Berachain background

Henlo, and furthermore, ooga booga.

If you haven’t been living under a rock, you must have heard of Berachain, or been to their IRL ragers at crypto conferences worldwide.

But in case you haven’t, Berachain is one of the most highly anticipated launches scheduled for later this year.

But, what is Berachain? What business do stoned bears and bikinied babes have with crypto? Why should I care and how can I get involved?

The following report will attempt to cover various aspects of the project, its unique mechanics, its NFTs, its ecosystem, and potential strategies to capture alpha pre/post-mainnet. Before kicking off, we’ve done a primer earlier this year, and I’d suggest giving it a read.

Without further ado, let’s dive right in!

Berachain TLDR

Berachain is an EVM-Identical L1 blockchain implementing its novel Proof-of-Liquidity (PoL) consensus mechanism, and is built on top of a modular framework that also integrates benefits of the Cosmos SDK.

The chain sits at the crossroads between serious big-brain crypto innovation and memes mixed with sticky ponzinomics.

It aims to align interests between users, validators, and protocols/dApps, as well as solving fragmented liquidity bottlenecks, currently ubiquitous across incumbent ecosystems.

In summary, for all the WAGMI boys out there, Berachain has gud tech, innovative tokenomics, autistic (in a good way) yet secretly intelligent community, and all the ingredients we need to MOON!

A bit of history

Berachain’s journey started in August 2021 when the team released The Bong Bears NFT collection. Who doesn’t love a faded bear taking fat bong rips and enjoying munchies, right?

Two months later, the team released its 1st rebase collection, The Bond Bears NFT Collection, and another month later, announced the intention of launching a chain.

On March 26th 2022, OlympusDAO passed a vote to invest $500k in Berachain at $50m FDV. Subsequently, the chain raised $42m @ $420.69m FDV in April 2023 (round committed in 2022 but announced on 420 for the culture) and $100m @ $1.5bn FDV in April 2024.

The team launched their NFTs & rebase collections before launching a chain. Because of that, they were able to build a loyal cult-like community, which arguably is the strongest moat in crypto.

In the current landscape where new chains pop up or are forked everyday, an organic community is the only thing that is not easily replicable. Whether that was the intention or not, it worked out very well for Berachain.

The tech

As I am not a dev, I won’t larp much here, but will rather focus more on tokenomics design and how value flows through the ecosystem below. Here’s what I think the average person ought to care about.

EVM Identical

This refers to Berachain’s execution layer being identical to that of EVM’s, using unmodified execution clients. Meaning when EVM is forked or updated, Berachain will be compatible with the latest version without any modifications.

Berachain is the first L1 other than Ethereum that is truly EVM identical.

In layman’s terms, Berachain can plug directly into Ethereum’s ecosystems, and with its PoL design (more on this later), serve the largest DeFi liquidity hub and community.

BeaconKit

BeaconKit is Berachain’s modular framework for building EVM consensus clients.

It introduces an innovative framework where a customizable consensus layer is tailored for Ethereum-based blockchains and uses the Engine API paired with any EVM execution client, allowing it to fully support any EVM execution client.

Its modular design also allows for further integration on different layers to achieve enhanced capabilities. Soon, it will also support the IBC protocol, opening Berachain’s doors to Cosmos-based blockchains.

While the tech and its composability are impressive, what really makes Berachain stand out is its novel take on tokenomic design and consensus mechanism.

Tokenomics

Berachain utilizes a tri-token model, here’s the TLDR:

1. $BERA = Berachain’s native gas token
   • 69,420 $BERA needs to be staked to activate validator nodes
2. $BGT = Berachain’s non-transferrable governance token
   • Vote on governance proposals (can be delegated)
   • Can only be acquired through liquidity provisioning in PoL-eligible assets
   • How to earn $BGT, either:
     • Deposit liquidity into whitelisted pools on its native decentralized exchange, BEX
     • Borrow $HONEY on its native money market, BEND
     • Provide $HONEY in the bHONEY vault on its native leverage trading platform, BERP
   • Protocols incentive validators with their native tokens through gauges in exchange for future $BGT emissions, usually per epoch
   • Can be burned 1:1 for $BERA (one-way function)
3. $HONEY = Berachain’s native stablecoin aiming to maintain a 1 USD peg
   • Backed and minted by depositing whitelisted collateral into Honey’s vault
   • Mint and redemption fees are distributed to $BGT holders

As it stands today, most governance tokens out there only have one use case - to vote on governance proposals.

Although this is extremely important in maintaining the wellbeing of a distributed network, more often than not, there is very little direct value accrual to voters, disincentivizing participation and token demand.

$BGT, however, plays the most important role in Berachain’s PoL system, and users who contribute the most to the ecosystem also earn the largest share of rewards #SkinInTheGame.

The tri-token model, specifically separating the gas from governance token, solves a big problem that Proof-of-Stake (PoS) chains face today. A PoS system uses the same native token for both staking and paying for gas, which means when a user pays for gas, there is a lower balance available for staking, diminishing chain security.

Token holders should not have to choose between usability or security, and by separating the gas and governance token, Berachain can obtain deeper market liquidity for $BERA while achieving decentralized governance.

Proof-of-Liquidity

PoL is a novel consensus design big brain Beras came up with, and is what truly sets Berachain apart from others. Similar to PoS, PoL also requires a validator to put up tokens as collateral to secure the chain.

However, on top of the initial validator set-up where $BERA staking is required, validators also need to obtain additional $BGT delegation to increase their reward weight - the more $BGT delegated to a validator, the more $BGT rewards the validator receives over time.

Process flow:

1. Users provide blue-chip liquidity in whitelisted pools to earn $BERA and $BGT rewards
2. A prospective validator stakes $BERA to secure chain and gain block building eligibility
3. Upon receiving $BGT block rewards, validators emit $BGT to preferred gauges
4. Gauges distribute $BGT rewards to users based on their pool weighting
5. Users delegate $BGT to validators with aligned interests to further increase reward weight
   1. Users can also burn $BGT for $BERA

Due to this design:

• Berachain is secured and backed by blue-chip token/liquidity,
• users no longer need to choose between security and usability,
• and validators strive to align interests with liquidity providers.

Take notes, this is how you align incentives.

Who are the stakeholders?

