Berachain’s Proof-of-Liquidity Mechanism Goes Live March 24

Berachain’s unique Proof-of-Liquidity mechanism will officially go live on March 24, expanding reward distribution beyond BEX pools to other apps and vaults.

In a post on March 21 on X, Berachain Foundation announced the launch of its PoL mechanism, enhancing the reward pool with additional vaults. Originally, Berachain’s (BERA) PoL functioned exclusively within BEX pools to distribute BGT, facilitating decentralized on-chain governance.

Starting Monday, the PoL will extend its reach beyond BEX, allowing additional apps and vaults to earn rewards. The first batch of Requests for Reward Vault from apps has already received approval. Initially, rewards will be restricted to DEX pools, but new vaults and use cases will be sanctioned starting next week. For holders of Berachain’s governance token, BGT, this means they will influence where rewards are allocated.

What is Berachain’s Proof-of-Liquidity Mechanism?

Berachain’s blockchain aims to rectify the misalignment of incentives seen in Proof-of-Stake (PoS) blockchains. In a typical PoS blockchain, users must lock their tokens to secure the network and earn staking rewards. However, this locking reduces the crypto available for applications and transactions, prompting users to prioritize staking over utilizing DeFi applications.

Berachain addresses this challenge through its innovative PoL consensus mechanism. In a standard PoS system, validators earn rewards for validating transactions and distribute a portion to their delegators based on their stakes. Conversely, Berachain requires validators to allocate a significant majority of their BGT rewards to the app’s reward vault instead of retaining it entirely. This design incentivizes applications to incentivize validators—often using their native tokens—to boost their BGT allocation. The outcome is a competitive marketplace where validators are motivated to endorse the most promising apps.

Market Performance

Currently, Berachain’s token BERA is priced at $6.35, down 57% from its all-time high of $14.99 recorded on February 6, coinciding with its launch. Following a dramatic drop from its post-launch peak to around $4, the price remained stable between $4 and $5 until a bullish breakout to $9 between February 18-21, bolstered by increased trading volume. The momentum persisted into early March, reaching a peak of $9.2 before facing resistance and retrenching. Subsequently, the price gradually decreased, stabilizing around the $6 support level, with trading volume diminishing, indicating traders are awaiting the next catalyst.

Source: crypto.news