Introduction

Thesis

Berachain's innovative Proof of Liquidity (PoL) consensus mechanism addresses the liquidity scarcity issue inherent in traditional Proof of Stake (PoS) networks. While this new approach offers significant advantages, it also introduces certain challenges and opportunities for all parties involved. One notable consideration is the potential for early adopters and individuals with substantial capital invested in liquidity to consolidate validation power. This could create an entry barrier for late adopters, as it may be challenging for newer capital investors to attain comparable validation power.

Additionally, this concentration of governance power among early participants might influence protocol decisions. Established validators with significant stakes may have a dominant influence on protocol governance, potentially affecting the whitelisting of new protocols for BGT issuance. In such a scenario, end users might not fully benefit from new technological advances, potentially leading them to seek better experiences and yield returns elsewhere.

To maximize rewards and ensure a balanced ecosystem, it is crucial to continuously enhance the PoL mechanism. By promoting innovation and participation from a diverse range of contributors, we can create an inclusive environment that encourages both security and growth.

Solution

BeraPaw's approach to Berachain's PoL consensus aims to enhance the experience for all participants. We believe that the validating power should neither be fully liquid nor fully illiquid. While non-transferability can limit incentives for liquidity providers, full transferability may not provide enough motivation. With that in mind, BeraPaw is implementing an abstraction of the BGT, allowing it to be transferable so that part of the total governance power can be bought, sold, or even borrowed. To achieve this, it is necessary to decouple the staking actions from BGT by wrapping it into a liquid staking token. We introduce the Liquid Bera Governance Token ($LBGT). To handle staking in a decentralized and transparent way, we also introduce the $PAW token, responsible for BeraPaw's governance and BGT delegation power. We strongly believe that we can bring value to the ecosystem's participants by enhancing their interactions:

• Users and investors: Easier governance interactions while earning the same block rewards; the possibility of entering and exiting BGT positions; higher yields compared to classic BGT staking; holding BeraPaw's deflationary $PAW token for potential gains.

• Protocols: The ability to permissionlessly issue $LBGT to users to provide higher yields; leveraging BeraPaw to be whitelisted for BGT emissions.

• Validators: The ability to stake $PAW tokens to delegate part of protocols' BGT to themselves.

In this whitepaper, we delve into the details of BeraPaw's protocol design, exploring its innovative approach to the PoL consensus mechanisms, liquidity provision strategies, and governance framework. Through its tokenomics and decentralized governance model, BeraPaw aims to establish itself as a cornerstone of Berachain's PoL consensus model, driving forward the principles of decentralization, security, and accessibility for all participants of the network.