What Is Berachain and How Does It Work?

Have you ever wondered how smart contracts are created and run on blockchains like Ethereum? If you have, you’d know the answer to that is an EVM. For those new to crypto, an EVM (Ethereum Virtual Machine) is like a computer program that runs apps on a blockchain (in this case Ethereum), making it easier for developers to create and run smart contracts.

But EVMs are costly and often lead to high fees and congestion, which can slow down transactions and frustrate users.

This is where Berachain comes in—it is a high-performance, EVM-identical Layer-1 blockchain introducing a fresh take on network security and liquidity. The platform is built around a unique Proof-of-Liquidity (PoL) consensus mechanism and uses a tri-token model to separate transaction fees, governance, and stability. 

This means faster, cheaper, and more secure transactions—plus, people can also earn rewards and have a say in how the network is run, making their crypto experience more engaging.

Let’s take an in-depth look at Berachain, how it works, and how Berachain’s innovative design solves common challenges in crypto for users and devs alike.

What Is Berachain?

Firstly, Berachain operates similarly to Ethereum’s Virtual Machine. It is designed so that existing Ethereum smart contracts and dApps can run without changes, meaning that Ethereum apps work on Berachain in just the same way. 

The standout feature though, is its Proof-of-Liquidity model, which keeps capital active instead of locking it away for staking, as seen in traditional Proof-of-Stake (PoS) systems.

In traditional Proof-of-Stake (PoS), you must lock up your tokens for a chance to earn rewards. But with Proof-of-Liquidity (PoL), you can still earn rewards while keeping your tokens accessible for trading or other uses. This innovation means you don’t have to tie up your funds just to stake them. It allows your capital to stay active and flexible.

History of Berachain

Originally emerging from the Bong Bears NFT collection, Berachain evolved from an art-driven project into a full blockchain platform. Bong Bears was a pioneering NFT project that introduced an innovative “rebasing” mechanism—rewarding long-term holders with additional NFTs over time. The collection featured unique, cannabis-themed digital bear collectibles and the highly engaged community eventually laid the cultural and technological foundations for the Berachain ecosystem.

Its founders remain pseudonymous, identified by monikers such as “Papa,” “Smokey,” and “Dev Bear.” Despite the mystery surrounding its team, the project secured multi-million-dollar investments from firms like Polychain Capital and Tribe Capital.

How Does Berachain Work?

Let’s now take a closer look at the components that drive Berachain, from its familiar Ethereum environment to its innovative consensus and user-friendly wallet integration.

EVM-Identical Architecture

Berachain mirrors Ethereum’s execution environment, meaning that tools and dApps built for Ethereum run on Berachain with minimal or no adjustments. Its modular architecture is powered by BeaconKit—a framework developed using the Cosmos SDK—that enables swift updates and component swaps. This design keeps the network agile and ready to adopt future Ethereum improvements.

Proof-of-Liquidity Consensus

Unlike PoS, where tokens are locked up to secure the network, Berachain’s Proof-of-Liquidity model requires validators to stake tokens by depositing them into liquidity pools. 

This process secures the network while keeping the capital available for other DeFi activities. Validators must stake a minimum amount of BERA, and rewards are paid in BGT tokens. Users can also deposit assets in reward vaults, earning additional rewards that can boost validator earnings.

Wallet Compatibility

Since Berachain is EVM-compatible, users can access the network with familiar wallets like MetaMask. This ease of integration reduces friction for developers and users transitioning from Ethereum.

Berachain Tokenomics: The Tri-Token Model

Berachain uses a three-token economic model that divides network roles among distinct tokens:

BERA – The Native Token

BERA is used for paying transaction fees and staking. With a supply of 500 million tokens, BERA is the network’s gas token. A significant portion was distributed through an airdrop at launch, though only around 15.8% was released directly to the community.

BGT – The Governance and Rewards Token

BGT is earned by participating in liquidity activities. It is non-transferable and gives holders the right to vote on network proposals. Additionally, BGT can be burned at a 1:1 ratio to mint more BERA, creating a balance between network security and liquidity.

HONEY – The Native Stablecoin

HONEY acts as a stable medium of exchange, pegged loosely to the U.S. dollar. It is designed for use in lending, trading, and other DeFi operations. Users mint HONEY by depositing approved collateral, which helps maintain its peg and stability within the ecosystem.

This separation of roles is intended to reduce the liquidity issues common in single-token models, keeping transaction costs low while maintaining robust network security.

Berachain’s Ecosystem and Native dApps

Berachain hosts a suite of native applications that form its ecosystem:

BEX: The Decentralized Exchange

BEX is the network’s built-in DEX. It facilitates token swaps with low fees and high liquidity. Liquidity providers on BEX earn rewards in BGT, which they can use to influence network governance.

BEND: The Lending Platform

BEND allows users to lend and borrow assets using HONEY. It is designed to offer competitive rates and to support the liquidity-friendly environment that Berachain promotes.

BERP: The Perpetual Trading Platform

BERP provides perpetual futures trading. It aims to offer efficient capital deployment and deep liquidity, making it an attractive option for traders looking for derivatives on Berachain.

Together, these dApps create a self-contained ecosystem where liquidity, security, and utility reinforce one another.

Key Features of Berachain

• EVM-Identical Execution: Seamless deployment of Ethereum-based dApps without modification. This means users can run their favorite Ethereum apps on Berachain without needing any changes, making the transition smooth and familiar.
• Proof-of-Liquidity Consensus: Ensures that staked funds remain active, so you earn rewards while still having access to your assets for other opportunities.
• Tri-Token Model: This tokenomic model separates functions across BERA, BGT, and HONEY—these three different tokens handle different roles—transaction fees, governance, and stability—helping to keep fees low and liquidity high for a better user experience.
• Modular Design: With BeaconKit, the system can adopt Ethereum updates, ensuring that the network remains secure and up-to-date without major disruptions.
• Native dApps: Built-in applications like BEX, BEND, and BERP provide essential services directly on the network, enhancing utility and convenience for users. 

Pros and Cons of Berachain

Berachain vs. Ethereum

While Ethereum uses PoS, which locks up tokens and may reduce liquidity, Berachain’s PoL keeps assets active, benefiting DeFi applications. 

Furthermore, Ethereum relies on a single token for multiple functions, whereas Berachain’s tri-token model separates these roles to help maintain low transaction fees and robust liquidity.

The Future of Berachain

Berachain’s mainnet launched on February 6, 2025, with an extensive airdrop aimed at rewarding early participants. While challenges—such as founder anonymity and contentious token allocations—remain, Berachain’s design may well provide the liquidity and security needed for a vibrant DeFi ecosystem.

In a blockchain world often cluttered by trade-offs—high fees or sluggish transactions, locked capital or limited rewards—Berachain emerges as a daring rethink of what’s possible. It’s a proving ground for a future where you don’t have to choose between flexibility and profitability, where devs can build without rewriting the rulebook, and where liquidity fuels growth rather than sitting idle.

With its seamless bridge to Ethereum’s vast ecosystem, a clever token trio that keeps the gears turning smoothly, and a suite of homegrown dApps ready to serve, Berachain isn’t waiting for the decentralized revolution—it’s actively making it happen.