Berachain: Liquidity Proof and Tri-token Model

Berachain is an EVM-compatible chain built using the Cosmos SDK. It adopts a unique "liquidity proof" consensus mechanism and a tri-token model. Berachain aims to incentivize the ecosystem in a more sustainable way, where liquidity proof consensus promotes the simultaneous growth of Berachain's liquidity, asset utilization, and market value.

There are three types of tokens in Berachain: the native stablecoin $HONEY, the Gas token $BERA, and the governance token $BGT. The separation of the Gas token and governance token is to avoid the reduction of voting power for frequent users over time.

Users deposit various assets into Berachain's consensus system to obtain the right to participate in consensus and share transaction fees, protocol fees, and block rewards in $BERA. The deposited assets are used to provide liquidity in the AMM by minting the stablecoin $HONEY, where the collateral for minting $HONEY is the assets deposited by users. If there are losses due to impermanent loss in the AMM or other reasons, the final amount of assets that users can redeem may also decrease. Besides being used for paying gas fees, $BERA can be staked to obtain governance token $BGT, which is the only channel for generating $BGT.

Staking $BGT can earn a share of protocol income such as transaction fees in the AMM. Here is a possible flywheel for Berachain:

• Users stake assets to obtain $BERA block rewards, and the staked assets and $HONEY form trading pairs in the AMM;

• The more assets staked, the better the protocol's liquidity, resulting in more trading volume;

The more transaction volume, the more protocol revenue generated, and the higher the demand for $BGT.

• Due to the fact that $BGT can only be generated by pledging $BERA, the demand for $BGT leads to an increased demand for $BERA.

• Encourage users to pledge more assets to obtain $BERA.

The Berachain mainnet has not yet launched, so specific performance needs to wait for the project to go live. In April of this year, the project received investments from Polychain Capital, Hack VC, OKX Ventures, etc., with a valuation of $420 million.

Tenet: Diversified Proof of Stake and Liquidity Staking

Tenet is also an EVM-compatible chain built on Cosmos SDK, which introduces a new proof of stake framework called Diversified Proof of Stake (DiPoS), which improves security compared to traditional PoS models.

In decentralized applications, security incidents such as governance attacks occur frequently, which corresponds to network attacks in Layer 1 blockchains. Diversified Proof of Stake allows users holding a basket of assets to participate as validators in network consensus, eliminating the risk of the network being controlled by users holding a large amount of a single asset (native token of the public chain).

Tenet's consensus approves assets other than native tokens to participate in network security, such as ETH, ATOM, BNB, MATIC, ADA, and DOT. As the number of assets increases, network attackers need to have a significant share of these mainstream cryptocurrencies to complete an attack, benefiting from the combined security provided by these assets.

To help users earn profits while maintaining network security, Tenet accepts protocols such as Lido, RocketPool, as well as liquidity staking derivatives minted by institutions like Binance and Coinbase. At the same time, Tenet provides its own internal infrastructure to facilitate liquidity staking for assets like ETH and ATOM. Since Tenet prioritizes network security, it does not charge a management fee of 10% like other protocols such as Lido, making its liquidity staking service more attractive.

Through this cross-chain staking method, Tenet hopes to create a cooperative relationship that benefits multiple parties. Other chains can increase security through more staking, users have more profit opportunities, and Tenet itself benefits from the security enhancement brought by diversified proofs.

Currently, Tenet has launched the mainnet Beta version, and the native token $TENET has also been listed on exchanges such as Bybit and Kucoin. In the Tenet system, there are also native stablecoins and DEX.

Mangate Finance: A DEX application chain using liquidity proof

Mangate is a cross-chain decentralized exchange in the Polkadot ecosystem, winning the 68th parachain slot auction on Kusama.

Mangate believes that PoS locks up a large amount of assets, resulting in a reduction in available funds in DeFi and low efficiency of staked funds. Therefore, it introduces the liquidity proof mechanism and uses LP tokens as staked assets to unlock staked liquidity, thereby improving capital efficiency.

Mangate is also a case of DEX application chain. Compared with traditional DEX, it has some advantages: no gas fees in transactions, but a transaction fee of 0.3% needs to be paid; preventing MEV at the consensus level; adopting liquidity proof mechanism, staking LP tokens can simultaneously receive block rewards and transaction fee income from providing liquidity.

After the upgrade in June this year, Mangate enabled single-asset staking of the native token $MGX in liquidity proof, expanding the usage of $MGX and strengthening the network's security.

Mangate has issued the native token $MGX on Kusama, but there are fewer users on Kusama. The project is still being updated and plans to build a new ZK Rollup on Ethereum's Layer 2.

Summary

In the above scenarios, Berachain aims to make liquidity more sustainable and form a flywheel between liquidity and token demand; Tenet seeks to enhance its network security by utilizing other PoS tokens; Mangate utilizes LP tokens as pledged assets to provide liquidity.

These improved PoS schemes can increase capital efficiency by obtaining block rewards, transaction fee rewards from DEX, and block rewards from other blockchains, thereby expanding the use cases of PoS assets. However, recent popular LSD and LSDFi are also competing in this field, allowing PoS assets to gain additional income from activities in DeFi while ensuring network security, earning staking rewards, and maintaining liquidity.

Furthermore, these improvement schemes allow a wider range of assets to participate in the consensus of the blockchain. As the project grows, supporting a variety of assets can attract more valuable assets, thereby improving network security. However, in the event of a death spiral, in traditional PoS chains, attackers must hold the native tokens of the public chain to launch an attack. In schemes like Tenet, even large holders of mainstream coins can potentially attack the network, which has both advantages and disadvantages.