Berachain 101: Everything You Need To Know | Founder Smokey The Bera

Welcome to Bankless, where we explore the frontier of internet money and internet finance. And today on Bankless, I'm talking to Smokey the Bearer, which is one of BearChain's creators and co-founders. BearChain is not something that I have deeply investigated prior to doing this interview, but since its mainnet is now launched and the project is real, I felt like it was a good time to get Smokey on the show and have him teach me directly about what BearChain is and what his core innovation called proof of liquidity brings to the industry. Proof of liquidity from BearChain, I think it's a pretty interesting concept. I'm definitely putting it into the category of valid economic experiment with uncertain and unproven outcomes.

I think the success of proof of liquidity will have to come with some relatively heavy top-down control and influence in order to make sure everything is balanced correctly.

I'll quickly illustrate proof of liquidity. Bear Smokey the Bear, we spend like 20, 30 minutes on this in the podcast, but just to really prime you as you go into it, I'll quickly illustrate proof of liquidity as a three-way relationship, like a three-party flywheel between one, BearChain's app layer, two, the validator set, like the stakers, and three, a new economic actor that holds a non-transferable BearChain governance token. So an additional token that is a core part of the blockchain. That's the big new thing that breaks the model for the typical proof-of-stake blockchain. In addition to the regular currency of the blockchain, like the ETH for Ethereum, which is the Barra for Bearchain. In addition to Barra, there's an additional governance token called BGT in the mix that helps direct economic resources between validators and the app layer. Is this additional mechanism a missing piece of the puzzle that truly unlocks economic resourcing for the blockchain economy? Or

Is it a chaotic introduction of an unnecessary variable that undermines the security and sustainability of the Bear Chain system?

I don't know. Only time will tell. But until then, I'm here for it. So let's go ahead and chat with Smokey the Bear from Bear Chain right now. But first, a moment to talk about some of these fantastic sponsors that make this show possible. Bankless Nation, I'm here with Smokey the Bear. Smokey the Bear is the co founder of Bear Chain, which is a brand new layer one on the scene, which uh a different flavor, a different flavor than I think we've ever really seen before. Smokey, welcome to the podcast.

Hey man, good to uh good to be here. Thanks for having me.

I think just to really set the table, I kind of need to hear the whole Barra explanation. Um Barra Chain and Barra has been positioned as like a more

uh mimetic uh styled layer one, which is it not a style that we've really seen before. Can you just kind of e elaborate on this unique positioning that Beara Chain has?

Yeah, for sure. I I'd say that the mimetic um you know position was uh a little bit of a happy accident, and and we'll find out if it's happy over the long term, but you know, we'll see where we are.

Yeah.

Um it actually started because uh Bear Chain didn't really start off as a chain. It started off as a whole bunch of NFTs with bears with bongs. Um and and that, you know, I think gives it uh some some somewhat hilarious, somewhat cursed roots. Um for you know deep context, uh myself, my co founder Papa had been in the space for uh close to a decade now, but um, you know, most active since like 2015, 2016. Then again, DeFi summer, and then again, sort of as NFTs and stuff like that became fun again or DeFi 2.0 in 21.

Um and as we were hanging out in a whole bunch of these DeFi native Disc words, we found um that you know NFTs were getting interesting again and a little bit beyond like the just 10,000 pictures of monkeys, et cetera. Um stuff like Parallel Prime and whatnot was starting to actually see uh it'd say more uh nuanced applications. Um and we said, hey, it'd be kind of cool to see what happened if we like took an NFT project and and saw what we could do with it. Um at first this completely started out as a bit of a joke and just a hundred you know, NFTs of ball of bears with bongs, aptly named the bong bears. Um then we decided to make these um bears effectively multiply or rebase. So those are of you from back in the day are familiar with sort of Olympus style mechanisms, um, certainly nowhere close to four or five-figure you know APYs, uh, but rather just sort of you know multiplying collections that reduced in uh you know scarcity and price over time and allowed more and more folks to enter that ecosystem. Um and what was interesting, I guess, is that having come from these DeFi native discords, uh and you know, sort of like your Olympus Frax curve, alchemics type communities, you had a lot of folks who are pretty far left curve and pretty far right curve in parallel.

Um, so you just sort of have these guys who are on one hand, funny JPEG of a bear. I'd like to interact with us. And on the other hand, we're like, okay, these guys have some kind of fun game theory or liquidity mechanisms here. Let's see what happens next. Um, and at some point the joke was just let's call it bears instead of bears. And that just sort of stuck. It was just someone in the Discord. Uh and um over time, I think that what we really saw was from talking to a lot of those folks who joined the ecosystem um from the NFT point of view, uh, was that there were a lot of ideas that they put forward and a lot of uh, I'd say productive conversation, um, given that commingling of intellectual uh, you know, disparities, I should say. Um, and it was more like, hey, what can we do that goes a little bit beyond a classic, you know, uh animal themed NFT project? And how can we do something a little bit more interesting here?

