What is Berachain? A Guide to the EVM-Compatible L1 Blockchain

Numerous blockchains exist, and many are competing to be the preferred choice for DeFi developers. Some of the defining features of Berachain that are intended to help it stand out from the crowd include the following:

Berachain was designed to have an execution layer that was identical to the EVM. This allows existing Ethereum smart contracts, wallets, tools, and infrastructure to be ported directly over to Berachain. Additionally, Berachain is capable of following updates to the EVM as they are deployed to Ethereum.

This native compatibility with the EVM is designed to make it easy for users to adopt the new blockchain. DeFi projects and other smart contract developers can simply redeploy their existing code on the new blockchain, and users can use existing Ethereum clients, such as geth. By using existing technology, the blockchain both eliminates potential sources of friction and reduces the risk that new security risks will be created due to the introduction of new code.

While many blockchains use Proof of Work (PoW) or Proof of Stake (PoS) to achieve consensus, these protocols have known limitations and issues. For this reason, several blockchains have developed their own, custom consensus algorithms designed to provide a better experience and security for their users.

Berachain uses its own Proof of Liquidity (PoL) algorithm to manage blockchain security. The PoL protocol is derived from PoS but introduces a soulbound governance token as well. Stakers receive rewards for providing liquidity to the blockchain platform, which enhances its trading, security, usability, and price stability.

Berachain has developed the BeaconKit Framework, which is a modular framework for developing EVM consensus clients. The Berachain ecosystem is built using this framework.

BeaconKit was created using the Cosmos SDK to create a consensus layer designed for EVM-compatible blockchains. It uses the Engine API to create an EVM-identical ecosystem that can be paired with any EVM execution client. 

Additionally, the modular design of the system enables new block builders, rollup layers, and other modular blockchain layers to be easily integrated into the system. This approach creates a framework for implementing Layer-2 solutions on top of the Layer-1 Berachain, which is useful as many protocols are moving to these Layer-2 protocols due to transaction speed, fees, and customizability.

Berachain defines a few “key principles” that describe its philosophy and how it plans to go after the DeFi developer market. These three principles include:

As a whole, the DeFi ecosystem holds a staggering amount of liquidity. The total value locked (TVL) of DeFi projects is approximately $80 billion at the time of writing.

However, this liquidity is fragmented across different blockchains and different projects within the same blockchain. As a result, each individual project has much less available liquidity, which limits trades and other activities within the project.

Berachain attempts to defragment liquidity on its platform by building key elements of DeFi projects — such as AMMs and lending — into the blockchain layer itself. This approach limits the competition for liquidity on the platform, improving the user experience.

Blockchains using PoW and PoS as their consensus layer largely direct block rewards to block creators. Block creators are responsible for maintaining the digital ledger, checking transaction validity, and executing smart contract code. The block rewards that they receive are compensation for their efforts.

Berachain argues that the applications built on top of a blockchain are major contributors to its value and success. However, the traditional system for blockchain rewards doesn’t acknowledge this, creating little incentive for a project to use or stick with a particular program.

Berachain’s PoL consensus algorithm is designed to “direct blockchain emissions” to applications and builders during the block production process. By incentivizing developers to build on the platform, it’s attempting to streamline and speed up the development of DeFi applications.

Ethereum was the original smart contract platform and has a dominant position in the DeFi space. While other blockchains are attempting to challenge this, the majority of DeFi apps and TVL are on Ethereum.

One way that blockchains attempt to attract DeFi projects away from Ethereum is by making the barrier to entry as low as possible. Berachain and other blockchains have EVM-compatible or EVM-identical execution environments where existing smart contract code can be painlessly deployed on the new platform. This provides projects with a quick and easy way to expand their reach or transition over to a new platform that lacks Ethereum’s congestion and fees or offers additional, desirable features.

Berachain is a smart contract platform designed to optimize the development of DeFi projects. This includes consensus algorithms that reward application development, a modular architecture that simplifies deployment of Layer-2 solutions, and an EVM-identical execution layer that makes it easier to transfer DApps over from Ethereum, which currently dominates the space.

As Berachain hosts more DeFi projects and their value increases, ensuring the security of these contracts becomes even more important. The fact that Berachain uses an EVM-identical blockchain and encourages Ethereum smart contracts to be ported over means that many of the same vulnerabilities that exist in Ethereum also apply to Berachain. Additionally, the unique nature of the Berachain ecosystem, with its built-in DeFi capabilities at the blockchain level, could introduce new security risks.

When deploying new code to Berachain or any blockchain, it’s vital to first perform a smart contract audit to identify and correct any vulnerabilities and other errors before they can be exploited by an attacker. For help in protecting your DeFi project against potential hacks, get in touch with Halborn.