportional to their deposited LP tokens.

Users can utilize $iBGT in the following ways:

• In Infrared staking, receive rewards generated by nodes.
• Use in other DeFi protocols
• Sell profits

Infrared concentrates and distributes the rewards generated by the PoL mechanism by turning $BGT into a liquid token, and distributes them to fewer $iBGT stakers, while also helping other protocols incorporate $iBGT into their protocols. Infrared also plans to launch new features that allow them to receive and settle the $BERA needed for node operation while running nodes and distributing profits.

Kodiak's Island Pool is the best example of effectively utilizing the Infrared feature. After the mainnet launch, the Infrared plan will 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 redeposited into Kodiak's $iBGT/$BERA Island Pool for more $iBGT farming.

Based on the interconnectivity of this protocol and effective ecological gameplay, Infrared has gained the attention of many users, currently receiving the most $BGT delegation in the bArtio Testnet. Many ecological projects have also partnered with Infrared and plan to launch various derivative products.

BeraPaw

BeraPaw is a liquid staking protocol that operates a treasury between different nodes and liquidity pools registered with BeraPaw, issuing $LBGT as the $BGT liquidation token.

The governance token of BeraPaw is $PAW, and users can vote on which liquidity pools should receive $BGT using the $BGT held by BeraPaw. Node operators distribute the reward income generated from staking $BGT to the holders of $LBGT through this method.

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

Lending

Berachain has a native lending protocol BEND, which provides the following functionalities:

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

BEND has two notable features: 1)$HONEY cannot be used as collateral, 2)$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 system, 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 not only permits ordinary assets such as $BERA and $HONEY but also allows BEX and Berps LP tokens as well as Infrared's $iBGT as collateral assets. The $NECT minted with collateral assets 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 also has a governance token $POLLEN, which can serve as an incentive token in the following aspects:

• Used to reward the liquidity pool for obtaining $BGT Emission
• Encourage the deposit of collateral into the liquidity pool of up to $NECT debt.
• Distributed as rewards to depositors in the liquidity stability pool

Depositing LP coins into BeraBorrow will automatically deposit into Infrared to generate $iBGT rewards and will automatically redeposit into Infrared for compound interest. Users can borrow $NECT to provide liquidity in other protocols and redeposit the received LP coins into BeraBorrow to establish a leveraged position.

BeraBorrow also plans to allocate $BGT to the DEX liquidity pool for $NECT and $iBGT trading, strengthening 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 utilize any assets from Berachain to provide users with the ability to establish 100x leveraged positions.

Before the mainnet launch, Gummi has formed partnerships with core infrastructure such as Infrared and Kodiak, and plans to support leverage farming position functions for various LP coins of $iBGT and Kodiak.

Derivative Protocol

SMILEE

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

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

• 牛(Bull): Bet on significant price volatility until expiration.
• 熊(Bear): The betting price fluctuates significantly downward until expiration.
• 微笑(Smile): Bet on the price fluctuating significantly upwards or downwards until expiration.

In addition to options trading, users can also provide liquidity for the options positions established by options traders and collect the option fees paid by the traders. Although liquidity providers face a risk of unearned losses equal to the traders' profits, SMILEE reduces the unearned losses for liquidity providers by real-time rebalancing of the liquidity provision positions when options trading occurs.

Exponents

Exponents is another derivative protocol that implements non-liquidatable leveraged positions on all assets within the ecosystem through its self-developed reverse asset issuance protocol IBC( and the reverse Bonding Curve ).

IBC adopts a reverse Bonding Curve, which is contrary to the general concept of Bonding Curve. Traditional Bonding Curve achieves price increases by reducing the required amount of assets and as more collateral assets are deposited into the liquidity pool; whereas IBC achieves reverse assets, where prices decrease as demand increases, and because more collateral assets are deposited, the amount of receivable assets also increases.

Exponents uses the IBC mechanism to implement long and short positions for all assets without the need for oracles. The goal is to adjust the parameters of the IBC mechanism to make the slope of the Bonding Curve steeper, thereby providing unliquidated leveraged positions.

In addition, IBC also provides functionality for staking synthetic assets issued within the protocol and for distributing profits generated by the protocol. When combined with Berachain's PoL mechanism, $BGT Emission can be distributed as rewards to users who issue assets through IBC. In other words, by using $BGT as a reward, users are encouraged to establish short positions on competitive protocol tokens, thereby achieving a more diverse ecological gameplay.

![Discussion on the Characteristics of the Berachain Ecosystem and Overview of Core Projects Before Coin Issuance