Um, and I think one

sort of narrative at the time that was uh just gaining popularity and interest was just sort of, you know, on one hand the broad concept of capital efficiency and maxing that out within crypto, but then also just liquid staking, I think was really having a heyday. Um people were understanding Lido, Rocketpool, you know, DVTs, everything in between.

Um, and a question that kept on coming up, especially as new alt layer ones went live, like think your your avalanches and nears, etcetera.

Was okay, there's, you know, hundreds of millions, if not billions, of dollars securing this chain, um, but there's really not any liquidity present on the network itself. Um, and and you know, how do you sort of solve that dichotomy? Because if you have the most secure network possible, that's that's great. But if no one uses it and transacts upon it, then it's a bit useless, right? Um, so the whole idea of bear chain, uh, as much of a joke as it might sound on on the top, um, was actually to build a chain that allows you to align liquidity and security at the protocol level. Um, such those those incentives when a user is allocating capital sort of point in the same direction uh as opposed to you know somewhat different ones as they do right now. Um and we think that in many cases with proof of stake, um, there's stuff like Lido, there's stuff like Eigenlayer, et cetera, that very much feel like extensions of this in the right direction. Um, but we wouldn't say they're as uh opinionatedly built into the protocol layer uh in the same way as they're on Bearchain. So um I think we we hope to cover both the left and the right curve, in that on one hand, it's like, hey, here's a chain powered by proof of liquidity, and that's really meant to build liquidity and security in parallel, uh, and perhaps most importantly, use that to actually power the application layer.

So that there's a differentiated economic reason as well for applications to exist on that base layer.

Um but on the other hand, there's a bunch of bears and it's kind of funny.

So um, you know, trying to go full range. Uh so a little bit long-winded there, but I hope that that gives you a little bit of like the the context on why this uh you know has occurred as it has.

No, that that was amazing context. I actually just answered a lot of questions that I had about Bear Chain. The typical path, the typical like community creation story is that there's like some a few founders, maybe one very technical founder who comes up with some zero-to-one innovation, and then they like make a chain around that or they make a project around that technical breakthrough. And then that technical breakthrough gets broadcasted to the broader crypto community, and then many people in the broader crypto community become like pilled, uh, they become nerd-sniped about that one technical breakthrough. And then they decide to form a community around that project. That's like the normal path. It's like first there's technical breakthrough, then uh that technical breakthrough turns into a shelling point that many members of the community find interesting and want to become a part of that community, want to become more involved, want to become like, you know, inside of that inner circle that's about that one technical breakthrough. This seems to have see this seems to have like flipped things where first you had the community brought around these NFTs and a variety of different factors, and the community had its own flavor and uh insights, and there seemed to be a lot of intellectual capital that was created, and then a bunch of social capital as that community grew kind of more tight knit. And then they collectively, with you and the co founders, created more of a technical breakthrough with proof of liquidity, which we'll talk about. Uh, but it was a community that came first rather than the technical breakthrough that came first. Uh, do you agree with this illustration?

A hundred percent. And I think that's actually sort of the model that we've taken internally as well. Um, in that it's exactly as you said, right? There's a large P there's a large, you know, um, you know, institution or research group, whatever that might be, that spins out, you know, an interesting new concept, snowman consensus, you know, SWE, whatever it could be. Uh, and then it's like, okay, cool, how do we make people care about this? We get a whole bunch of of money behind it. We start, you know, talking to KOLs, we start building quote unquote community around it, we we nerd snipe some people, and we run at full speed. Um, I think that we, we

took a largely opposite direction. And of course, I would love to be able to say, and I can say that a lot of the technical innovation that underpins BearChain was built internally. We've been really thankful to have input from the community along the way and just a large ecosystem of application builders that's sort of been there while we build so that we can get their input live, which I think has also been incredibly helpful for us. But yeah, I think the the model was kind of flipped on its head a little bit and we'll get to see how that ages. To date, I think it's been really good to us. But the you know the open market and a liquid token always has a different story to tell. And you know, I don't believe in in calling shots until until I'm sure of it.

