🐻⛓️ Berachain Core Docs

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Proof of Liquidity Overview ​

Berachain's Proof of Liquidity (PoL) mechanism can be broken down into two broad categories:

  1. BGT Distribution: How $BGT is created from the block production process
  2. Incentive Marketplace: How protocols compete for validator $BGT allocations by issuing incentives

The below diagram shows the relationship between the main PoL contracts and how they interact.

PoL Overview For Devs

1. BGT Distribution ​

As discussed in Block Production, $BGT emissions stem from the block production process. A variable component $BGT emissions per block is determined by the proposing validator's $BGT delegation (also referred to as "boost").

Distributor ​

The Distributor contract is the entrypoint for BGT distribution. The distributeFor() function accepts a Merkle proof that a validator has proposed a certain beacon block. The Distributor then:

  • Receives newly minted BGT from the BlockRewardController
  • Processes rewards based on validator-specified allocations via BeraChef
  • Distributes BGT to the validator's designated Reward Vaults

BlockRewardController ​

The BlockRewardController contract is the only entity authorized to mint $BGT. It is entered through the processRewards function from the Distributor contract. The BlockRewardController then:

  • Mints a base $BGT amount to the proposing validator's operator
  • Mints a variable $BGT amount based on the validator's boost which is sent to the Distributor

BeraChef ​

The BeraChef contract manages validator reward allocations. These preferences are set by the validator operator and can be updated following a short delay. The BeraChef contract then forwards these allocations to the Distributor contract for distribution to specified Reward Vaults.

2. Incentive Marketplace ​

The Incentive Marketplace creates a market-driven liquidity incentive system where protocols compete for validators' $BGT allocations.

RewardVault ​

RewardVaults act as the core PoL integration point, they:

  • Receive $BGT emissions from the Distributor
  • Allow protocols to add incentive tokens with a minimum incentive rate per 1 $BGT emitted
  • Manage token staking and $BGT distribution to liquidity providers/users

Validators are incentivized to allocate $BGT to vaults offering higher protocol incentives, as they receive these rewards proportional to the $BGT allocated. This creates the "marketplace" dynamic where protocols compete by offering better incentives to attract more $BGT allocations.

TIP

RewardVault creation is permissionless, but vaults must be approved by governance to be included in validators' reward allocations.

The RewardVaultFactory contract deploys standardized RewardVault contracts and maintains a registry of approved vaults.