Berachain token guide: Models, benefits, and tax implications

Berachain is attracting a lot of attention lately, because its developers are rethinking how a Layer 1 (L1) blockchain can manage incentives and control. Instead of relying on a single asset and traditional proof-of-stake (PoS) model, the Berachain token design combines a tri-token structure with proof of liquidity (PoL).

This design keeps capital active while the network remains secure, and it changes how value flows across the chain and how influence is earned. Validator behavior is shaped by liquidity participation, and governance is tied to on-chain activity rather than token accumulation. 

In this article, we’ll explain how the Berachain token model works and what you should know if you want to interact with this network as it develops.

What’s Berachain?

Berachain is an Ethereum Virtual Machine (EVM)-compatible L1 blockchain built around PoL and a tri-token economic model. It supports Ethereum-style smart contracts, but redesigns how validators, liquidity providers, and governance participants are rewarded. With these changes, Berachain aims to keep capital active in decentralized finance (DeFi), while still securing the network and coordinating protocol upgrades.

This project originated from the Bong Bears non-fungible token (NFT) collection, and it was founded by developers Smokey the Bera, Papa Bear, Homme Bera, and Dev Bear. Berachain’s NFT-driven origin helped it bootstrap early traction and capital.

Across all disclosed rounds, Berachain raised over $140 million in its early stages. After the mainnet launch in 2025, this network reached one million unique users in the first week. That’s one of the fastest early user adoption surges recorded for a new L1 blockchain, and it shows strong market interest in Berachain’s liquidity-driven design.

How does the Berachain tri-token model work?

Berachain separates crypto economic functions into three distinct asset tokens, reducing overlap and minimizing incentive conflicts.

BERA

The Berachain (BERA) coin is the Berachain network’s native gas token. The blockchain launched with an initial supply of 500 million BERA, and this coin is used to pay transaction fees, deploy smart contracts, and interact with applications – making it the base asset that keeps the Berachain network operational.

BERA is also used for network security, as validators stake BERA to participate in block production and consensus. This staking mechanism aligns validators with the chain’s long-term health, since misbehavior or downtime can put their BERA at risk.

Unlike with governance or reward tokens, BERA’s role is intentionally narrow. This coin secures the network and powers transactions, but it doesn’t directly control protocol-level decisions.

BGT

Unlike similar coins, the Berachain Governance Token (BGT) is non-transferable. BGT can’t be traded on secondary markets – the only way to obtain this token is to participate in the network’s PoL mechanisms.

Users earn BGT by providing liquidity through approved vaults and protocols. Liquidity providers who support trading and lending receive BGT over time, giving them influence over parameter changes and reward eligibility. As a result, Berachain’s governance power is tied to assets that remain actively deployed in the blockchain, rather than to idle holdings as in PoS systems. 

Because BGT can’t be bought or transferred, users can’t accumulate governance influence by buying tokens. Only users who contribute and use the network get to make decisions.

HONEY

Honey (HONEY) is Berachain’s native stablecoin, designed to maintain a value close to one USD. This coin is backed by approved collateral assets and integrated directly into the Berachain ecosystem, so it serves as a medium of exchange and a source of stability in an otherwise volatile market.

By maintaining a native stablecoin, Berachain reduces its reliance on external assets and improves capital efficiency. HONEY also plays a role in liquidity strategies, allowing users to stay exposed to on-chain activity without constant price risk from volatile tokens.

2025

Crypto Tax
Guide is here

CoinTracker's definitive guide to Bitcoin & crypto taxes provides everything you need to know to file your 2024 crypto taxes accurately.

Get startedLearn more

What’s the role of PoL in Berachain?

PoL is the mechanism that connects Berachain’s security, governance, and liquidity incentives. Unlike PoS systems that lock assets and remove them from circulation, PoL allows liquidity to remain active while still contributing to validator incentives and governance outcomes.

Under PoL, users deposit assets, such as liquidity positions and stablecoins, into governance-approved Reward Vaults. In Berachain, validators stake BERA to secure the network, then direct BGT emissions toward specific Reward Vaults. This lets validators favor vaults that support applications or liquidity pools they want to encourage.

