Berachain Expands Governance with 'Proof-of-Liquidity' System

Berachain is expanding its proof-of-liquidity system, allowing other decentralized applications to apply for incentives through new reward vaults. This will further decentralize governance and help these apps expand by drawing liquidity. The initial set of vaults includes liquidity pools from multiple DeFi platforms, with more to be added later. This system ensures that validators send back some rewards to the network, supporting applications that boost activity on the blockchain. The governance token, BGT, gives holders the ability to vote on which validators and projects receive support.

Introduction:
Berachain, an EVM-based Layer 1 blockchain, is set to expand its proof-of-liquidity (PoL) system, marking the beginning of phase 1 of on-chain governance [1]. This innovative approach aims to decentralize the supply of BGT, Berachain's governance token, enabling on-chain governance through a network of incentivized decentralized applications (dApps).

Berachain's PoL System:
The PoL system encourages users to provide liquidity to the network while allowing assets to remain usable [1]. This approach redefines the role of staked assets and integrates liquidity provision into the network's security and governance. Validators receive BGT emissions based on how much BGT liquidity providers delegate to them, incentivizing them to boost their influence in consensus and optimize their rewards [1].

Decentralizing Governance:
By introducing PoL, Berachain aims to further decentralize governance, allowing dApps to apply for incentives through new reward vaults [1]. This approach ensures that validators send back some rewards to the network, supporting applications that boost activity on the blockchain [1]. The governance token, BGT, gives holders the ability to vote on which validators and projects receive support [1].

The Impact of PoL:
The initial set of vaults includes liquidity pools from multiple decentralized finance (DeFi) platforms, with more to be added later [1]. This system ensures that the network's security is tied to the ecosystem's liquidity, providing a strong foundation for the growth of dApps on the Berachain ecosystem [1].

Conclusion:
Berachain's PoL system represents a significant step forward in the decentralization of governance and the growth of DeFi applications. By incentivizing users to provide liquidity and encouraging validators to optimize their rewards, Berachain aims to create a robust and dynamic ecosystem that benefits all participants.

References:
[1] Coinglass. (2023, April 25). Berachain to Roll Out Proof-of-Liquidity System, Kicking Off Phase 1 of On-Chain Governance. https://www.coinglass.com/news/433319