Hack VC: Why Are We Leading Berachain's Series A Funding Round?
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Hack VC: Why Are We Leading Berachain's Series A Funding Round?
Berachain's innovative approach to blockchain infrastructure addresses key challenges in scalability, capital efficiency, liquidity fragmentation, and token economics.
Navigating Web3 tides with focused insightsBy Peter Hans and Rodney Yesep
Compiled by TechFlow
At Hack VC, we focus on investing in early-stage Web3 infrastructure, artificial intelligence, and decentralized finance projects, supporting founders who push the boundaries of what’s possible. Berachain stands out as a leading example in the Web3 infrastructure space and is a perfect fit for our portfolio. It is one of the most innovative products in today's Web3 landscape.
By addressing some of the biggest pain points in the blockchain ecosystem, Berachain’s architecture and unique mechanisms offer a viable path toward scalability, capital efficiency, cross-chain liquidity, and long-term value creation.
Our investment thesis for Berachain stems from how its protocol addresses alignment challenges within existing ecosystems. Below, we outline the key factors defined by market problems and the solutions we believe Berachain can deliver at the time of our initial investment.
Ethereum’s Scalability Limits Innovation
Problem:
Ethereum’s EVM (Ethereum Virtual Machine) remains the gold standard for smart contracts. However, its monolithic architecture limits throughput to 15–30 transactions per second (TPS), with finality taking around 13 minutes. As a result, developers are forced to choose between EVM compatibility and performance. Competing chains that prioritize speed often sacrifice EVM support entirely, leading to fragmented liquidity and tooling. Even Ethereum’s Layer 2 solutions inherit slow finality times and rely on centralized sequencers, resulting in high fees, slow transactions, and isolated liquidity.
Berachain’s Solution:
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Modular EVM-Same Architecture: Berachain separates consensus (CometBFT) from execution (unmodified Ethereum execution clients like Geth, Reth, etc.), enabling parallel transaction processing while maintaining full EVM bytecode compatibility.
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Single-Slot Finality: Berachain achieves single-slot finality with sub-2-second block times via CometBFT.
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Testnet Performance: Berachain’s testnet has achieved over 1,000 TPS and is connected to more than 20 chains via LayerZero, enabling seamless cross-chain asset transfers.
Staked Capital Trapped in Non-Productive Roles
The Problem:
In proof-of-stake (PoS) chains such as Ethereum and Avalanche, over $114 billion in assets are locked up in validators, earning only modest yields (typically 3–5% annualized), while remaining unusable in DeFi. Liquid staking tokens (like Lido’s stETH) attempt to solve this but introduce counterparty risk and governance centralization. Moreover, validators are incentivized to prioritize staking rewards over ecosystem growth, creating misalignment between network security and user utility.
Berachain’s Solution:
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Proof of Liquidity (PoL): Validators earn governance rights (in BGT) by directing liquidity to BEX (Berachain’s decentralized exchange), Bend (Berachain’s lending protocol), or other third-party applications built on-chain—aligning incentives with ecosystem growth.
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BGT Soulbound Tokens: Only liquidity providers receive these non-transferable governance tokens, ensuring influence remains with active participants in the ecosystem (e.g., staking BERA/wETH LP tokens in BEX).
Liquidity Fragmented Across Chains
Problem:
Cross-chain interoperability remains one of Web3’s weakest links. Cross-chain bridges are often unreliable, with billions of dollars already stolen through bridge exploits. Cosmos’ IBC protocol lacks native EVM support, isolating it from Ethereum’s DeFi ecosystem worth over $45 billion. This fragmentation forces developers to rebuild tools for each chain and burdens users with high slippage and fees.
Berachain’s Solution:
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Natively Incentivized Liquidity Aggregation at the Protocol Level.
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BEX DEX: “Environmental liquidity” pools aggregate cross-chain liquidity. While most liquidity pools are limited to specific trading pairs (e.g., USDC/ETH), environmental liquidity pools provide a dynamic mechanism allowing liquidity to be used across multiple assets and trading pairs within the Berachain ecosystem. With liquidity no longer restricted to fixed pairs, price discovery and market making become more efficient.
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EVM Tooling Compatibility: Full support for Ethereum RPC, Foundry, and Hardhat enables rapid cross-chain dApp deployment for developers.
