Investigating Innovation on Berachain

"Many of the characteristics that make for successful organizations also sow the seeds of inertia when it comes to innovation." – Clayton Christensen.

We might, from an introspective point of view, have to agree with Clayton on whether we should apply his theory to the current landscape of blockchain innovation.

While we greatly admire the dedication and hard work of the teams innovating with new layer 1 and layer 2 solutions, the sheer number of attempts addressing the same issue can dilute the excitement.

This saturation of efforts suggests that we're caught in a loop of innovation inertia when it comes to solving the blockchain trilemma.

It is within this line of thinking that we are poised to step back to re-examine or investigate further some of the most recent L1s on the block to find out what true innovations lie within or if the rumors are true: that a good number of L1s and L2s out there are nothing other than a host of VC attempts at low-float-high-fdv-ing us to death.

In light of this, today, we seek to examine one of the ready-to-launch L1s, Berachain, to share areas where we’ve found interesting innovation.

We’ll also examine consumer apps on the network, showcasing how they're set to transform the user experience. Along the way, we'll highlight foundational solutions and uncover some intriguing non-consumer applications. Sit tight.

Berachain in one minute

As you may know from the swarm of content we have put out on these guys, on a high level, we can describe Berachain as a layer 1 EVM-compatible blockchain built on top of the cosmos-SDK using a novel consensus method of Proof-of-Liquidity (PoL).

Sounds a bit posh, doesn’t it? Mike did a solid piece on PoL and Berachain as a whole, which you can read here.

But we’re always game for a fresh breakdown if you need a brush-up, so here goes.

Basically, a handful of existing L1s function using the proof-of-stake consensus mechanism, which allows the use of native tokens as collateral to get involved in the validation process of a network chain.

However, this consensus mechanism has limitations, including centralization risks, infrastructural bottlenecks or stiffness, reduced composability, and a rift between validators and protocols built on the network.

Berachain introduces proof-of-liquidity (POL) as an alternative to the POS consensus style. With POL, protocols, and validators are well aligned through incentives at the consensus level, and the security of the network is ensured using liquidity.

For a thorough overview of Bera, we recommend skimming our previous articles and videos on the POL chain.

Ground Zero Innovation on Berachain

For those familiar with Berachain, the first sign of innovation lies in its choice of consensus model.

The PoL consensus model supports three core (native) dApps: a decentralized exchange (DEX), a lending and borrowing protocol, and a perpetual market (BEX, BEND, and BERP).

This integration enhances the network's functionality from the ground up, enabling a direct relationship between validators and protocols right from the start.

This approach is quite unlike any other Layer 1 out there. Berachain’s model ensures that the native apps are integrated from day one, with built-in utilization. This allows the native apps to benefit through shared network activity.

Consumer app innovation on Berachain

Given the recent trend of user drought on newly launched L2s and L1s (study Starknet), we consider consumer apps a focal point of our investigations as they are a veritable source to gauge potential user adoption.

At the moment, there are quite a good number of consumer apps that exist on Berachain, with most of them in the testnet phase of their development and, like us, counting down the days to the Berachain mainnet.

However, for this investigation, we will highlight a few apps that we find quite innovative in terms of their value offering and strategic positioning to align with the foundational innovation (PoL) and flywheel on Berachain.

Shogun

The app is being built as an intent-centric DeFi application that allows traders to maximally extract value, known as TEV, which represents the difference between a trader's requested limit price and the actual price achieved.

How? Shogun scans multiple networks through an algorithm (solvers), identifying trader extractable value (TEV).

How does this benefit end users? Trading with Shogun abstracts gas fees, wallets, bridges, and so much more, thereby improving the user experience for traders.

Based on established standards in on-chain trading, Shogun can be compared to Hyperliquid, but it offers a significantly enhanced user experience.

It’s fair to say that one of the issues with on-chain consumer apps across several networks is that they’re being built with only the average crypto user in mind. We fail to see how this unambitious approach to developing on-chain applications spells a bright future for the entire industry.

Shogun, however, is different. In terms of goals, the project is attempting to emulate the feat of web2 fintech giant Plaid by making it simple for non-crypto companies to integrate DeFi.