1. Users
   • Supply liquidity for LP tokens, which are staked into gauges
   • Select validators to receive $BGT delegation
   • Governance participation
2. Liquidity Pools & Gauges
   • Liquidity pools are seeded by protocols
   • Gauges are smart contracts where user deposit LP tokens for $BGT rewards
3. Validators
   • Provide security for the chain
   • Maximize $BGT delegation
   • Emit $BGT and protocol incentives to gauges based on alignment of interests
     • Exchange $BGT for protocol incentives (protocol tokens)
     • Attract user flow from popular gauges
4. Protocols
   • User-facing frontend dApps
   • Incentivize validators with their native tokens to boost $BGT emissions towards their liquidity pools/gauges
   • Bootstrap liquidity with PoL (more on this later)

Intertwined relationship between all stakeholders

The flywheel and incentives

Berachain is designed for all stakeholders to have aligned interests and for value to flow between users, validators and protocols, creating an ecosystem flywheel effect.

1. For protocols to attract users/liquidity to their pool, they incentivize gauges with their native tokens, which is paid to validators in exchange for $BGT emissions.
2. Gauges with high $BGT yield attract users to provide liquidity.
3. These users delegate $BGT to validators that provide high $BGT emissions to these gauges.

In this flywheel, users get boosted returns, validators attract delegators, and protocols attract liquidity to their pool. Validators can also pass protocol incentives to users, further juicing user returns.

In addition, as another layer of incentives, QuickSnap has launched Beravote, a voting platform facilitating governance decision making for ecosystem protocols on Berachain.

Anyone can launch and provide incentives to sway protocol directions, and its gas free feature makes voting more accessible and outcome more equitable.

Flywheel risk

In an ideal world, all stakeholders (3, 3) to maximize their returns, and this positive feedback loop feeds into its own growth. However, there are a number of inherent risks that may break up the flywheel.

A user can opt to liquidate their $BGT holdings and burn for $BERA upon claiming gauge rewards.

Instead of delegating to the validator and strengthening its reward weight, this withdrawal causes the validator to lose confidence in the respective gauges and underlying depositors. As a result, the validator may direct future emissions to other gauges, causing liquidity pool rewards to decrease and users to pull liquidity.

On the flip side, a validator can also alter their strategy between earning $BGT from block validations and targeting protocol incentives.

If not communicated properly, a depositor may be stuck in a pool with misaligned interests, and be exposed to unnecessary risks. As a result, the validator may be tagged with a bad rep, lose $BGT delegation, and have liquidity pulled from underlying gauges.

In both examples, the biggest victims are protocols suffering from pool liquidity depletion and having their native tokens dumped on the open market. Indirectly, users are also affected with weakened confidence in the ecosystem and thinner market liquidity.

Proof-of-Liquidity for Protocol Owned Liquidity (POL)

Another important property of PoL is that it enables protocols to generate and maintain sustainable liquidity in the long run.

During DeFi Summer, protocols often had to engage in liquidity mining where protocols offered sky-high staking yields to users by inflating their own native token supply. It was very expensive and unsustainable, and most protocols that engaged in such activity fell at the hands of mercenary capital (see R.I.P. Liquidity Mining).

PoL is a potential solution for protocols building long-term liquidity, albeit that it may still be as expensive in the short-term as liquidity mining.

Here is how it’s done:

1. Set-up, whitelist, and deploy treasury assets into their own liquidity pools
   • Earns swap fees
2. Incentivize validators to direct $BGT emissions toward these pools
3. Upon receiving $BGT, delegate $BGT to validators that boost protocol-owned pools
   • Alternatively, protocols can also spin up their own validators
4. Use the new-found governance power to emit more $BGT towards themselves
5. Rinse and repeat

There, however, may be a number of drawbacks. Incentive proposals need to be passed through governance voting, and it’s unlikely that every proposal gets approved (this is still a WIP, but will likely be streamlined post mainnet launch).

In addition, if not executed properly, validators may dump incentives and cause market FUD to a point of no return. And, validators may also be less inclined to accept incentives / HODL, knowing the protocol’s intention of setting up their own validator, creating more competition.

This works best if all stakeholders collaborate, HODL, and design an exit plan the market can absorb (in other words, (3,3)). Though, I hardly believe this will be the case.

How am I playing the early days of Berachain?

There are a few factors and intricacies to consider in order to maximize risk adjusted returns. In this section, I will share some considerations and questions to ask in developing a suitable strategy, specifically around the native dApps.

1. General strategy
   • Should I target $BGT or protocol token incentives?
     • This comes down to personal risk tolerance, but burning $BGT outright for $BERA is likely to be an unprofitable move in the long run
       • $BGT is likely to trade at a premium against $BERA (more on this later)
       • $BGT wields substantial power in the Berachain ecosystem, which is most efficiently deployed to kick off the flywheel’s compounding effect, especially right after the chain launches
   • Where are we in the market cycle?
     • As the entire ecosystem revolves around $BGT, accumulation of $BGT in the early days is of utmost importance as holders can dictate future emissions and incentives
     • As the market tops and reaches maximum hype due to cyclicality, one may consider rotating to the more liquid incentives and swap for $HONEY
   • Ecosystem projects may provide higher risk adjusted returns compared to deploying directly on native dApps
     • Infrared
     • Kodiak
     • The Honey Jar
     • and more…
   • Arbitrage opportunities
     • Creative DeFi strategies
2. Liquidity Pools
   • Target high quality asset pairs with low risk of price depreciation
   • Target strongly correlated asset pairs with low impermanent loss risk
   • Target popular projects with higher trading volumes and fee rewards
3. Gauges
   • Target gauges with high and sustainable $BGT yields
   • Target gauges that work closely with validators for future emissions
   • Target gauges that maximize protocol incentives
   • Target gauges with suitable sizes (TVL)
     • User rewards are based on their weight in the gauges, hence  target returns should be adjusted accordingly
4. Validators
   • Target validators with high reward passthrough
   • Target validators that collaborate with protocols and gauges to boost returns
   • Target validators with aligned interests (direct rewards to user pools)

In summary, users need to decide which routes to take and if the risk level is justified, and make decisions based on market positioning and outlook. There is no perfect strategy, but users should keep their ears to the ground and monitor newest developments and launches - that’s where the alpha is!

Personally, instead of targeting the native dApps directly, I will likely aim to rehypothecate the same capital as much as I can across core DeFi protocols, loop where possible, to farm both protocol incentives and $BGT (and its derivatives) emissions (more on this later).

For example: deposit liquidity on Kodiak (DEX) → stake LP token on Infrared’s Gauge ($BGT LST platform) → use governance rewards ($IRED) to boost future emissions & roll/use incentives to provide further liquidity → deposit newly earned liquidity back into Kodiak and keep looping back into the flywheel until we reach Valhalla, but more on this later!

