Understanding the BGT and iBGT Vote Incentives Markets
A key part of the Proof of Liquidity (PoL) flywheel is the vote incentives market for the Berachain Governance Token (BGT). This market lets protocols on Berachain encourage validators to vote in ways that direct future BGT emissions to their project’s pools. By doing so, protocols can deepen their liquidity and give their community more control over where to delegate voting power, increasing their chances of controlling more emissions in the future.
In this blog post, we’ll explore the BGT vote incentives marketplace, its impact on BGT holders and projects, and how Infrared and iBGT fit into this ecosystem.
Note: Berachain and Infrared are still on testnet. This information is based on what we currently know about the network specifications and details about Infrared are subject to change before mainnet launch.
BGT Emissions
Understanding vote incentives starts with understanding BGT emissions. BGT emissions are the rewards generated by the Berachain network, which are allocated to liquidity providers through specific “gauges.” Validators play a crucial role in this process: when a validator produces a block and emits BGT, they get to decide which gauges will receive those emissions. The ability to decide where BGT emissions go could be tricky… unless there are incentives to guide one’s decision.
Vote Incentives
Emissions are a critical component of any blockchain network, so it’s easy to tell that using vote incentives to influence those emissions will be a critical tool. When a validator emits BGT, they can direct it to gauges that have been incentivized by protocols — providing extra motivation for validators to favor certain gauges.
This incentives marketplace benefits everyone involved. Validators earn more by directing BGT to incentivized gauges, protocols boost their liquidity and visibility, and liquidity providers receive more rewards. This creates a dynamic environment where vote incentives drive competition among protocols while making sure validators stay active in their role.
Infrared Vote Incentives
As users earn iBGT through Infrared’s PoL vaults, the underlying BGT is managed by our smart contracts and is delegated to Infrared’s operational partners in our distributed validator set. This delegated BGT gives Infrared voting power that we can use to influence future BGT emissions.
To ensure that this power remains decentralized, we plan to hand over control of Infrared’s BGT votes to Infrared token holders. This decision allows the community to vote on the best outcome for all key stakeholders (token holders, iBGT users, etc). Eventually, the distribution of this voting power to token holders will allow for a new bribe marketplace specifically for Infrared token holders. Here, protocols can offer bribes to influence how Infrared’s accumulated BGT voting power is used.
In this marketplace, Infrared token holders will have the opportunity to direct the platform’s BGT emissions by voting for specific gauges, incentivized by protocols looking for Infrared’s votes. This system ensures that the power of iBGT benefits the entire Berachain ecosystem while keeping the decision-making process dynamic and community-driven.
Looking to the Future
As we continue to build and refine our infrastructure, Infrared aims to ensure that all Beras — whether users, validators, or protocols — have the tools they need to thrive. If you’re looking to test out iBGT yourself, you can find our testnet deployment.