Frequently Asked Questions

What is Proof of Liquidity?

Proof-of-Liquidity (PoL) is an innovative reward mechanism that aligns the incentives and goals of Berachain validators, users/liquidity providers, and ecosystem protocols and dApps. In this mechanism, users earn $BGT over time by providing liquidity in PoL-eligible assets, and they can then delegate $BGT to validators to earn incentives and rewards.

The needs of protocols and validators are aligned and met through coordinated "bribe" incentives to attract $BGT emissions to particular liquidity pools and reward vaults, fostering deep liquidity that enhances trading efficiency, price stability, user engagement, and overall protocol growth.

What is $BGT?

$BGT, or Bera Governance Token, is the primary reward distributed through Proof of Liquidity.

Designed as a soulbound token, $BGT is non-transferable and can only be accumulated over time by providing liquidity in venues whitelisted by Berachain governance.

If $BGT is designed to be soulbound and non-transferrable, why build a marketplace for it?

Two key market forces drive the need for a spot $BGT marketplace:

Demand: The demand for $BGT will remain consistently high due to its governance benefits and yield opportunities, but there is no easy way to acquire large amounts of $BGT trustlessly.

Supply: Market participants holding $BGT have limited exit strategies, typically involving redemption for $BERA, which increases the float and dilution of $BERA. When $BERA prices rise, profit-taking through redemption and sale of $BERA can create significant selling pressure. Moreover, a marketplace for spot $BGT, especially one with a Dutch auction mechanism, could potentially allow sellers to benefit from a price premium for their $BGT.

We believe the establishment of a decentralized auction market for $BGT will deliver substantial benefits to the ecosystem, catering to the needs of both buyers and sellers.

What is BGT.m? Is it the same as $BGT?

BGT.m is not a wrapped token or a ticker for a new token contract; it simply refers to the user's spot $BGT balance deposited in the BGT Market contract, to avoid confusion with the $BGT balance that a user may see on BGT Station or in their wallet.

On BGT Market, BGT.m functions exactly like $BGT: you can access all the same functionalities as if the $BGT is in your wallet.

What can I do on BGT Market?

• Auction – Sellers can contribute their BGT.m into lots, which are then auctioned off using a Dutch auction format once a lot is fully filled. Multiple sellers can pool their BGT.m into a single lot, but only a single buyer can purchase each lot. Buyers can also resell their BGT.m at any time.

• Delegate/undelegate – Users can delegate their BGT.m to their preferred delegator(s) and claim incentives and rewards. Similarly, they can undelegate their BGT.m as needed.

• Redeem – Users can redeem their BGT.m for $BERA at a 1:1 conversion rate instantly. This redemption is irreversible.

Why is each lot sized at 100 BGT.m?

The current lot size is 100 BGT.m. We have set the lot size at 100 BGT.m to strike a balance between accessibility and practicality. We want to avoid sizing the lots too large, in which case the lot will be too expensive, which limits the pool of potential buyers.

We will experiment with adjusting lot sizing and auction parameters based on user feedback and market validation.

What is the minimum amount of BGT.m I can contribute to a lot?

The minimum contribution to a lot is 0.05 BGT.m.

Why is the dutch auction denominated in $BERA?

Currently, we denominate the Dutch auction in $BERA to avoid reliance on a price oracle, which would be necessary if the auctions were denominated in $HONEY or any other assets.

How does the dutch auction work?

A Dutch auction begins instantly once the current lot is completely filled. When that happens, the next lot will be opened up for contributions.

In BGT Market, Dutch auctions are priced in $BERA. Each lot starts with a fixed initial offering price of 690 $BERA, representing a 690% premium. The price will decrease over time until the lot is purchased. The offering price will reach parity after approximately 5 hours (i.e. 100 $BGT = 100 $BERA), and further decreases to about 69 $BERA after approximately 12 hours.

The final settlement price is distributed pro-rata to contributors of the lot, minus protocol fee.

For example, if Greybear contributed 25 $BGT into a 100 BGT.m lot that sold for 150 $BERA, Greybear would receive (25/100) * (0.967*150) = 36.2625 $BERA.

What are the protocol fees?

The protocol fee is 3.3% of the settlement price of each lot. There are no fees on all delegation rewards and incentives.

Can I withdraw $BGT from BGT Market?

Since $BGT is designed to be non-transferable, it cannot be withdrawn from BGT Market. However, you can still access all functionality associated to the ownership of $BGT, such as delegating $BGT to preferred validators and claim rewards as intended or redeem it for $BERA. BGT Market and its smart contracts do not have permissions to act on behalf of users.