Creating a Governance Proposal for Berachain Reward Vaults

NOTE: For a detailed guide on how to create a reward vault, please see this blog post: Creating a Governance Proposal for Berachain Reward Vaults where you can learn how to create your own Reward Vaults.

Berachain's Proof-of-Liquidity (PoL) consensus mechanism allows protocols to bootstrap their liquidity by receiving Berachain Governance Token ($BGT) emissions from validators. This process is facilitated through Reward Vaults, which play a crucial role in the governance and incentive structure of the Berachain ecosystem.

Understanding Reward Vaults in PoL

Reward Vaults are smart contracts that enable validators to share their $BGT rewards with protocols. When validators build blocks, they earn $BGT proportional to their staked amount. Validators can then:

1. Use $BGT for governance participation
2. Exchange $BGT for $BERA (the native gas token)
3. Share $BGT rewards with protocols through Reward Vaults

This mechanism is central to Berachain's Reward Vaults system.

Governance and Reward Vaults

While creating a Reward Vault is permissionless, for it to receive $BGT emissions from validators, it must be whitelisted through a governance proposal. This process ensures community oversight and alignment with the PoL system's goals.

Governance Process for Whitelisting

1. Meet $BGT Requirements:

   • A minimum amount of $BGT is needed to create a proposal
   • $BGT can be acquired through participation in PoL on native dApps

2. Create and Submit Proposal:

   • Proposals are submitted on-chain
   • There's a waiting period before voting begins

3. Voting Period:

   • Active voting window
   • $BGT holders cast votes (quorum required)

4. Proposal Outcome:

   • If passed: Enters a timelock queue
   • If declined: Marked as defeated, allowing for a new proposal after addressing concerns

NOTE: For specific testnet values such as required $BGT amounts, voting periods, and quorum requirements, please refer to the Governance Overview section.

Impact on the PoL Ecosystem

Whitelisting a Reward Vault through governance has significant implications:

1. Liquidity Incentives: Approved vaults can receive $BGT emissions, incentivizing liquidity provision.
2. Protocol Growth: Protocols can use accumulated $BGT to bootstrap liquidity or participate in governance.
3. Ecosystem Alignment: The governance process ensures that whitelisted vaults align with the community's interests.

You can read more about Reward Vaults in our Reward Vaults section.

For more information on Berachain's governance system, see the Governance Overview.

Learn more about creating a governance proposal for Berachain Reward Vaults