Berachain in numbers

Testnet

Berachain kicked off its 1st testnet, named Artio Testnet, in January 2024 and quickly became one of the most participated testnets ever. It reached 2m+ transactions a day with 1m+ active addresses at its peak. Despite (or more accurately, “due to”) its success, the heavy traffic often crashed the chain and faucet.

While part of the traffic was organic, it is also believed that this was heavily farmed by bots. Understandably, the timing of the testnet was just after lucrative airdrops conducted on other chains.

By June, Berachain released the second (and improved) version of testnet, called Bartio Testnet.

In Bartio, the team implemented several upgrades, including modular architecture by separating the consensus and execution layers, EVM identical execution for developers to deploy at ease, and improved economics designs around $BERA staking and slashing. As a testnet user myself, I can say Bartio is a lot smoother with much better UX.

With improved capabilities, Bartio reached 3.5m+ transactions a day with 1m+ active addresses.

Funding

Berachain raised a total of $142m over three funding rounds across three years, predominantly from VCs and a few select angels. Compared to other large ecosystem projects with large VC backing, Berachain’s 36.7% VC supply allocation is significantly higher, which may translate to higher sell pressure.

That said, investors will be vested in $BERA, and because value should mostly accrue to $BGT (and its derivatives), ecosystem participants with limited exposure to $BERA may be somewhat insulated - at least it won’t be a direct impact.

For those that didn’t study the dynamics of Berachain and choose to hoard $BERA, you’ll probably get rekt by VCs.

Valuation

Projecting valuation for a crypto project pre-launch is often more of an art than science.

A metric normally used is FDV/TVL, which is more useful for projects that implement stake-drop campaigns, such as Blast, EigenLayer, and Mode. However, Berachain has not opened deposits, and testnet activities are only facilitated using testnet tokens.

It is also difficult to assess Berachain’s relative value due to the lack of true comparables. That said, when taken broadly, Berachain fits into a few different buckets.

Looking at the table above, I think it is likely that Berachain trades at a minimum of $2bn when it goes TGE.

Given market weakness over the last four months and where we are in the market cycle, I believe this $2bn prediction is relatively conservative - the only way is UP! In my base case, I expect Berachain to achieve $6bn FDV (reference APT/SUI), and $10bn+ FDV in a bull case.

A few insightful data points and in relation to Berachain:

• LayerZero went to great lengths to ensure only real users received airdrops and filtered out sybils. As a result, there were less dumpoors. Berachain may have a slightly higher percentage of dumpoors as airdrop farmers are buying Bera NFTs to qualify for airdrops (more on this later).
• Celestia was one of the first modular chains (new big brain tech) to launch their token. Similarly, Berachain may be recognized for its innovative take around the PoL design and BeaconKit’s capabilities.
• Blast was upfront and gamified its points/airdrops farming process. As a result, they were heavily targeted by mercenary capital and professional farmers that dumped $BLAST upon receiving their airdrops. Berachain should have fewer dumpoors, potentially resulting in a higher FDV.
• Merlin was also heavily farmed with clear stake-drop instructions. Within private circles, it was also said that the bulk of their TVL was inorganically funded by the founder’s inner circle. As a result, Merlin’s TVL and $MERL has been on a straight bleed since TGE. Berachain should have fewer dumpoors, potentially resulting in a higher FDV.
• Ondo is a new DeFi leader this cycle after catching the RWA / Blackrock narrative. Berachain’s tech and token model allows for DeFi to flourish, and the flywheel may propel its valuation inline with Ondo’s.
• Pendle is a big brain project that allows for complex farming, trading, and derivative-like DeFi activities. In recent months, it gained mainstream attention by allowing users to create leveraged exposure to specific rewards (yield vs points); though it has pulled back over the last few months as the points narrative cooled off. Berachain will also enable many creative and big brain ways to customize specific exposures ($BERA, $BGT, incentives).
• IO.NET and Bittensor both caught the AI narrative and are leaders in the vertical. Similarly, Berachain exhibits the same clout, though more organically.
• Ton is to show moon math and what a cult-like community and ecosystem can achieve in valuation.

The case for $BGT / $BERA cannibalism

Is there enough demand for $BERA to prop up prices, or is $BGT taking all the value away?

When $BGT is burned for $BERA and dumped on the market, will there be enough liquidity to absorb the price impact?

Does $BERA price decrease translate to value deterioration for $BGT?

This is new territory for crypto, so let’s lay it all out there. How should we think about $BGT vs $BERA?

$BERA / $BGT demand

$BERA has three main uses:

1. paying for gas fees,
2. staking to launch validators,
3. and pairing in liquidity pools.

‍

On the flip side, $BGT is used to:

1. affect governance,
2. sway rewards and incentives,
3. farm bribes,
4. approve validators,
5. and more.

Not only do $BGT holders hold more power, they also receive more economic benefits.

I believe the crux of the issue here is that $BGT captures the majority of ecosystem value and attention, and away from $BERA. As a result, I foresee inadequate demand (bids) for $BERA to absorb selling pressure when $BGT is burned and when users claim rewards.

$BGT’s value could also be impacted if $BERA’s price drops substantially. Other than the obvious where ecosystem sentiment sours, $BGT’s ability to influence pool transaction volume and its $BERA rewards may no longer be as lucrative and sought after.

Value between staking/governance vs usage/liquidity

Because the same native token is used for staking and paying for gas fees on PoS chains, the staking rate (% supply staked), in a simplified world, can also be interpreted as the % of holders targeting staking rewards, while the rest are holding to use the chain.

In other words, the staking rate shows the value attribution between staking (or “governance”) and usage (or “liquidity”) for a coin.

Applying the same logic, we can examine the value distribution between $BERA and $BGT, and project what they may be worth.

As $BGT is non-transferrable, in the context of examining value distribution between $BERA and $BGT below, $BGT is to be interpreted interchangeably with its LSTs (e.g. iBGT).

Amongst the largest PoS chains, on average, ~62% of circulating supply is staked.

Using our FDV projection from the previous section above, assuming a conservative case of $2bn FDV, $BERA will be worth $760m FDV and $BGT will be worth $1.24bn FDV; and assuming a base case of $6bn FDV, $BERA will be worth ~$2.3bn FDV and $BGT will be worth ~$3.7bn FDV. This is a very simplified approach, and there are many factors that can tilt the scales.

Adjustments to average supply staked

Adjustments are based on the differences between $BGT and governance tokens on the market today around their utilities and properties. The premium and discount is to be applied to the staking rate above.

