The blockchain war is now full of chaos. Cast your mind back to the 2020-2021 bull run. As crypto degens, we had some options back then. We could opt for Ethereum Mainnet, which was (and still is) a haven for whales, boasting incredibly groundbreaking projects with 100x returns, with NFTs worth over $100k each. The downside? We were hit with a $100 gas fee per swap. Another path was Binance Smart Chain (now called BNB Chain), a breeding ground for tiny cap shitcoins and slow rug gamefi projects, appealing for its $0.3 gas fees and attracting a crowd of low capital investors. And let's not forget Solana, charging less than a cent per transaction for their DeFi and NFT offerings. The picture was that, we had a few options, and our job was to pick the ones that matched our investing style.
Fast forward three years, and what do we have? A more-than-enough of new protocols: Arbitrum, SUI, SEI, Optimism, Base, zkSync, Metis, Scroll, Starknet, Mantle, Manta, Linea... and I’m probably only listing 10% of them, and we're not even in a bull market yet.
However, the number of crypto users, and their liquidity, isn't rising as rapidly as these blockchain protocols. A clear sign of this is seen in older protocols like Fantom, NEO, and Dash, which have been losing TVL and going into veins. This suggests that many of the blockchain protocols I've listed will not succeed; they may fail, or they may not, but are then likely to become average Joe protocols. From the perspective of a crypto degen – you and me - what do we want? I'm sure not just you, but most crypto degens out there are overwhelmed by this abundance of blockchain protocols, uncertain about the best moves for the 2024-2025 bull run. We want to identify and pick those with the potential to be among the winners, so we can confidently invest our life savings and wait for the price surge in the next bull run to retire from 9-to-5 jobs. So now, let's ask the most important question:
What determines a successful blockchain?
We are to explore this question. Based on the upcoming findings, I'll highlight a blockchain that I believe holds all the potential to be a frontrunner in the next bull run. This article is a mix of market insights, including my personal judgments, and project research on Berachain.
The image above was posted somewhere on Twitter in 2021, by a Fantom maxis. Let’s just take a look. Fantom, against some of the biggest blockchains at that moment, stood to be the best. What it had, and still has, is the highest speed of just 1-2 seconds per block, and the lowest gas fee for a transaction, about $0.00001. It’s notable that, this isn’t 10-20% better, it is a thousand times better compared to Ethereum Mainnet with 15-600 seconds and $3 to $20 per transaction.
This raised a burning question among crypto degens: why hadn't Fantom overtaken Ethereum as the top blockchain? Why were people still pouring fortunes into a blockchain from 2015? Fantom seemed destined for greatness, both then and in the future.
Yes, that was the narrative 3 years ago. Let’s take a look at the current situation.
Fast forward to today, January 22, 2024. Fantom’s TVL has plummeted to 67.78 million, a 99% drop from its 2022 peak. Other metrics like volume, fees, and stablecoins are at rock bottom, showing no signs of recovery. Big names on Fantom, like Tomb Finance, have crumbled, and SpiritSwap, a key AMM, shut down.
The biggest hit to Fantom, was the Multichain accident. Multichain CEO Zhaojun was arrested from his home by Chinese authorities and has been unreachable by Multichain's global team since May 2023. 122 million dollars worth of tokens, which were the collaterals for bridging assets, were taken from Multichain to an unknown wallet. Since then, $USDC, $BTC, $ETH, and other bridged assets on Fantom have been forever depegged.
From a blockchain of the future, a blockchain of the most optimized blocks, a blockchain of DeFi and developers, now turns into a blockchain of depegged stablecoins.
While some argue that the Multichain accident was the main cause of Fantom’s downfall, the statistics paint a different picture. Fantom was struggling to come back long before, especially during the bear market. It found itself increasingly outperformed by Layer 2 solutions like Arbitrum and Optimism, which surpassed it in key metrics across the board.
And the story about Fantom here is not just about Fantom. Blockchains with incredibly fast and cheap transactions like Near, Celo, and Algo, which have been hardly shilled during the last bull run, are now all going to veins. Meanwhile, the slow, costly blockchain, Ethereum Mainnet, is still at the top and has a better position due to many L2s developing there. And you know what? The blockchain of 15 years ago, Bitcoin blockchain, with stupidly high gas fees and 30-60 minutes per transaction, is attracting attention relentlessly.
