Proof-of-Liquidity Participants 👥

This article explores the different players in the Proof-of-Liquidity (PoL) ecosystem and their roles. The following diagram shows a breakdown of the different participants and their priorities/responsibilities:

Validators ✅

The active set of validators consists of the top N validators ordered by BERA staked. Being part of the active set entitles validators to earn block rewards, so a key priority for validators is to obtain sufficient $BERA stake to be in the active set. Validators earn through three primary means:

1. Gas fees and priority fees
2. Collecting incentives provided by protocols for directing BGT rewards to their Reward Vaults
3. A base block reward (in $BGT) for successfully proposing a block

Validator Incentives 💎

When a validator directs $BGT emissions to a reward vault, they receive project-supplied Incentives provided to attract these emissions (thus increasing the attractiveness of depositing into that project). These Incentives can be in the form of the protocol's native token or any other whitelisted ERC20 token.

Successful validators in PoL optimize for:

• Securing $BGT delegation to increase their block rewards
• Efficiently exchanging $BGT block rewards for protocol incentives
• Distributing value back to their $BGT delegators

BGT Holders & Farmers 🥕

BGT holders play a crucial role in:

• Voting on governance proposals
• Influencing economic incentives through $BGT delegation
• Supplying ecosystem liquidity in reward vaults to earn $BGT

TIP

$BGT that is delegated to validators is not subject to slashing. Only validators' $BERA stakes can be slashed.

Earning and Delegating $BGT ⬇️

Users can earn $BGT by staking PoL-eligible receipt tokens in reward vaults. These receipt tokens are generated by performing actions that benefit the Berachain ecosystem, such as providing liquidity to a BeraSwap pool.

When selecting a validator to delegate $BGT to, users typically consider:

• Which reward vaults validators direct emissions to
• Validator commission rates and incentive distribution strategies
• Validator uptime and performance

The primary goal is to earn as much Incentives as possible through delegation.

Ecosystem Projects 🧸

Projects participate in PoL by:

1. Creating a reward vault through the factory contract
2. Submitting a governance proposal to whitelist the vault
3. Supplying incentive tokens and managing rates in their vault

The Incentives marketplace allows protocols to bid for validators' emissions using whitelisted tokens, creating alignment between all stakeholders to increase the overall value of the network. Projects must earn also gain the favor of $BGT holders to enter into the PoL system.