1. Unlike most governance tokens currently on the market, $BGT has the ability to sway additional rewards and earn bribes. This makes it more valuable and warrants an economic premium.
   • When the Berachain ecosystem is in hypergrowth, $BGT becomes more valuable given this property, which warrants further economic premium.
   • However, when the ecosystem contracts, $BGT becomes less important, which warrants an economic discount.
2. While $BGT is backed by blue-chip liquidity, it can’t be swapped for them. It can only be swapped for $BERA, which is less valuable. This warrants a liquidity discount.
   • $BGT is likely to always trade at a premium to $BERA, and at a minimum, at par to $BERA, given its 1:1 burn mechanism. This warrants a price premium.

In the end, the market will find an equilibrium point between $BERA and $BGT prices based on their utilities and perceived value, which will be constantly changing.

Berachain NFTs

As alluded to above, Berachain’s journey started with the release of The Bong Bears NFT collection. Subsequently, the team adopted a rebase system, pioneered by OlympusDAO, where each Bears NFT holder received a free NFT from the newest released collection.

For example, every Bong Bears NFT holder received a Bond Bears NFT when the collection was released. Assuming the holder didn’t sell his Bong Bears NFT and Bond Bears NFT (which was given for free), the holder would have received two Boo Bears NFT when it was released.

Meaning if a holder never sold their Bong Bears NFT and free rebases, the holder would have a total of 32 Bears NFTs today; and 64 by the time the last rebase is released.

The collections are:

• Bong Bears (OG) - 107 released on Ethereum Mainnet
  • Interesting fact: Bong Bears #79 and #84 are the only duplicates (glitch makes it more valuable)
• Bond Bears (Rebase 1) - 126 released on Ethereum Mainnet
• Boo Bears (Rebase 2) - 271 released on Ethereum Mainnet
• Baby Bears (Rebase 3) - 571 released on Ethereum Mainnet
• Band Bears (Rebase 4) - 1,175 released on Ethereum Mainnet
• Bit Bears (Rebase 5) - 2,355 released on Ethereum Mainnet
• TBD Bears  (Rebase 6, the final collection) - name and # of NFTs is to be determined, but will be released on Berachain upon mainnet launch

Holder distribution

Looking at the holder / wallet distribution between Bears NFT Collections, there are a few interesting phenomena.

Diamond hands

Due to the rebase mechanism, many holders are OGs, whales, and diamond hands. Holders are disincentivized to sell as the rebase collections received were acquired at zero cost and they are already sitting on sizable unrealized profits. More importantly, holding the NFTs qualifies them for future rebases.

As we are getting closer to mainnet, many ecosystem projects are also announcing rewards for long-term diamond hands with airdrops, early access, and other perks.

High concentration

The chart below shows the number of unique wallets holding a Bears NFT, currently sitting at 1,414 wallets. However, it is unlikely for a holder to hold all 32 Bears NFTs, valued at well over $500k, in one single wallet. Meaning, there likely are fewer than 1,414 unique Bears NFTs holders.

Given there is a total of 4,605 Bears NFTs in circulation, each holder owns more than three Bears NFTs on average. Having spoken to holders IRL, I’d argue that number is much higher. If I had to guess, there likely is less than 750 unique holders, implying each holding six Bears NFTs - it is highly concentrated!

Diamond hand strongest amongst the first four collections

The below chart shows the number of unique wallets holding each Bears NFT Collection. Combined with the chart above, we can gain further color (no pun intended) into holder distribution.

The number of unique holders of the first four collections (Bong Bears -> Baby Bears) have largely stayed the same from contract deployment to today.

These are the OGs and early believers that entered the Berachain ecosystem and haven’t left. Perhaps, part of the reason why they haven’t sold is because there wasn’t a deep and liquid enough market.

Selling came from Band and Bit Bears holders

Holders

Looking at the distribution of unique wallets holding a Bears NFT from when Band and Bit Bears launched to today, we observe a wallet # increase of 3-4x, and by looking at the breakdown between collections, we clearly see that the bulk of this increase is attributed to holders of Band Bears and Bit Bears selling.

This is further corroborated by the chart below, showing that 90%+ of transactions were for Band and Bit Bears.

Understandably, these two collections are the most affordable and have the best liquidity, albeit  likely offering the lowest yield (more on this later). As OGs have held from peak bull to deep bear, it made sense that they trimmed exposure and took profits as markets improved.

New entrants

The graph below, from Kaito, shows change in attention, mindshare, and sentiment in Berachain based on mentions and engagements, which started to pick up in December 2023.

Looking at the same timeframe (Dec. 2023 - today) on the wallet and holder charts above, we can observe unique wallets for Band and Bit Bears increased from 1,245 to 1,485, an increase of 240, and unique holders increased from 1,154 to 1,414, an increase of 260.

From this, we can deduce that when a new entrant buys a Bears NFT, they typically go for Band and Bit Bears.

While they’re the most affordable collections in the Berachain ecosystem, Band Bears were still going for $7,500 and Bit Bears were going for $4,500. I’d argue this was quite expensive given how much the NFT markets have pulled back as these NFTs didn’t have any “confirmed” utilities.

Volume vs Value

Consistent with Kaito Sentiment, Bears NFTs trading volume peaked from December 2023 to April 2024, and cooled off alongside the rest of the market.

While most transactions were for Band and Bit Bears, dollar value transacted for each collection looks much more even. For reference, Boo Bears transacted at 10-28ETH each, while Bit Bears transacted at 2-5ETH each.

What about volume as a % of collection supply?

Looking at the table above, albeit The Bong and Bond Bears have lower supplies and offers, it is clear that the most actively transacted collection was The Bit Bears collection.

Trading activity in relation to supply is roughly inline with each other between The Boo, Baby, and Band Bears Collections, and January 2024 aside, they are not even half as active as The Bit Bears Collection.

What does this tell us

In the early days, there were many OTC transactions where OGs consolidated, cleaned out the paper hands, and traded up to The Bong Bears Collection. As they received the bulk of following rebases, the collections holders are highly concentrated around OGs and they control a big chunk of total supply.

From what we can observe, OGs mostly only trimmed positions from the later rebases. If they had wanted to take profit, they would have sold down their earlier rebases prior to pricing getting out of hand and liquidity drying up, and kept the later rebases with better market liquidity and depth.

This signifies that OGs are likely to continue to hold and wait for future announcements on NFT utility and benefits.

Why are people spending thousands of dollars on Bear NFTs

Berachain airdrops

One of the biggest reasons why holders keep on HODLing is the expectation to receive Berachain airdrops.

SmokeyTheBera (Berachain co-founder) has stated his intention on airdropping to the “original community”, and as Bera NFT holders are the earliest entrants and believers of the ecosystem, they are expected to be rewarded. This expectation has been reflected in its NFT collection prices.

