Proof Of Liquidity Series Pt. 3 | iBGT and IRED
In parts one and two of this series we’ve walked through how the value flows enabled by Proof of Liquidity (PoL) benefit everyone on Berachain. Users earn rewards and participate in governance through BGT; protocols can grow their liquidity; validators secure the network and receive rewards for their role.
Throughout this final post of the series, we’ll explain how Infrared, iBGT, and our governance token IRED tie everything together.
Note: Berachain is still on testnet. This information is based on what we currently know about Proof of Liquidity and details are subject to change before mainnet launch.
Infrared Vaults and iBGT
Infrared will play a unique role on Berachain. By placing Infrared at the center of the Berachain ecosystem we serve as a gateway for users seeking to take advantage of PoL. By aggregating the ecosystem as whole through our vaults, we simplify the user experience, making it easier for users to get the most out of their liquidity.
Users deposit assets into these vaults, which then end up deposited to the users’ desired BGT-earning opportunities. For example, if there is a HONEY/BERA liquidity pool receiving BGT emissions, we create a vault on top of that pool and allow users to deposit liquidity through the vault.
The earned BGT block rewards are then delegated to Infrared, and iBGT, a liquid and transferrable version of BGT, is emitted back to the users.
This dynamic alone allows for new DeFi use cases on Berachain, but there’s more. Behind the scenes, the BGT earned from deposits will be used to stake and run our validator set. This positions Infrared as a key player in Berachain’s governance with significant influence over BGT emissions. We will distribute this governance power through IRED, our governance token. But hang tight, we’ll cover why that’s important below.
Emissions Flywheel
From part two, we know liquidity is crucial for any DeFi project’s success. As such, we have seen many of the teams building on Berachain looking to build up Protocol Owned Liquidity for their treasuries. Teams do this to ensure that their project’s liquidity isn’t short-term capital and to encourage stable revenue growth for their treasury.
Teams with Protocol Owned Liqudity will eventually seek to get their pools approved for BGT emissions for additional rewards and more influence over governance. This is where Infrared’s emissions flywheel proves valuable. After their pool(s) are approved for emissions, they can deposit their liquidity with us to earn iBGT and IRED emissions. iBGT offers a yield-bearing liquid asset for their treasury. Meanwhile, IRED provides the desired governance control, plus earnings from Infrared’s protocol fees and incentives.
Taking things a step further, protocols will likely want to boost their BGT emissions as much as possible. Enabling them to earn more iBGT and to continue to build the pools liquidity. In this case, they will want to incentivize the Infrared validator sets to direct more emission towards their pool. How? Through IRED.
IRED is a proxy for influencing Infrared’s BGTvotes and validator set. Through IRED bribes, protocols would incentivize our validators to direct emissions towards their pools. These bribes are then directed to IRED holders. So as protocols accumulate larger positions of IRED, they will receive a proportional amount of their bribes back through their existing IRED holdings. Thus, the Infrared flywheel is born.
How Users Win
While this post has primarily discussed protocols, ultimately, users gain the most. This dynamic simplifies how protocols offer deep liquidity, directly benefiting users by providing them more flexibility and confidence in using these platforms.
Additionally, enabling projects to build robust treasuries means users can trust in the project’s longevity, avoiding the pitfalls of insufficient liquidity and lack of governance influence. This stability protects against the negative effects that come with lacking these critical components of any DeFi protocol.
Not to mention: users also reap significant benefits from Infrared. By staking assets in our vaults, they earn iBGT and IRED emissions, mirroring the advantages protocols can enjoy. So, they too benefit from earning a yield-bearing, liquid version of BGT. Holding IRED also offers benefits, as mentioned earlier, with IRED holders eligible to receive bribes from protocols.
What’s Next?
All-in-all, we believe Infrared is designed to benefit every participant involved in the Berachain ecosystem. We’ll do everything we can to ensure a smooth user experience, to expand iBGT’s utility, and to make it as easy as possible for everything to access Proof of Liquidity.
Stay tuned and see you on mainnet 🐻⛓️