This scenario proves that technical features like block speed and gas fees don't really make a blockchain successful. So, what's the real secret ingredient?
Actually, the answer lies within crypto degens themselves. Why are degens in the crypto game?
Because of the technology? Maybe for some, but not primarily.
Because of the community? Not exactly the main reason.
Because of the fun? Certainly more than that.
The truth is, it's about the financial potential. Degens are here, investing their hard-earned money in coins, NFTs, private pools, and whatever new definitions in the next decade, with the aim of growing their wealth. They are not spending liquidity to experience a smooth, seamless blockchain, they are spending liquidity to bring more liquidity, and that's the mindset of 99.99% of them. That’s why, Ethereum Mainnet, though slowly costly, will keep thriving for its abundance of liquidity from the biggest whales. and that’s also why, the Bitcoin blockchain, with huge liquidity inflow into BRC-20, was crazily hyped in 2023.
We've got our answer, but it leads us to another question: What’s the best way to bring liquidity to blockchain protocol?
Some of you might pop up one thing in mind: a massive airdrop. Yes, you’re right, but you’re just partially right. A huge airdrop is like a hit or miss. It will bring substantial liquidity into a blockchain, but will not keep it there for a long time. The Aptos airdrop, one of the massive money rains during the last bear market, has attracted most of the crypto degens there. But then a few weeks ago, everyone started to disappear with their liquidity to find another place to gamble, leaving Aptos Ecosystem a ghost town.
A successful blockchain needs a strategy that not only draws in liquidity, but keeps it.
In the next bull market, when retail investors flood in and liquidity starts pouring like rain, any blockchain that's got the magic formula to not only lure in that liquidity but also keep it hooked is set for a win. Berachain, with its new approach, could very well be among those leading the charge.
As I mentioned earlier, this article combines market insights with project research, and BeraChain is still at testnet. So, I won't dive deep into all the nitty-gritty details. Instead, I'll focus on explaining its selling points in a way that even someone without a tech background can grasp. From now on, we'll be looking at BeraChain’s Proof-of-Liquidity (PoL).
So, before we get into PoL, it's helpful to understand two other notable consensus mechanisms first: Proof-of-Work (PoW) and Proof-of-Stake (PoS).
PoW is the old-school way where computers solve tough puzzles to validate transactions. Here, rewards are entirely based on computational power. The more computing muscle you have, the more you can mine and earn. This mechanism has nothing to do with liquidity or assets.
PoS, now adopted by Ethereum Mainnet, shifts the focus slightly towards assets. The more crypto you lock up as a stake, the more you get to call the shots. However, All the staking ETH is then locked in the vault, and the only way to utilize that liquidity is through alternatives like stETH. Not just that, PoS mainly deals with just one specific coin - the native currency of its blockchain.
Now, let's delve into Berachain's Proof-of-Liquidity (PoL), starting with its straightforward Tri-Token model:
$BERA: This is Berachain's native token. It's transferable and primarily used for gas fees – the basic transactions on the network.
$BGT: The governance token, which is non-transferable. This token is at the heart of Berachain’s PoL system.
$HONEY: A stablecoin.
Moving onto the PoL mechanism – Berachain elevates the ve(3,3) system, similar to what's seen in Curve Finance, to a whole new blockchain level.
Here's how it all comes together in the PoL system:
- You get the governance token $BGT by contributing to Berachain’s liquidity pools.
- Once you have $BGT, you assign it to validators. These are the guys who make sure transactions and activities on Berachain happen smoothly.
- The more $BGT a validator has, the more it contributes to maintaining the blockchain. The validator mines blocks and, in return, both the validator and those who assigned them $BGT earn $BERA.
- Validators use $BGT to decide how new $BGT tokens will be spread across different parts of Berachain.
- If you’ve delegated your $BGT to a validator, sometimes they'll throw some extra rewards your way as a 'thank you' for your support.
What does PoL do?