Looking at the rebase collection price changes when they first traded, every collection is up over 5x, with earlier collections achieving even higher returns.

This is very impressive given how poorly the broader market (and especially the NFT market) has performed since the rebases were launched, at the peak of the last bull market.

In one of the earliest versions of the Berachain white paper, dated January 15th 2022 released before OlympusDAO’s seed round investment, it stated that holders of Bong Bears NFTs and its rebase collections are due to receive a 5% airdrop of total token supply.

While this is likely outdated, we at least have a ballpark number to base our analysis on.

Other than holding these NFT collections to qualify for airdrops, Berachain also launched Galxe Quests and two Testnets.

However, after the advent of institutional and bot farmers, many recent launches have lowered allocations to event based airdrops. I believe this will also be the case for Berachain, especially given the high number of testnet participants, who were likely bots.

This further strengthens and enhances the NFTs’ intrinsic values as holders are expected to receive the bulk of airdrops.

Are we being airdropped $BERA or $BGT?

While there’s been countless debates between airdropping $BERA or $BGT, I think it is more likely for $BERA to be airdropped. By dropping $BERA to NFT holders, Berachain can achieve an adequate float at TGE to support ecosystem activities.

In addition, private investors will also be vesting in $BERA, so in this way, one group is not favored over the other.

Many argued that it would be more beneficial to receive $BGT airdrops, but the crux of this issue is that the NFT holders would end up holding too much governance power, and this centralization of power can be lethal to the other ecosystem participants.

I think part of the fun and culture of Berachain is for users to figure out the best way to run-up their $BGT holdings while playing around and exploring different verticals of the ecosystem.

Ecosystem benefits

Bears NFT is a status symbol in the Berachain ecosystem and opens the door to a plethora of ecosystem perks, privileges, and access.

For example, The Honey Jar (Berachain OG community NFT project) gave holders free mints to HoneyComb NFTs for every Bear NFT they held. The HoneyComb NFT Collection ran up to ~0.7ETH each in February before retracing back to ~0.3ETH today, and by holding HoneyComb NFTs, holders also qualified for Beraplug airdrops.

In addition, The Honey Jar also gave Bears NFT holders faucet access to drip testnet tokens when the official faucet was overloaded with traffic.

It is expected that more ecosystem projects will open their doors to Bears NFT holders, whether granting early access, giving airdrops, or offering preferential status/terms on their dApps.

Valuation

After reading about the NFT collections at length, you’re probably wondering if you should cop a Bera for yourself or what levels of return you might expect.

While we don’t have all the information and data needed, I will attempt to cover a few considerations and provide the best guesstimate I am going off of for my own Bears NFTs.

Assumptions

1. Since Rebase 6 will be deployed on Berachain, the collection will likely be released post mainnet launch and TGE. As such, holders will not be eligible for Berachain airdrops.
2. Other than The Bong Bears NFT Collection, NFT returns are calculated based on the floor price (the Buy Now Price). The Bong Bears NFT Collection pricing will be based on the last price given its thin liquidity and lack of sellers - current asking price is too high and is considered an outlier.
3. 5% of total token supply to be airdropped to NFT holders, and the allocation will be split evenly between collections. For example, if the 107 Bong Bears NFT holders receive 100 $BERA airdrop collectively (0.935 $BERAs each), the 271 Boo Bears NFT holders will also receive 100 $BERA collectively (0.369 $BERAs each). This means each Bong Bears NFT holder will receive 2x+ more airdrops than Boo Bears holders.
   • 5% airdrop is consistent with the seed round white paper, inline with recent L1 launches, and also leaves room for testnet users and Galxe participants. As the latter is expected to receive a much smaller share, assuming 1-2%, token supply reserved for airdrops is lower than comparable launches.
     • Berachain raised $152m over three financing rounds from private investors accounting for 36.7% of total token supply. This is higher than comparables, which may have also been a reason behind lower airdrop allocation.
   • Some expect The Bong Bears Collection to receive a larger share of airdrops for being the OG collection, but I have assumed that to not be the case and that their privileges will come in forms of other ecosystem benefits and deeper integrations.
4. Average FDV of comparable launches from March 2024 to today have decreased from ~$6bn to ~2bn. Given where we are in the market cycle, I believe we are close to the local lows and that the market sentiment improves over the coming 6-12 months. As such, I have chosen $2bn to be the low of the range (worst case scenario), $6bn to be the middle (normalized market), and $10bn+ as the market becomes more euphoric.
   • $10bn+ is definitely achievable for a hyped chain catching multiple narratives with a cult-like community.

Illustrative returns

As the collections are denominated in $ETH and given the volatile nature of crypto and NFT prices, the example above only serves as an illustration.

At these price levels, The Bong Bears NFT is 30x+ more valuable than The Bit Bears NFT. If an OG held onto all the rebase collections, the free bases would be worth ~$500k!

Analysis at various prices looks at how much each NFT holder is expected to receive in airdrops at various FDVs. Based on the tables above, we can see that The Boo and Baby Bears provide the highest yield, or the most undervalued compared to the other collections. Taking our assumptions, it might be a profitable play to buy one of the two collections.

Given the negative sentiment around projects with venture capital backing launching at unreasonable valuations, Berachain may linger around the $2bn FDV range after TGE before reaching higher valuations as the flywheel effects kick in.

It is rumored in private circles that Berachain is planning to launch during Token 2049 in Singapore. Achieving an 100%+ return within two months while adopting prudent FDV assumptions is a high alpha play.

However, I need to caveat again that

1. the team has not confirmed to conduct airdrops to NFT holders,
2. the team has not confirmed the airdrop %,
3. the team has not confirmed what instrument to conduct airdrops in,
4. and this assumes NFT prices hold up at current prices.

Ape at your own risk, but you can expect I to be on the frontlines with you!

Market depth

But is this all? This may seem like a straightforward and profitable play as long as Berachain airdrops to NFT holders.

However, the above illustration is based on the premise that the Bears NFTs retain their market value and can be market-sold easily without much price impact. Let’s take a look at their market depth.

Market depth for the collection is very thin and has a large bid-ask spread.

Looking at the table above, The Baby Bears collection has a bid-ask spread of 10%, meaning a holder has to swallow a 10% loss to market dump his holdings.

In addition, there are only six bids within 10% below the highest bid, making it difficult for holders to market-sell multiple NFTs in one go without suffering from large slippage.

Price after airdrops

I expect pricing for Bears NFTs to depreciate significantly after holders receive airdrops. The team may come up with NFT utilities (more native integration) or staking mechanisms to incentivize holders to HODL, but as many are only holding to receive airdrops, they’d sell their holdings regardless.