Inflationary Tokenomics Undermine Long-Term Value
Problem:
Most chains rely on inflationary token emissions to bootstrap liquidity. Beyond dilution, allocation dynamics encourage short-term capital that may exacerbate internal sell pressure. Even so-called “deflationary” models like Ethereum’s EIP-1559 fail to offset staking emissions, while veToken systems (like Curve) overly concentrate governance power.
Berachain’s Solution—Three-Token Model:
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BERA: A fixed-supply gas token with deflationary mechanics—burned in the same way as EIP-1559.
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BGT: A non-transferable governance token earned through providing liquidity. BGT can be redeemed 1:1 for BERA, creating potential for a deflationary cycle.
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HONEY: A native stablecoin asset designed to de-fragment centralized stablecoin liquidity and serve as a universal unit of account within the ecosystem.
With a clear understanding of the key challenges facing Web3 and how Berachain’s innovative approach addresses them, the next step is assessing how this vision translates into tangible outcomes. Berachain has already demonstrated impressive momentum, indicating that its ecosystem is not only viable but also well-positioned for long-term impact. Below, we briefly highlight how this logic plays out in practice.
Progress to Date
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Developer Activity: 180 teams are actively building on Berachain’s mainnet, spanning DeFi, RWAs, NFTs, GameFi, and more.
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Community Growth: Berachain’s community is growing exponentially, with over 100,000 Discord and Telegram members and more than 1 million followers on X. Its pre-launch market attention ranks among the highest in the industry.
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Boyco: Berachain’s liquidity bootstrapping platform has become a cornerstone of its ecosystem, attracting $2.1 billion in total value locked (TVL) as of January 2025. Projects create liquidity markets where users deposit assets (such as ETH, BTC, stablecoins) in exchange for future rewards (tokens, points, or NFTs). Boyco ensures deep liquidity at launch, reducing day-one slippage.
Key Vaults
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Stakestone ETH Vault: Allows users to deposit wrapped Bitcoin (e.g., WBTC, cbBTC) and earn BERA rewards.
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EtherFi BTC Vault: Allows users to deposit wrapped Bitcoin (e.g., WBTC, cbBTC) and earn BERA rewards.
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Bong Bear NFTs: The Bong Bears NFT collection has become a cultural phenomenon within the Berachain ecosystem. These NFTs act as gateways to ecosystem participation, granting holders access to exclusive governance proposals, airdrops, and community events.
Berachain’s innovative approach to blockchain infrastructure tackles critical challenges in scalability, capital efficiency, liquidity fragmentation, and tokenomics. Its Proof of Liquidity consensus mechanism and three-token model align incentives across validators, developers, and users, fostering a cohesive and thriving ecosystem. Hack VC is proud to support this project and looks forward to its significant role in the inevitable evolution of Web3.
Disclaimer
The content below is for informational purposes only and does not constitute any form of investment advice or recommendation, nor should it be used as the basis for evaluating any investment decision. This information should not be construed as accounting, legal, tax, business, investment, or other professional advice. You should consult your own advisors, including legal counsel, for advice on accounting, legal, tax, business, investment, or other matters related to the topics discussed herein.
The views expressed in this article reflect the current opinions of the authors and do not necessarily represent the views of Hack VC or its affiliates (including any funds managed by Hack VC). They also do not necessarily reflect the views of Hack VC, its affiliates (including affiliates of its general partners), or any other individuals associated with Hack VC. Certain information contained herein is derived from publicly available sources and/or prepared by third parties, which in some cases has not been updated to the current date. While these sources are believed to be reliable, Hack VC, its affiliates (including affiliates of its general partners), or any other individuals associated with Hack VC make no representation as to the accuracy or completeness of such information and should not be relied upon for accounting, legal, tax, business, investment, or other decisions. The information provided herein is not intended to be complete and is subject to change without notice. Hack VC has no obligation to update this information or notify you if it becomes inaccurate.
Past performance is not necessarily indicative of future results. Any forward-looking statements contained in this article are based on assumptions and analyses made by the authors, drawing on their experience, knowledge of historical trends, current conditions, expected future developments, and other factors they deem appropriate under the circumstances. Such statements do not guarantee future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict.
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