Liquidity providers in those vaults receive BGT over time, which grants governance rights. Validators compete for delegated stake by offering better alignment with productive liquidity, while protocols may offer incentives to attract validator-directed emissions. This means that capital stays liquid, governance is earned through participation, and validator influence is linked to real economic activity. 

Over time, this structure should encourage deeper liquidity and sustained usage. Plus, it supports tighter alignment between network security and application growth.

How does Berachain differ from traditional L1 blockchains?

Berachain stands apart from most L1 networks because validator selection and influence are tied to liquidity participation, rather than purely to token stake. This shifts power toward active contributors instead of passive holders.

The three-token economy also contrasts with the one-token systems common on many chains. Each token has a narrow role, reducing incentive conflicts and simplifying economic analysis. Users earn governance through activity instead of open market purchases, which limits speculation-driven voting power.

The presence of a native stablecoin further integrates financial primitives directly into the protocol. In contrast, many L1 blockchains rely on external assets that introduce new risks and dependencies.

Is Berachain EVM-compatible?

Berachain’s developers define the blockchain as “EVM-identical,” which means that smart contracts run on Berachain exactly as they do on Ethereum. Berachain is built using the Cosmos SDK, which handles consensus and core protocol logic, while the execution layer is based on EVM.

This separation allows Berachain’s developers to update how the network is secured and how incentives work, without changing the way smart contracts are written or executed. Applications behave just as they would on Ethereum, but operate within an economic environment that fosters ecosystem growth through PoL and the tri-token model.

What are the pros and cons of the Berachain ecosystem?

The advantages of Berachain’s model include:

• Better liquidity: PoL keeps capital active by rewarding liquidity that remains usable in DeFi.
• Clearer token roles: The tri-token model separates responsibilities based on gas and security (BERA), governance (BGT), and price stability (HONEY).
• Improved participation: Users earn BTG that can’t be purchased or traded, tying voting power to contribution.
• Less reliance on external networks: Native stablecoin HONEY improves internal liquidity efficiency and reduces reliance on external assets for trading and payments.
• Lowered development barriers: EVM-identical execution allows Ethereum applications and tooling to run without contract changes.
• Access to a growing community: Strong early momentum, driven by active NFT collectors and fast user onboarding, helped bootstrap liquidity and developer interest.

However, this model isn’t without potential downsides, such as:

• A new consensus mechanism: PoL is new and unproven at scale, with limited stress testing.
• Multi-token complexity: The tri-token model can be difficult for new users to understand, especially if they’re not familiar with governance and liquidity systems.
• Liquidity dependence: Reduced participation would weaken incentives and slow ecosystem activity, affecting Berachain token market prices.
• Early-stage volatility: HONEY and BERA prices are likely to be volatile until the network matures and liquidity stabilizes. 
• Governance concentration risks: Large liquidity providers could gain disproportionate ownership over BGT.
• An uncertain future: Because Berachain is so new, it still has to demonstrate long-term adoption and sustainability.

What are the tax considerations for Berachain tokens?

For crypto tax purposes, Berachain tokens should be treated like standard digital assets. In the U.S., this means:

• Selling BERA or HONEY typically triggers capital gains or losses.
• Trading between BERA, earned BGT representations, and HONEY can create taxable events.
• Liquidity rewards and staking-related gains are often treated as ordinary income.
• Using BERA or HONEY in DeFi activities may count as disposal events, depending on how the transactions are structured.

Because Berachain has multiple tokens that interact across liquidity vaults and governance mechanisms, it’s critical to accurately track and record all crypto transactions for tax and audit purposes.

Manage your Berachain activity with CoinTracker

Berachain is defined by its tri-token design and PoL system. By rewarding active participation rather than passive holding, this network contrasts with traditional staking-based blockchains, which makes it appealing to many traders and investors.

However, Berachain is still early in its lifecycle. While its PoL model shows promise, the blockchain’s long-term performance will depend on sustained liquidity and ongoing development. If you plan to engage with this network, follow official team announcements and keep a close eye on how your assets interact across the tri-token system as the chain matures.

Managing your crypto assets shouldn't be complicated. CoinTracker lets you track your entire portfolio across multiple exchanges and wallets, all in one place. Join the three million users who rely on CoinTracker for a seamless crypto experience – start free today.

Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.