Coupled with thin market depth as shown above, I would expect little to no salvage; in other words, holders likely will only be able to sell their NFTs for dust.

The above table shows potential net airdrop yield after marking NFT value to zero post-TGE. After the adjustment, airdrop yields no longer look as lucrative. For those looking to dump airdrops when trading opens, they may be looking at <30% yield, and in worse cases, get rekt.

Ecosystem projects

There are three main groups of ecosystem projects, including official native dApps, Berachain incubator projects, and ecosystem projects. I will attempt to cover a few selected ones that are integral to value flows across the Berachain ecosystem.

This is not a deep-dive on the projects, but rather on the roles they play in the ecosystem and how they collaborate with each other - users can adopt a similar farming playbook!

Official native dApps

BEX is Berachain’s native decentralized exchange (DEX). Specific pools provide $BGT rewards when users stake with the corresponding vault.

Honey is where users mint and redeem Berachain’s native stablecoin, $HONEY.

BEND is Berachain’s native money market for supplying and borrowing $HONEY. Users deposit whitelisted blue-chip assets as collateral, and borrowers receive $BGT for borrowing $HONEY.

BERPS is Berachain’s native leverage (up to 100x) trading hub with $HONEY as trading collateral. A user can also deposit $HONEY to the vault in exchange for $BGT rewards.

BGT Station is Berachain’s governance platform where users deposit to gauges, delegate to validators, collect incentives, burn $BGT for $BERA, and more.

Beratrail is Berachain’s block explorer, equivalent to Etherscan of Ethereum or Solscan of Solana.

Build A Bera

Build A Bera is the official incubator funded by the Berachain Foundation, and aims to deploy $150k cheques into early stage projects.

On top of financial support, they also help portfolio companies integrate with the ecosystem, grow, and acquire future financing. They are currently on the second cohort with five projects in each cohort.

1st cohort: Infrared Finance, Kodiak, Shogun, Gummi, Baratone

2nd cohort (unannounced yet): Exponent, Puffpaw, GOY, Over/Under, + 1 more

Infrared Finance

Infrared is THE most important piece of Berachain’s PoL flywheel legos. Full stop.

When Ethereum’s Beacon Chain first launched, users could deposit $ETH but not withdraw / unstake. Lido created $stETH, a liquid version of staked $ETH, to address this problem where users could freely deploy (rehypothecate) $stETH across DeFi protocols while also earning native staking yields. It quickly rose to prominence and became an integral part of everything DeFi on Ethereum.

Similarly, given $BGT is non-transferrable, Infrared Finance created $iBGT, a liquid wrapper for $BGT, to allow for additional utilities and use cases. When a user deposits PoL assets to Infrared’s vaults, they earn LP yields, $IRED (Infrared’s governance token), and $iBGT, which is backed 1:1 by $BGT Infrared receives.

With $iBGT on hand, a user forgoes native $BGT yields (block rewards from native dApps), but can choose to deploy across Berachain’s DeFi protocols. Alternatively, while $BGT and $iBGT can’t be swapped or staked for each other directly, a user can stake $iBGT for $siBGT and receive all native $BGT rewards.

Because Infrared allocates all $BGT earned to their own validators, all rewards will be directed to the stakers. And because not all $iBGT will be staked for $siBGT, $siBGT holders get to enjoy boosted returns.

Given its design, $iBGT allows for much higher composability than $BGT, and I foresee $iBGT gaining major market share from $BGT and Infrared dictating significant influence over Berachain governance.

To win Infrared’s $BGT votes for one voting epoch, protocols will have to bribe $IRED holders on Infrared’s native bribery market. As this feature is unlikely to be released on day one, protocols will be bribing Infrared on the Berachain base layer instead.

In addition, Infrared will also release an LST for $BERA, $iBERA, and stake the underlying with their own validators. This let’s users participate in block validation without needing the tech knowledge to set up a validator, and also enjoy the unencumbered liquidity to freely deploy across DeFi protocols while generating staking yield.

The POL flywheel

Similar to Berachain’s native dApps, Infrared’s design also allows protocols to build long term, sticky liquidity via its POL flywheel, with the biggest difference being earning $iBGT instead of $BGT, giving it higher flexibility.

After a protocol gets their pool approved by Berachain’s governance, Infrared will open a feeder vault on top of it. The protocol then deposits treasury assets into the feeder vault, earning LP yield, $IRED, and $iBGT. This combination gives protocols much more control and creative ways to generate value.

Protocols use $IRED to influence Infrared’s BGT votes and validator set, and these bribes are directed back to $IRED holders. Meaning, as a protocol’s $IRED stack increases, so does the share of the bribes they receive, creating The Infrared Flywheel.

This is taken straight out of Convex and Votium’s playbook, using lessons learned from the bribes and gauges systems to direct emissions and attract liquidity.

Just that this time in a more refined system, liquidity is not directly farmed through bribes, but rather indirectly through PoL. It is the common goal for all stakeholders to farm Berachain’s governance power that results in sticky and long term liquidity.

Furthermore, $iBGT can be staked for $siBGT to generate boosted yields on Infrared to increase protocol earnings. Alternatively, protocols can also deploy $iBGT on other ecosystem protocols, increasing collaboration between Berachain participants while generating additional rewards.

Implications on Berachain

Because of $iBGT’s composability, many users may opt to earn $iBGT instead of $BGT altogether. This could make Infrared one of the most important protocols within Berachain’s PoL ecosystem and be potentially both accretive and dilutive.

On the positive side, now that users no longer have to burn $BGT for $BERA, $BERA’s selling pressure diminishes, which helps protect ecosystem sentiment. In addition, by selling $iBGT instead of $BERA (burned from $BGT), users get to capture the full value of their holdings.

However, Infrared’s growth into prominence may create an overconcentration of assets and $BGT control on its platform, which is detrimental to Berachain’s decentralized qualities. And any fatal attack on the protocol may also have outsized impacts on the overall ecosystem.

Kodiak

Kodiak is the only DEX incubated by Build A Bera, and offers both (Uni)v2/3-style liquidity pools.

Its flagship product, Island, allows users to provide v3 liquidity without needing to manually readjust liquidity ranges. The automated liquidity management vaults have predefined rules and optimized parameters, and rebalance liquidity systematically to ensure it is in-range and maximizing yields.

The LP receipt token from specific vaults (Sweetened Islands) can be further staked and rehypothecated throughout Berachain’s DeFi ecosystem, earning boosted yields and incentives.