Berachain’s PoL handles liquidity differently. It separates two types of tokens: $BGT for decision-making and $BERA for transaction fees. You earn $BGT by contributing liquidity to the network, not just by holding onto it. This method spreads new tokens more fairly, rather than just rewarding early big investors as happens in Ethereum’s PoS. PoL also gets liquidity providers and network maintainers (validators) to work together. This system leads to a network where everyone's interests are aligned, and more people get a say. With PoL, Berachain keeps liquidity flowing in the network, and incentivizes liquidity providers to stay.
Practical example of PoL
Imagine you are running a project with its token, $X, on Berachain. You have an X/HONEY pool and want to deepen its liquidity. Traditionally, you might incentivize this pool directly. However, with Berachain’s PoL, you can establish your own node, vote for your liquidity pool, and then the $BGT emissions will rise to reward participation in your token pool.
Furthermore, you can bribe delegators with $X, attracting $BGT holders to support your node. For the project, having a node means securing a vote on Berachain and providing more incentives to the community.
This mechanism motivates every project to deploy its node, forming a governance community where users and projects have aligned interests. The more nodes there are, the more decentralized the network becomes.
Now, let's move past the tech talk. To be honest, if it’s just about the tech, BeraChain won’t persuade me enough. But the narratives behind BeraChain really are a key.
BeraChain’s devs are the ones who created an NFT Collection called Bong Bears, featuring 107 uniquely crafted bears. Beyond the main collection, there are five rebase collections, with each NFT valued between 4 to 380 ETH. This gives me a strong belief that BeraChain’s mainnet launch will turn it into a hotspot for NFT enthusiasts.
But there's more – it's the art of BeraChain that truly stands out. The design, a poorly drawn bear, is surprisingly impressive.
With 42 million raised from tier-1 VCs, BeraChain has the means to hire pro max ultra senior graphic designers in the space, but they choose not to. In my opinion, It’s a clever move to slot BeraChain right into the crypto meme category. If $DOGE and $SHIBA can rocket to billions with just memes, why not a scrappy-looking bear with a whole L1 blockchain behind it?
As we conclude the exploration into “What determines a successful blockchain?”, it's become evident that the answer lies not only in the most advanced technology or the fastest transaction speeds, but also in something more fundamental: liquidity. Liquidity is the lifeblood of the blockchain ecosystem, much like water in a river, determining the health, vitality, and potential of any platform.
Berachain's approach to drawing and handling liquidity really sets it apart. The selling point of Berachain lies in its ability to align the benefits of all participants. From validators and liquidity providers to token holders, everyone plays a critical role in the ecosystem. Also, BeraChain’s vibe hits right in the meme sweet spot, which is a direct way to pull in liquidity from crypto newcomers.
However, it's clear that we're dealing with a potential game-changer... or a spectacular flop. Berachain’s got this fancy model, but with just testnet running, it's still just on paper. If the bulls come charging, it might soar higher than Luna did, making early believers dance all the way to the bank. But when the bears take over? It's a whole different story. We're looking at a dead spiral, inevitable as the tide. Why? Because when the market's bleeding, liquidity's the first to go. And Berachain, with its heavy bet on DeFi, needs that liquidity like we need our daily dose of hopium.
Moreover, crypto is now flooded with dApps, and frankly, most of them are junk. Going with that, users are not exactly lining up. Berachain needs top-tier dApps, especially in DeFi, and a bunch of validators working overtime. Without solid projects to kick off some serious initial yield and pull in more developers and liquidity, Berachain could end up just another 'could-have-been.'
In the end, it's a high-reward, high-risk play. We might be watching Berachain write crypto history, or we might be seeing another case of big dreams hitting the hard wall of reality. All we degens can do is stay sharp, stay flexible, and maybe, just maybe, ride the wave to glory. Or crash and learn. That's the crypto game.
What’s important in this fast-paced crypto universe is to stay adaptable and well-informed. Being biased to a single project might sometimes lead to extraordinary success, potentially rocketing your portfolio to new heights and retiring your mom at home. But more often than that, putting all your eggs in one basket likely leads you down a less desirable path, perhaps even browsing job openings at McDonald's.