Infrared Flywheels Explained (ft. Kodiak, Gummi, BeraBorrow)

Decentralized finance (DeFi), thrives on flywheels. Flywheels kick off when projects work together to boost each other’s liquidity, yields, treasuries, etc.

We’re building Infrared, iBGT, and our governance token IRED with this dynamic in mind, and plan to enable many infinite sum partnerships on Berachain 🐻⛓.

This post will explain how Infrared and iBGT function, our strategy to foster flywheels within the ecosystem, and the benefits for both users and protocols.

Infrared and iBGT

Many of our readers will understand how Infrared works, but we can give some background for the newcomers. Infrared offers a straightforward way for users to engage with Proof of Liquidity (PoL) via user-friendly vaults. By depositing liquidity in these vaults, users earn the Berachain Governance Token (BGT), which is usually a non-transferable, illiquid asset.

To enhance BGT’s utility and liquidity so the wheels can start flying, we’ve introduced iBGT — a liquid form of BGT.

When users deposit liquidity, they accrue iBGT instead of BGT. This is handled by our smart contracts, which custody the earned BGT, delegate it to our validators, then issue iBGT to users. Every iBGT is backed 1:1 by BGT.

This newfound flexibility allows users to borrow against, trade, or even stake their iBGT for yield. You can read more.

Partner Flywheels

Even pre-mainnet iBGT is starting to make an impact, enabling several collaborative flywheels with our partners. Let’s take a look.

Kodiak

Kodiak is the native liquidity hub on Berachain, and plans to integrate Infrared and iBGT to activate not one, but two flywheels within their ecosystem for their treasury and community.

The treasury flywheel leverages Infrared and iBGT to increase Kodiak’s Protocol Owned Liquidity (POL). POL is the strategic holding of a meaningful percentage of a project’s liquidity, serving as a hedge against mercenary capital. This liquidity is typically managed within the project’s treasury — as with Kodiak.

Kodiak’s strategy involves allocating treasury liquidity to Infrared vaults, which in turn generate iBGT and IRED (our governance token) for their treasury. Following this, Kodiak aims to incentivize Infrared gauges, encouraging us to vote with our BGT to further increase BGT emissions to their POL. This increases iBGT emissions and strengthens their liquidity, creating a positive feedback loop.

The community flywheel is even simpler. When users allocate their liquidity to Kodiak, rather than directing these assets into BGT-earning pools directly, Kodiak funnels the liquidity into Infrared Vaults. This approach enables Kodiak to distribute not only Kodiak emissions and pool fees to users, but also iBGT and IRED emissions — substantially increasing the earning potential of Kodiak LPs.

Gummi

Gummi is a dynamic money market designed for Berachain users, enabling them to borrow against any asset, including iBGT. Leveraging BGT (through iBGT) is only possible because of Infrared.

For Gummi, this extends the potential for users to access boosted yields through leveraged iBGT positions. Specifically, Gummi will support up to 100x leverage on staked iBGT, which will likely become a popular option for degen beras. Risk averse users can instead use the leverage to long or short the value of BGT.

Looking ahead, Gummi aims to get approval to receive BGT emissions directly to their protocol. By integrating Infrared, users will benefit further as liquidity deposited through Gummi flows through Infrared, enabling users to earn pool yields, iBGT, IRED, and GUMMI rewards.

BeraBorrow

Last, but certainly not least, is BeraBorrow, a protocol that will allow users to borrow NECT, a decentralized stablecoin, against iBGT interest-free. This positions iBGT as a premier collateral option within the ecosystem.

Unique in their approach, BeraBorrow is building the first stablecoin backed by iBGT. This enables users to access liquidity directly through NECT, maintaining their iBGT positions while participating actively in the DeFi ecosystem.

Looking Ahead

The partnerships we’ve highlighted above are only the beginning. As we march towards mainnet, we’ll continue to share announcements that will explore more innovative use cases and flywheels, powered by iBGT. Watch this space: there’s much, much more to come.