Berachain Launches PoL v2: Building On-Chain Yield Infrastructure

In the current competition landscape of public chains, most Layer 1 projects still follow the traditional PoS (Proof of Stake) incentive model, which involves issuing new tokens and distributing them to validators and delegators according to their staking ratio. Although this simple "pure inflation" token issuance logic is easy to implement, it lacks refined economic guidance and can easily lead to incentive mismatches and low capital efficiency.

Berachain has taken a different path in this regard. Its PoL (Proof of Liquidity) consensus mechanism has directly tied block rewards to on-chain liquidity since its design, creating a unique ecological growth model. Recently, Berachain officially launched the PoL v2 version, and this upgrade not only optimized the economic model but also represents an important step towards institutional-grade and sustainable returns.

The Core Concept of PoL: Transforming Consensus Incentives into Liquidity Competition

The core idea of PoL can be simply summarized as: whoever can bring more liquidity can gain more network rewards and influence.

In the Berachain ecosystem, the economic operation mainly relies on two native assets:

• BGT: The central token for governance and incentive distribution.
• BERA: As an on-chain Gas token.

The operating mechanism involves three core participants: validators, protocol parties, and liquidity providers (LP).

• Parties to the agreement need to "bribe" validators (by providing stablecoins, protocol tokens, etc.) to obtain BGT incentives.
• Validators will prioritize protocols with higher yields when allocating BGT, leading to liquidity competition.
• When LP supports these protocols, they can earn additional BGT incentives along with regular returns.

This mechanism has produced several significant effects:

• Long-term games are formed between protocols, continuously increasing LP returns and attracting liquidity.
• Validators will actively optimize liquidity allocation to enhance the "Boost" value.
• The liquidity, security, and economic incentives of the entire network form a positive feedback loop.

PoL v1 has already proven the strong effect of this model in on-chain ecosystem traffic diversion, but it has also exposed the issue of BERA's insufficient status in the economic cycle.

Shortcomings of POL v1: The "Missing" Role of BERA

Under the v1 model, BGT serves as an active economic medium in the ecosystem, featuring both inflationary issuance and a clear distribution mechanism and profit scenarios. In contrast, BERA's functionality is relatively singular:

• Used for validator staking
• Used to pay Gas fees

Ordinary users can hardly obtain native yields directly from BERA holdings unless they participate in the complex LP farming of third-party DeFi protocols. This not only raises the participation threshold but also limits BERA's capital utilization rate as a core PoS asset.

A more realistic challenge is that, in the context of increasingly stringent global regulations, PoS assets like BERA, which lack compliance-friendly yield models, find it difficult to be adopted by institutions or integrated into the traditional financial system.

Core Improvements of PoL v2: BERA Incentive Module

The biggest highlight of v2 is the introduction of a native staking yield mechanism for BERA.

Users can now directly stake BERA or WBERA on Berahub to receive the voucher token sWBERA (similar to stETH). This voucher can continue to be used in the DeFi ecosystem, enabling multiple uses of funds.

The source of income has also undergone key transformation:

• The protocol bribes received by validators in the PoL mechanism, 33% will be repurchased as WBERA.
• These WBERA are proportionally distributed to BERA stakers.
• The yield is not pure inflation, but rather the conversion of real protocol income.

This model actually redirects part of the revenue that would originally flow to validators into the BERA staking system, transforming BERA from a "network operating cost token" into an "on-chain real yield certificate."

Real Yield and Capital Efficiency: The Sustainability of v2

The yield model of PoL v2 has two notable features:

Real cash flow support

1. The revenue comes from the bribes paid by the protocol to compete for BGT, which are sourced from the protocol's treasury rather than being created out of thin air through inflation.
2. Realize value through "auctioning the right to issue tokens" and then redistribute to stakers.
3. Under the same inflation conditions, Berachain's capital reinvestment efficiency is higher than that of traditional PoS chains.

Capital Efficiency Improvement

• sWBERA can be used as LST to capture yields again in the ecosystem.
• Users do not need to participate in complex LP or delegation processes; the staking path is simpler and safer.
• The current on-chain staking annual yield is as high as about 103%, significantly better than the 60%-90% earning functions of centralized exchanges.

Institutional Perspective: From Crypto Incentives to Compliant Yield Products

Another layer of value in PoL v2 lies in its natural adaptability to the logic of institutional participation:

• The sources of income are clear and auditable, and can be directly incorporated into the compliance financial reporting system.
• The flow of funds is transparent and does not rely on speculation in the secondary market.
• The yield model can be packaged in a custody environment as structured financial products, digital asset bonds, etc.

This is highly in line with the recent regulatory direction: the yields of on-chain assets should be auditable, linked to real economic activities, and able to be managed and distributed. In the future, BERA has every opportunity to become part of institutional digital asset portfolios, and even to form standardized products for an on-chain "Digital Asset Treasury."

Conclusion: v2 is the accelerator of the growth flywheel

PoL v1 solved the problem of matching incentives and liquidity, allowing Berachain to form a liquidity-driven consensus network. PoL v2 further addresses the issue of the lack of returns on the core asset BERA, upgrading it from a network operating cost token to an on-chain real income certificate, and endowing it with institutional-friendly attributes.

This will not only accelerate the capital circulation within the ecosystem but may also open up avenues for Berachain to extend into traditional finance and institutional investments. In other words, PoL v2 is not just an upgrade of the token economy but a key step for Berachain to transition from an "on-chain liquidity engine" to an "on-chain yield infrastructure."