Berachain Launches Proof-of-Liquidity System to Enhance On-Chain Governance

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EVM-based Layer 1 blockchain Berachain is set to introduce its Proof-of-Liquidity (PoL) system later today, marking the first phase of its on-chain governance framework.

The PoL system is designed to decentralize the distribution of BGT, Berachain’s governance token, by integrating liquidity provisioning into its governance model. Initially, the rollout will focus on select DeFi liquidity pools, with plans to expand to additional reward vaults beyond the initial DEX pools, according to Berachain developers.

Berachain operates with multiple native tokens, each serving a unique purpose:

• BERA: The gas token used for transaction fees and validator staking.

• BGT (Berachain Governance Token): A non-transferable, soulbound token earned through liquidity provisioning. It grants governance power and directs rewards within the ecosystem.

Unlike traditional proof-of-stake (PoS) blockchains, where tokens are locked in staking contracts, Berachain’s PoL model requires users to stake assets in DeFi liquidity pools to earn BGT. Validators depend on BGT delegations to increase their influence in network consensus, directly linking network security to liquidity provision.

Why Proof of Liquidity?

Although Berachain operates as a proof-of-stake blockchain, built on the Cosmos SDK and utilizing a Tendermint-based consensus mechanism, it introduces a unique liquidity-driven security model. Validators stake BERA tokens for block production and transaction validation, but BGT liquidity delegation determines their governance power and reward distribution.

This approach integrates liquidity provisioning into both governance and security, making it more than just a DeFi incentive system—it’s a fundamental part of network operations.

Berachain’s Growth and Funding Milestones

Berachain initially launched with Boyco, a pre-mainnet liquidity platform, aimed at bootstrapping liquidity for decentralized applications. Following its mainnet launch in February, Berachain amassed an impressive $3 billion in total value locked (TVL).

The project has also secured significant funding rounds, including:

• $42 million Series A round in April 2023, led by Polychain Capital, with participation from Hack VC and others.

• $100 million funding round in April 2024, co-led by Polychain Capital and Framework Ventures.

With its PoL system now live, Berachain is positioning itself as a leader in on-chain governance and liquidity-driven blockchain security.