Kodiak will also offer a token-deployment solution where users can easily launch new tokens permissionlessly without coding requirements.

The protocol token, KDK, when earned via liquidity provisioning/swaps can also be escrowed and allocated to utility modules for additional rewards.

As BEX only offers Uni v2 liquidity pools, Kodiak’s v3 capabilities complement BEX’s offerings well. Kodiak’s Island is especially useful when fighting $BGT sybil farmers on BEX who set v3 liquidity bands consistently out of range. Furthermore, Kodiak could also utilize BEX’s liquidity when rebalancing pools.

This symbiotic relationship promotes deeper liquidity for both protocols and improved user experience. It is also important to note that Kodiak worked closely with the Berachain Foundation to ensure Islands are compatible with PoL and eligible for $BGT emissions.

Gummi

Gummi is a leverage trading and money market platform that supports any token without external reliance on oracles. This design is based on a bond mechanism where liquidators put up a bond in order to facilitate liquidations.

The protocol allows lenders to permissionlessly create customized lending markets with isolated risks and flexible terms, which can range from 100x leverage to 99% LTV. This enables the birth of various strategies, from arbitrage, looping, NFT liquidity, to leveraged farming. Gummi acts as a one-stop shop for trading, lending and yield farming.

The team also hopes to get approval to receive $BGT emissions directly to their protocol.

Ecosystem projects

The Honey Jar

If you’ve been playing around with the Bartio Testnet, you may have recognized a familiar name at the top of the validator list; yes, it’s The Honey Jar (THJ).

THJ is one of the most OG community projects on Berachain, founded by a Bera whale, Janitooor. More than just being a validator, THJ is Berachain’s go-to community partnership aggregator. Started in 2022, the project currently has over 40 live partnerships ranging from DeFi protocols to NFT and community projects.

In addition, its contribution to Berachain’s ecosystem growth also earned it the right to be one of the only few official testnet faucets. They have onboarded over 100k unique users through the faucet who’ve minted 2.5m testnet NFTs.

Honeycomb

During The SVB Bank Run of March 2023, THJ released its premier NFT collection, Honeycomb (HC), of which 40% was given to the community for free and 60% was fair-minted, completed in two weeks. It is the most widely held NFT collection on Berachain, counting 4,450 holders, and most deeply traded, at 3.5x of the Bears NFT Collections.

The HC collection entitles holders to a plethora of ecosystem benefits, which so far has included free mints, discounts, airdrops, whitelists and more. Instead of spending hours fighting over a WL spot, holders can now enjoy priority access to the newest projects.

Furthermore, it has also become the de facto leader of Bera airdrop/attention farming - HC was the only collection on Berachain that received LayerZero airdrops, and most recently $UWU.

Is their success sustainable?

THJ plays an extremely important role in the community, effectively offering cult-as-a-service, bringing eyeballs and community over to new project launches. Their symbiotic relationship with the community and projects generates immense synergies and fosters a strong foundation for ecosystem growth.

As we near Berachain’s mainnet launch, THJ’s partner list is expected to grow further, which will generate additional value for holders. It is also a useful tool to keep track of new projects coming into the ecosystem.

What’s the play?

Honeycomb

• Due to the role THJ plays, HC grants holders a more diverse and holistic exposure to the Berachain universe, and with confirmed community privileges, it is the preferred alternative to the Bears NFT Collections.
• Each Honeycomb reached a peak of 0.7ETH during the Artio Testnet, but is only going for 0.3ETH now (was at 0.15ETH at the time of writing, and floor swept up to 0.3ETH within a week).
• This may be a suitable option for many as it is more affordable, has strong intrinsic value from partnership privileges, and potential price pump from mainnet launch hype.

Engagement with THJ

• Complete quests, participate in raffles, and collect badges on THJ’s platform.
• Delegate $BGT to THJ’s validator for incentives and potential future rewards, as they also offer a more favored proposition.

Complete other collections

1. Less recommended as has lower risk-return, more time consuming, more expensive, and likely lower returns
2. Six generations of Honeyjar (HJ)
   • Supplement HC’s utility
   • Additional benefits and rewards at mint for gen 1-2
   • Grants access to ApiologyDAO
     • ApiologyDAO is responsible for collecting ecosystem airdrops and rewards, which they will HODL in their treasury and deploy to improve ecosystem liquidity. They are managed by THJ, and is also one of the largest HoneyComb NFT holders.
3. NFT Collab with Milady - Mibera
   • 7 sets, each with a mint for:
     • Mirror article
     • Poster
     • Video
     • Music

$HENLO

Henlo is how Beras greet each other/say “Hello” - Beras can’t read or write properly.

More importantly, $HENLO is Proof-of-Liquidity wrapped in a memecoin. It will also be used as incentives to farm $BGT delegation, deployed to power the POL flywheel, and earn $BGT for THJ’s own validators. It is also the first memecoin with community wide backing within Berachain.

As a little bonus, I also heard from a little bera that HC, HJ, and Bear NFT holders may receive some benefits around $HENLO.

Beraborrow

Beraborrow operates as a lending market, taking yield-bearing assets as collateral and using said yield towards interest payments.

$iBGT is the first approved collateral to mint/borrow $NECT (Beraborrow’s stablecoin with a 1 USD peg) against. The team plans to accept other collateral assets in the future.

When $iBGT is deposited, Beraborrow stakes it on Infrared for $siBGT and generates boosted yields. This yield is used to offset interest payments, and in cases where $siBGT yield is higher than the $NECT borrowing rate, borrowers enjoy positive staking yield while having freedom to deploy $NECT across partner protocols. Each $NECT can be exchanged for $1 worth of $iBGT at face value.

One of the most powerful parts of the protocol is that users are able to borrow more on the same collateral as the collateral is yield-bearing and increases in value over time.

The borrowing rates, borrowing fees, collateral ratio, and redemption rates (to open position) are dynamic and driven by market demand, market conditions, utilization, collateral asset, and other factors.

There are two collateral ratios Beraborrow adopts in governing and making sure the protocol steers clear of bad debt.

The Minimum Collateral Ratio, specific to each loan, ensures there is a safety margin for liquidation before the protocol starts incurring bad debt.

Total Collateral Ratio takes the ratio between total present value of all collateral and total debt, where liquidation is triggered when the ratio falls below a critical level.

Beraborrow also offers flash loans on assets in its possession, and is looking to launch a bribe market and cash and carry module in the near future.

How protocols cross pollinate

Infrared x Kodiak

For the treasury flywheel strategy, Kodiak bribes Infrared Gauges to emit higher $BGT to its Islands.