So uh there's a gonna be a bunch of technical questions that I have for you, and I'm gonna ask you about just like you know, proof of liquidity uh and the EVM and you know a technical roadmap. But since this is a community like bootstrapped project or like a community first project, mimetic first project, is there such a thing as like a memetic roadmap? Because the memetic the memetics of Bear Chain has gotten us to this point today where we have like the layer one, it's it's launched, the tokens out, and networks up and running, and the community's there. But like what's next for like the memetic side of things? What's next for the bearer side of things instead of the chain side of things?

No, good question. Um I I think the bear chain has developed its own culture. Some people really don't like it, other people's do.

Uh and I'm you know, I I have no I I have no dislike for for those who who hate it, if you will. I think everyone everyone's entitled to an opinion. Um and I think that on my side

Uh we can't exactly uh I think that planning a mimetic roadmap is sort of a recipe for disaster. Um, because trying to force a meme or trying to force a a narrative or trying to force some like you know sphere of existence from a cultural point of view uh often ends with with getting your your face punched. Um but I do think that finding ways to run with existing new things uh and then to have fun with it is kind of what it comes back to. Um and I think that a lot of what we thought about as building Bear Chain is okay, how do we build something that is both um robust and and excellent and fun at the same time? Um, which is of course easier said than done, but the the end game, what people are looking for, right? I think a lot of people want to be on chain to, of course, make money, but also to have a good time while they're doing so.

Um, so for us, it's not like, ah man, we gotta make sure that that people laugh about this next month. Or we gotta make sure we're like, you know, this is the the joke of the week. Uh I think it's actually just sort of on one hand leaning into FUD and being like, cool, man, if like Suzu and Arthur are gonna like dump my coins, I'm sure that that has always worked well for their other ones in the past, right? Or like, you know, it's just gonna be like, yeah, we're not launching in Q4, we're launching in Q five.

I mean, like that kind of stuff is I I'm quite okay and I'm I'm an advocate for, you know, I'd say uh friendly fire humor.

Um, because I think that you know, if if you look at like

I I I think a lot about the concept of of eight miling oneself, um, you know, if one's just to think about like the callback to the old MM movie,

it's like if you say all the shit that's going wrong or that people can like um that that people can call you on in public, then I think that it becomes a lot less fun to FUD. And otherwise times you can actually kind of weaponize that FUD into something a little bit more entertaining. So sorry about my other alarm going off. But yeah, TLDR, no, no exact memoric roadmap, but keep on doing what we're doing in terms of leaning into fun shit, uh, and I think not taking things exceptionally seriously when it comes to the way that um people might view us.

All right, let's dive headfirst into proof of liquidity. And and from what I gather, from what you're saying to me just now, this is kind of like the

no call North Star of BearChain is like g the thing that you guys are really bringing to the table and the innovation that you guys are really trying to squeeze the juice out of.

So

Um just give us a down low on proof of liquidity.

100%. So you know proof liquidity basically means that as a block is uh is built on bear chain, there's two factors that go into it. Um one is the bearer token itself, which is the gas token and the staking token of the network. Um there's a bear

Bear Bearchain is the ETH of Bearchain.

100%. And then there's also a token that is non-transferable and soul bound called BGT, which perhaps, you know, on the nose stands for the Barra Governance token. And BGT is really what in my mind the network circles around, if you will, in that it cannot be earned by, you know, just you can't stake BGT to get more BGT, if you will. You effectively have to do the work of providing liquidity on the network. And the way that this works is that going back to my original point, when a block is built, there's two factors that uh affect that block building process and the size of the reward. On one hand, the amount of barrel that a validator has staked with it is effectively increasing or affecting the frequency of its block production. So it's linear-weighted block production on one hand. On the other hand, the amount of BGT that a validator has uh delegated towards it is actually what affects the size of its block reward. Um and each block reward or each block is effectively um built with a reward based on a formula that sort of has a constant that's based on uh, you know, effectively just there's a there's a y equals mx plus b. There's a b type value. Uh and then there's a more complex equation that I could probably touch on in more depth, but like once might kill me, uh, that is basically meant to avoid the centralization of BGT, but nonetheless allow uh validators to have more BGT directed towards them to produce larger blocks. Um

Can I just check my understanding really quick? Um so we have uh just normal proof of stake on the one layer, which is uh, you know, for the Ethereum-minded people, you know, ETH staked to a validator. And the more ETH that you have staked, the more frequently you are going to validate a block. And so that's the BERA token. The more bearer that is staked, the more frequently you are you are going to add a block to the network. Like nothing changes there. But the new thing is that the governance token, the BGT governance token, determines the amount of rewards that a validator gets for proposing a block. So if you propose it, maybe you're proposing a block very, very frequently because you have a lot of barra staked, but you could have not very much rewards if you do not have a lot of governance tokens pointing towards your validator. Is that correct?

