With high inflation and private equity sell-offs, can Berachain still stabilize market expectations?
TechFlow Selected TechFlow Selected
With high inflation and private equity sell-offs, can Berachain still stabilize market expectations?
Simply holding $BERA is not a good idea, but participating in PoL could be highly worthwhile.
Navigating Web3 tides with focused insightsAuthor: Ericonomic, author of Three Sigma
Translation: Ashley, BlockBeats
Editor's Note: As one of the most watched Layer 1 projects recently, Berachain has attracted numerous developers and investors with its PoL mechanism. However, following the launch of Berachain’s mainnet, controversies have emerged around its inflation model, private sale allocations, and changes to staking rules. Drawing from his own research, the author provides an in-depth analysis of Berachain’s current state, exploring its potential risks and future prospects.
Below is the original content (slightly edited for clarity):
Some Thoughts on Berachain’s Current State
Many friends know that I’ve been actively involved in the Berachain ecosystem, investing significant time and effort. After going through all this, I feel it’s necessary to share my honest views on Berachain’s launch, current situation, and future outlook.
I’ll start by discussing some aspects I’m not satisfied with:
$BERA Inflation Issue
This is my biggest concern, as it directly impacts price performance.
The annual inflation rate for BGT is 10% of the total supply (total supply = 500 million; first-year inflation = 50 million).
In the first year, circulating supply will be approximately 21.5% (110 million tokens) plus Boyco’s 2% release within 30–90 days. Under these conditions, 50 million in inflation implies a near 50% inflation rate in the first year if all BGT were burned (though this won’t happen in reality). By the end of the first year, the number of tokens in circulation will reach about 170 million.
Second-year inflation: BGT still maintains a 10% inflation rate (55 million), plus 196 million tokens released through various allocations (the largest portion coming from private investors). This means the circulating supply at the end of year two will reach 418 million, with an inflation rate of around 150%.
While most L1s experience high inflation early on, Berachain’s inflation rate far exceeds that of other projects. Moreover, such comparisons do not favor Berachain, as many projects’ price action has been severely hurt precisely due to high inflation. Therefore, this cannot justify Berachain’s elevated inflation levels.
$BERA Private Investors
Berachain sold over 35% of its token supply to private investors (I previously thought it was only 20%).
-
Seed round: $50M FDV
-
Second round: $420M FDV
-
Last round: $1.5B FDV
This means there is a large volume of tokens originating from private fundraising.
Most projects allocate around 20% to private investors, which I already consider excessive and detrimental to long-term project health. Berachain’s private funding ratio is even higher. Combined with a long vesting schedule, this creates persistent selling pressure, which typically drives token prices into a prolonged downward trend—especially when FDV is high but circulating supply is low (high FDV, low float).
$BERA Staking (for Private Investors)
This isn’t extremely negative (but honestly, I don’t like it), though it should have been better explained.
Private investors can stake $BERA to earn liquidity rewards, then sell those rewards (in other words, they can stake $BERA to get more $BERA).
15% of BGT’s annual inflation (7.5 million BGT) will go to validators, most of which will flow to stakers. If all 500 million supply were staked, the annual percentage yield (APY) would be about 1.6%, but full staking is unrealistic in practice.
Actual staking rates may hover around 60%, resulting in an APY between 2.8% and 3.2%.
Many compare Berachain to Celestia, but Celestia had an initial APY of around 20%, making this comparison unreasonable. While anyone can stake $BERA to earn yields and thereby dilute private investors’ APY, this staking mechanism still adds to selling pressure.
Last-Minute Changes + Poor Whitepaper
What frustrates me the most is that the $BERA staking mechanism was only made public a few weeks ago. Even now, finding meaningful information requires considerable effort.
This mechanism is crucial for market sentiment, especially given the current market environment and rising anti-VC sentiment. It should have been announced earlier, transparently, and clearly documented on day one.
It wasn’t until Jack posted an explanation that the community became aware of this issue, leading to FUD, disappointment among OGs, and even reluctance to engage further with Berachain.
To be honest, I was angry—it felt like they intentionally delayed revealing the staking mechanism (otherwise why wouldn’t it be in official docs?). But upon learning the APY is only 3%, it seems more like a communication failure than malicious concealment.
PoL Is Not Live Yet
Berachain’s core product is PoL. Without PoL live, Berachain is just another PoS fork—and that’s exactly what it currently is.
I believe this won’t last long (hopefully), but since BGT currently has no real utility, many people are disappointed and may never bother trying to understand Berachain’s design again.
From what I understand, this step was necessary to ensure Berachain remains stable before full PoL deployment. I’m not sure if there’s a better alternative. But the key point is they must deploy PoL quickly—delays cannot be tolerated.
DevBear Is Selling Tokens
Berachain co-founder DevBear is selling tokens from a doxxed address. He received about 200,000 $BERA from the airdrop (which itself is questionable, since they set the airdrop rules), then exchanged part of it for assets like WBTC, ETH, and BYUSD.
Even if he weren’t selling, allowing core team members to receive such a large airdrop allocation is problematic.
He might be testing the product or providing liquidity, but regardless, this issue should have been clarified immediately.
Berachain Still Has Bright Spots
Berachain Has a Strong Community
Berachain’s community is one of the strongest in the entire industry. Having been in this space for many years, I can confidently say so. Even with existing issues, both the community and developers remain fully committed to supporting Berachain’s growth.
Robust Dapp Ecosystem
Berachain’s developer ecosystem is highly active, with numerous Dapps already built, tested, and deployed, set to go live in the coming weeks.
Every blockchain needs a strong application ecosystem to succeed, and Berachain having these Dapps early on is the primary reason I remain bullish on its medium-term outlook.
Strong Focus on Security
Security is always a major concern when developing new mechanisms and new blockchains. For a novel project like Berachain, this importance is amplified. What impresses me is that the Berachain Foundation takes security extremely seriously, paying attention to every detail and opting for a conservative, secure approach to launching and decentralizing the network.
While most people dislike slow progress, I see this as aligning expectations properly.
PoL Mechanism
I still believe PoL is a very interesting mechanism. Once fully deployed and the flywheel kicks in, we’ll see highly attractive APYs, drawing significant liquidity miners into the Berachain ecosystem.
Conclusion
I’m quite certain that simply holding $BERA is not a good idea, due to the factors I’ve outlined above. At the same time, however, I firmly believe participating in the PoL proof-of-liquidity mechanism will be a highly worthwhile choice.
I prefer to view Berachain as a yield chain rather than a chain where you just hold a non-productive token. You need to provide liquidity, recycle funds, borrow, research optimal BGT earning strategies, conduct due diligence on each validator to decide where to delegate your BGT—or whether it’s better to burn BGT for auto-compounding. On Berachain, you must be actively involved, not just passive holders.
In my view, the most critical task is bringing in liquidity and kickstarting the flywheel effect. If that succeeds, Berachain will succeed.
Before concluding these thoughts, I want to say that I’ve always seen Berachain as a rare beacon of culture and integrity in an industry rife with scams. So seeing it go through this “less-than-ideal” launch and some “ambiguous” adjustments (like the change in BERA staking rules) has indeed left me somewhat disappointed. That said, if the foundation and developers continue their efforts as they have over the past few years, Berachain still has the potential to become the highest-yielding chain, far surpassing its peers.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@threesigmaxyz
