The PoL cycle

The most important part is here.

Think Proof of Liquidity of it as a cycle, similar to a cycle where $BGT is points emitted by the chain.

These points will pass through the hands of various stakeholders:

(validators -> dapps -> users), ensuring everyone has something to win.

1. How to earn $BGT? Gauges.

Users (you and me) will earn $BGT by providing liquidity to certain whitelisted smart contracts. They're also called: Gauges

For example:

  1. $BERA/$HONEY pair of a DEX is whitelisted for $BGT rewards

  2. You put your $BERA in

  3. You earn $BGT because you provide liquidity, the "Proof of Liquidity"

Other examples:

  • 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

Bozito maximizing $BGT earnings

2. But where does this $BGT come from?

Intentionally simplified sketch:

  1. Validators secure the network and receive allocations of BGTs.

  2. Validators MUST distribute BGTs between Dapps

  3. Dapps MUST redistribute BGT to users that bring them liquidity

  4. Users can either: - burn their $BGT for $BERA and sell - delegate their $BGT earned to validators and get rewarded in exchange (will explain this below)

Watch the full 'cycle':

3. Users can delegate their $BGT instead of burning it

IMPORTANT: Users who delegate their BGTs, will keep the ownership, it's only a delegation. You can unbond them later.

The more users delegate their BGTs to a validator, the more this validator we'll have BGTs to redistribute.

This is the first time validator will play an important role in convincing users to delegate to them:

In fact, if a validator has more $BGT delegated to him, he will be able to distribute even more. As a result, this validator has more power and can earn more from the Dapps because Dapps will remunerate him for it.

4. But why should a user choose which specific validator to delegate his BGTs to?

Because the validators distribute the $BGT to the Dapps that users will use.

So, as a user it's on your best interest to delegate our $BGT to a validator who will give more to our favorite Dapp.

Let's take an example if Uniswap existed on Berachain:

  1. I use Uniswap as my favorite DEX.

  2. I've deposited liquidity to earn $BGT on Uniswap (Gauges)

  3. I know that validator A gives a lot of $BGT to Uniswap.

  4. So I'm going to delegate my $BGT to validator A because I know he'll have more BGTs to give to Uniswap.

  5. Uniswap therefore has more $BGT to distribute to its users (us).

  6. I earn more $BGT.

Bozito wen he understands PoL

In the end, BGTs will flow through:

Validators -> Dapps -> Users

Users will have 2 choices:

1) Burn $BGT for $BERA

2) Delegate $BGT to their favorite validators to receive more rewards

Conclusion:

As mentioned, $BGT is not tradable/transferable and cannot circulate other than via the cycle I listed above.

For @camiinthisthang, $BGT can be thought of as points, as they are used by dapps to reward users. (Think Golds on Blast but better)

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