Yep, you've you've totally got him, man. And okay, I'd say that from there, the part that is most interesting and most important, in my opinion, um, is that that those emissions, those BGT block rewards, uh are not primarily being actually uh reaped by the validator per se. Uh those are actually primarily being emitted into the ecosystem. Uh as in there's a set of pools, you can think of them as reward vaults or a cutting board of sorts, like one might have been familiar with in like curve type ecosystems that validators can choose to direct those emissions towards. Um these are often either pools or vaults or any form of stakable token from applications on the network. Um, what gets kind of interesting there, in my opinion, um, is that you actually have the opportunity for the first time for applications and validators to work together to bootstrap liquidity and effectively build a marketplace for the emissions of the chain.

Um, so what that means is that, you know, whether that is the native decks that is built into the chain or, you know, a random money market that might come up, uh, or even a gaming project, a structured project, a product, whatever it might be,

they can actually work through effectively an incentive marketplace that's also built into the chain with this validator and say, hey, in exchange for you giving me X dollars worth of BGT.

Or, you know, 100 BGT emissions, I will give you 125 of my token or whatever that might be. Right. And they can actually look to find that market optimal rate, if you will, that allows them to price their liquidity and do so in a manner that is, I'd say, you know, meaningfully more uh cost effective and efficient than sort of a standard liquidity mining program.

Um and in this way, validators and and their delegates and the BGT delegates are effectively able to earn a diverse portfolio of these different um ecosystem projects or these different projects on the chain and their governance tokens. Um and uh the applications themselves are actually able to, on one manner, uh effectively subsidize or boost their own incentive profiles through the chain itself. And I think what this sort of goes back to for us is that when we look at the majority of networks today, um, there's very little that's done, I'd say, at the protocol level uh to actually support the application layer.

Right. Um, and one can certainly look at, you know, sort of CSR type gas rebate programs, uh, or you know, STIP type programs, or, you know, like avalanche rush grant type programs, whatever that might be. Um, but we don't really see these as things that are necessarily always sustainable or uh enshrined into the chain. They're rather things that are they're bursts of nitro, if you will. Right. Um, while on this side, the whole point of BearChain's application layer is to drive value back to the chain, and the whole point of the chain is to drive value back to the application layer.

Um so what you're really looking for here in a perfect world is for people to be providing liquidity onto a net onto, you know, pools that they'd like to use on the network, um, then taking that BGT that they have earned for providing that liquidity um to a set, you know, there's only a certain set of whitelisted tools that grows over time by governance.

Uh, and then to take that BGT and say, hey, I'm gonna delegate this to a validator

that is in turn, you know, effectively incentivizing pools that I care about. And that allows me to auto-compound my rewards to some extent, or perhaps I'll delegate it to a completely different one that is working with a set of other projects in the ecosystem whose incentives I'd like to get exposure to as the validator takes a cut of that.

Um, so in in short, the way we see it is a another degree or another degree of freedom for interplay between the application layer and the validators on the network, then effectively means that their liquidity helps to boost the security over time.

Okay, so there's uh is it is it correct that there is a three uh like a triangle-based loop here where one is the application layer, one is the BGT governance token uh stakers, and then the third is the validators who are staking Barra, the gas token. Is that correct?

Yeah, that that's correct. The only thing I would I would um you know sort of add there is that when you think about the BGT token holders, um they're also they're they're not quite staking it. I'm just kind of nitpicking on the terms, um, but they're delegating it to a validator, and each validator will basically have both a bear a stake and a BGT delegation.

Okay, okay, so so I really like this. I want to try and nail down this triangle. So validators have Barra staked, and then they have an amount of BGT delegated to them by BGT stakers.

Um

If I can uh

just basically

excuse.

any farmers, anyone who has has acquired BGT on the network, largely by providing liquidity. But yeah, you're you're you're good so far.

Okay, cool. And then validators have a relationship with applications and the app layer. Can you define that relationship? How is what is the connection between um Barra validators and apps in the application layer?

Yeah, I I would primarily think of it as an order book, in that every validator has, you know, emissions that are these BGT emissions that are a function of, like I mentioned, the amount of barrel that they have affecting the number of blocks they're producing, um, and their BGT delegation affecting the size of those block awards. Um, and each application is able to effectively propose a bid in that marketplace, right? Either directly to a given validator or to the set as a whole, if you will, and say, hey, we're looking for 100 BGT for this pool of ours, like as in we want to incentivize it with this. We're willing to give you guys.