Simultaneously, Kodiak also deploys POL into Infrared Vaults (to earn $iBGT and $IRED rewards), which is further deposited into Kodiak’s Islands with juiced $BGT rewards. Kodiak then uses the new found governance power ($iBGT) to influence and further boost future rewards and emissions.

For the community flywheel, users earn boosted rewards in $iBGT, $IRED, Kodiak emissions, and LP yield by simply providing liquidity to $BGT whitelisted Kodiak Islands and depositing the LP token into Infrared Vaults.

Infrared x Beraborrow x Kodiak

Beraborrow allows users to loop and build their original $iBGT stack by up to 11x.

First, $iBGT holders borrow $NECT and deposit the pair into a DEX, and subsequently, the LP token into Infrared to earn $iBGT, $IRED, and fees. Second, swap everything other than $iBGT for $iBGT, which can be used to borrow more $NECT. Lastly, loop it up 11x!

Once Beraborrow opens their doors to other collateral assets, we can apply a similar strategy to farm rewards, and in the right conditions, for free. It is important for users to manage $iBGT prices, yield, and collateral ratios closely to avoid liquidations.

Users can also fit Kodiak into the mix by targeting $NECT/$iBGT liquidity pools on Kodiak and depositing the LP tokens on Infrared to continue the above-mentioned loop.

Other than smart contract risks, these are relatively low execution risk strategies, and I suspect it will be a crowded trade from day one, until the $NECT borrow rate = $siBGT yield.

Some users may be open to paying interests (borrow rate > yield) on the expectation that $iBGT price appreciation outperforms interest payments. This is definitely one to keep an eye on, but I doubt there will be much room for plebs to profit from.

Infrared x Kodiak x Gummi

Users can use LP tokens from Kodiak as collateral to borrow any asset on Gummi, where the users earn underlying swap fees from Kodiak, as well as borrowing fees from Gummi (when assets are lent out). The team is also planning to launch levered Kodiak vaults so depositors can easily earn boosted returns.

Above all else, Gummi also enables optionality around $iBGT where users can opt to go long/short, or run leverage up 100x via their vaults. When Gummi becomes $BGT-emissions eligible, $iBGT deposits will earn rewards from Infrared, Gummi, and $iBGT. The team expects to achieve 3x the original yield via its Gummi-Infrared Vault.

The protocol’s flexibility and customizability is extremely powerful in building different trading and farming strategies.

$iBGT valuation

It is evident that $iBGT plays one of the most important roles within Berachain DeFi and is deeply integrated across key protocols.

In addition to max farming $iBGT, a less capital-intensive strategy and more liquid way is to swap for $iBGT and capture its price appreciation. But, how can one tell if the price is too high or too low?

Illustrative example

Assume there is a 50/50 $BERA-$HONEY pool on Infrared giving 5% $iBGT yield. This implies each asset contributes 2.5% $iBGT yield when paired together, and that $iBGT is 40x (1/2.5%) more valuable than the base assets. By comparing the ratio between $iBGT and the base assets, we can deduce that one is over or undervalued.

However, when the pool is not 50/50, the base asset with fewer tokens in the pool will be more valuable than the other, and when there are multiple pools with the same base asset, an arbitrage could be done in relation to $iBGT pricing.

In addition, another factor to look at is $IRED bribes to ascertain if the $iBGT yield is sustainable going forward. During volatile times, $iBGT could also be trading at a premium or discount in relation to the underlying pool yields.

In reality, there is no perfect way to value $iBGT in real-time as there are too many factors at play; plus, intrinsic value hardly ever tracks market value (price).

Food for thought

Ape with me

The focus during pre-mainnet launch is to farm potential airdrops, both from Berachain and from ecosystem projects.

If portfolio asset allocation allows, it may make sense to assess mispricings between the Bears NFT Collections, as well as to explore ecosystem NFTs, such as Honeycomb from THJ, Tour de Berance from Beradrome, or Big Fat Beras from Beraborrow, which may come with additional benefits on top of potential airdrops.

Once mainnet goes live, I will have four main focuses:

1. monitor and buy $iBGT when it’s underpriced,
2. farm $iBGT with high-correlating non-stablecoin pairs and rehypothecate across ecosystem flywheels (Kodiak - Infrared),
3. trade 50% bribes and incentives and roll the rest back into base pairs,
4. and monitor new project launches, especially those offering juiced yields, incentives, and flywheel integrations around $iBGT.

The key to this strategy, especially around $iBGT, is to monitor ecosystem hype and market cycle timing and exit positions accordingly.

As far as portfolio compositions go, I will be instant dumping high-beta incentives for $iBGT, derisk core protocol tokens on pump days for stables and $iBGT, and DCA out $iBGT as hype growth slows (based on Kaito and CT/CX monitoring).

In a way, all Bera assets have a level of dependency on the valuation of $iBGT - if $iBGT nukes, so will protocol tokens.

I believe Berachain has the potential to bring life back into DeFi and kick off another round of DeFi Summer.

And just to play the devil’s advocate, while I don’t think this will be the case, if Berachain struggles to attract liquidity, we will likely find ourselves stuck in a reverse flywheel and turbo nuke to zero.

In closing

There is so much to Berachain: an EVM identical L1, memeic culture, novel PoL concensus; but above all else, it is an ecosystem where all participants come together to work towards one goal. Its token model coupled with PoL allows new projects to bootstrap liquidity and ensures value flows across all stakeholders.

Many have been accumulating Berachain NFTs, participating in the testnets, and engaging with ecosystem projects in hopes to receive airdrops when mainnet goes live. But that is just the beginning!

The fun starts once mainnet goes live and we hit TGE. Users will need to come up with the most suitable strategies for themselves, whether that be trading newly launched tokens, running creative farming strategies built on top of PoL, stacking $BGT to sway strategic decisions, or others yet to be born.

I hope and believe Berachain will reinvigorate the DeFi landscape, douse us with sporadic spurts of adrenaline rush, and bring back “smart” on-chain degeneracy.

In the current landscape where most new chains suffer from TVL and user outflow after doling out airdrops, I believe Berachain’s game theory and strategic farming element will bring new excitement to the community, users to the ecosystem, and deeper liquidity, improving UX.

On top of the tech and community, Berachain also sits at the intersection between multiple narratives - I would not be surprised to see them reaching $10bn+ FDV.

Only time will tell if this major DeFi experiment works, but Berachain sure is set on the right course.

I will continue to follow the ecosystem closely with capital on the line, if you should choose to join me.

DISCLAIMER: The author of this report, zkHopium, has been bera-pilled for over two years, and has vested interests throughout the Berachain ecosystem.