Understanding the Berachain Governance Token (BGT)
Central to the design of Berachain, Proof of Liquidity, and Infrared, is the Berachain Governance Token (BGT). BGT works differently than many other governance tokens in the crypto space, so it is critical to understand its role on Berachain.
This blog post details what BGT is, how it will work, why users and protocols should care, and how Infrared plans to extend BGT’s role to introduce new use cases to the ecosystem.
Note: Berachain is still on testnet. This information is based on what we currently know about the network specifications and details are subject to change before mainnet launch.
Note 2: This has been edited in light of the Berachain V2 release and its associated changes.
BGT Overview
Berachain stands out as a layer 1 blockchain through its use of not one, but three native tokens. Typically, blockchains have a single token that is used to secure the network, pay fees, etc. Instead, Berachain introduces a trio of tokens each with its own role: BERA, HONEY, and BGT.
BERA is the fee (i.e. “gas”) token, HONEY is Berachain’s native stablecoin, and BGT is the network’s governance token. This approach is important for the design of Proof of Liquidity–which you can read more.
BGT has a unique characteristic: once it’s earned, it’s forever tied to the address which earned it and cannot be transferred elsewhere. Think of it as a soulbound token.
This design supports its main role in governance and allows holders to delegate their voting power to validators. Allowing for delegation of voting power increases network participation and impacts the amount of rewards a validator can receive
Additionally, BGT holders have the power to decide how BGT emissions are distributed, directly affecting liquidity on the network. This role is significant, as BGT emissions will play an important part in attracting builders and users alike to our ecosystem.
How to Earn BGT
As a governance token, BGT needs a wide variety of holders. To enable this, users and protocols can earn BGT by performing specific actions on chain such as:
- Depositing liquidity in the native BEX for an LP pair that is earning BGT emissions
- Borrowing HONEY on Bend
- Providing HONEY in the bHONEY vault for Berps
Note: Initially, BGT distribution may be limited to providing BEX liquidity, then it will expand to other use cases as mainnet matures.
Performing activities on-chain and receiving governance power in return is one of the core ideas behind Proof of Liquidity. This dynamic makes Berachain especially unique.
Enhancing BGT Utility with iBGT
With Infrared, we’re looking to expand BGT’s utility further through iBGT. How it works is simple: Infrared simplifies Proof of Liquidity (PoL) through our vault infrastructure–giving users access to PoL in one click.
Users (or protocols) deposit liquidity into these vaults and, in return, earn BGT as they normally would. However, instead of receiving the non-transferrable BGT, our smart contracts distribute iBGT to users instead. iBGT, unlike BGT, is liquid and transferable, which allows holders to do whatever they please with their tokens.
Our smart contracts manage this process by holding the original BGT, delegating it to Infrared validators, and issuing an equivalent amount of iBGT to the users. Each iBGT is always backed by 1 BGT.
This newfound utility for BGT is already opening up tons of new use cases and opportunities throughout the ecosystem, a few of which we explore. If you’re building on Berachain, don’t hesitate to reach out–we’d love to hear from you.
Learn More
While BGT and iBGT play essential roles, they’re only the tip of the iceberg. Berachain has many moving pieces that make it one of the rarer attempts at innovation when it comes to Layer 1 networks. We recommend exploring more of our educational resources as we inch closer to mainnet launch.