Exponents

These guys are innovating along the lines of the derivatives market. The issue they’re trying to solve here is an obvious one: many tokens exist, but very few have derivatives, mainly because of the nuances that price oracles bring to the table.

Exponents view this as the bottleneck to solve for the on-chain derivatives market to take off.

To solve this problem, they’re building an oracle-less and permissionless leverage derivatives protocol that allows for the creation and trading (longing and shorting) of derivative tokens, similar to how Uniswap’s existence allowed for the spot-trading of any crypto asset.

Exponents incentivize positional trading through its novel bribing market. This innovation will create a zero-to-one effect for derivatives trading, increasing the amount of tradable on-chain derivatives from 1% to 100%.

The exponent’s success will trigger an exponential growth in derivatives trading, significantly contributing to DeFi's overall market efficiency, liquidity, and risk management.

IVXfi

On-chain derivatives can be termed innovative depending on the approach to executing them, as they’re not the easiest trading venture to execute.

IVX is a derivatives protocol that functions as a liquid options automated market maker (AMM) on Berachain. Starting at 8 AM UTC, traders can take zero-day-to-expiry contract positions (0DTE), options contracts that expire within 24 hours.

IVX derivatives feature crypto and real-world assets, allowing traders to leverage these assets with up to 200x exposure.

To ensure efficient liquidity provision and utilization of its pools, IVX allows stablecoin provision to its implied volatility liquidity pool (IVLP) and further implements a dynamic hedging strategy for LPs, automatically adjusting LPs' positions to optimize risks and manage returns.

Non-consumer (B2B2C) app innovation on Berachain

There are also a handful of non-consumer applications on Berachain, and like their consumer counterparts, they are awaiting mainnet launch. We’ve found a few of them interesting enough to be considered really innovative.

Beraroot

A close look at what’s being built here will reveal an inward innovation directly beneficial to the Berachain ecosystem and other networks built on top of it.

If you’re an on-chain maxi, you’ve likely felt the pangs of MEV bots swooping in to front-run your transaction. The immediate hit to your wallet and the spike in costs are hard to miss.

These front-runners often grab the assets you're eyeing, driving up prices and snatching away profitable opportunities right before your eyes.

Beyond just wasting gas fees, this shady practice twists market conditions, making real trading a tough game to play.

The constant threat of front-running erodes trust in decentralized platforms, discouraging participation and jamming up the network. Plus, it can expose your trading strategies, giving competitors an unfair edge.

Beraroot’s solution to this issue integrates MEV optimization through open remote procedure call services (RPC), auction mechanisms, and data availability tech to boost Berachain’s and its users' transaction efficiency, security, and transparency, solving the problem from the ground up. The result is a fair trading scene for Beras.

Burrbear

Burrbear is making the stablecoin trading scene on Berachain as capital-efficient and liquid as possible.

Its novel DEX offers multiple stable pools for stablecoin swaps as well as a novel Burr pool that boasts 20x more capital efficiency in executing more exotic stablecoin trading.

Burrbear's goal is to allow stablecoin issuers to grow liquidity and yield for tokenized RWAs, stablecoins, and tokenized hardware assets off-chain.

When executed correctly, Berachain's design as a liquidity-efficient chain from the ground up should foster a comprehensive flywheel effect in Burrbear's tokenomics.

Thanks to its unique and diverse stablecoin pools, Burrbear can be positioned as the go-to protocol for deep liquidity on Berachain.

Concluding thoughts

The above projects built natively on Berachain are proof that the proof-of-liquidity L1 is more than its robust meme culture and community; it actually provides a playground for innovation that can spiral beyond its ecosystem.

Although we’ve mentioned only a handful of interesting applications on the chain, from an observatory point of view, we can see that a good number of these applications bring something fresh to the market or at least add a cool spin to existing systems in a way that ties into the network's foundational design.

We anticipate that more innovative and fresh builds will emerge even after Berachain is live on mainnet mainly due to its EVM compatibility despite being structurally different underneath.

Nonetheless, the existing projects so far are a testament to things to come.

Side note, to not miss any of the headlines be sure to keep tabs on our crypto news section and our full crypto research reports here.