Berachain PoL v2 Upgrade Analysis: Reshaping Token Revenue Mechanisms on Layer1 Blockchains

Berachain PoL v2: A Historic Shift in Layer1 Revenue Distribution

On July 14, 2025, the Berachain Foundation officially released the PoL v2 upgrade proposal, planning to permanently redirect 33% of Proof of Liquidity (PoL) incentive pool to the native BERA token revenue module. The move aims to resolve core conflicts within the original PoL mechanism: although the ecosystem’s total value locked (TVL) exceeded $2.5 billion, BERA holders could not directly share protocol revenue, leading to a 38% decline in token price from its peak (as of July 15, $6.11).

If the proposal passes the governance vote on July 21, Berachain will evolve from a mere gas token into a yield-bearing asset. Holders will be able to stake it and receive a share of trading fees, bridge taxes, and other protocol revenues. The team claims this would make Berachain “the highest-yielding token among all Layer1s.”

This market insights article explores how the Berachain PoL v2 proposal enables token holders to directly capture protocol income, with deep analysis on systemic upgrades and governance implications.

PoL Pain Points and Motivation for Upgrade

Berachain’s unique three-token model places incentive control in the hands of governance token BGT holders, while the base token BERA is used only for gas. This created two imbalances: (1) BGT holders—mostly short-term liquidity providers—reaped all protocol incentives, while long-term BERA holders were excluded; (2) the unrestricted release of BGT invited frequent arbitrage-driven capital movement. The May 2025 Boyco unlock triggered a $2.5 billion liquidity migration, revealing the ecosystem’s fragility. In the face of increasing competition from high-performance chains like Monad, Berachain urgently needed to improve its token value capture.

PoL v2 Core Mechanism: Democratizing Yield

At its core, the upgrade introduces a BERA revenue module that aggregates protocol income via smart contracts and proportionally distributes it to stakers. Key technical features include:

• Incentive Redirection: 33% of the PoL incentive pool (~$825M/year) permanently reallocated to the revenue module.

• Revenue Sources: On-chain trading fees, bridge taxes, and liquidation penalties from the HONEY stablecoin.

• Unstaking Delay: A 7-day mandatory unbonding period to discourage arbitrage and promote long-term holding.

• Projected Yield: Estimated 15–25% APY, significantly above Ethereum’s 3–5% staking yield.

This shift in revenue rights redefines governance: BGT holders’ share of incentive control drops from 100% to 67%, but they gain revenue rights via the new module. BERA holders gain protocol revenue rights and the ability to initiate governance proposals.

Governance Timeline and Potential Conflicts

The proposal follows a strict schedule:

• July 14–20: Community consultation, foundation releases yield simulation dashboards.

• July 21: On-chain vote by BGT holders. Requires 2 billion BGT (26.7% of circulating supply) for quorum. If passed, the mainnet will hard fork the same day.

Main controversies include concerns from BGT holders over token devaluation due to reduced incentives. The top 10 whales control 42% of BGT, raising manipulation concerns. Additionally, the “guardian veto” clause allows the foundation to pause the revenue module during security events, sparking centralization criticisms. The community has proposed adopting JuCoin’s phased authorization framework for better balance.

Ecosystem Impacts and Paradigm Shift

If successful, the PoL v2 upgrade would trigger three major changes:

• Liquidity Migration: Around 30% of BGT liquidity expected to shift to BERA staking, increasing demand for HONEY stablecoin (which requires BERA overcollateralization).

• dApp Transformation: DEXs like BeraSwap, which rely on BGT incentives, will need to pivot to user-driven models.

• Competitive Pressure: 15%+ yield may pressure Solana, Ethereum L2s, and others to raise revenue-sharing ratios.

The deeper significance lies in setting a new precedent for protocol revenue sharing—a Layer1 model directly linking native token holding with base-layer income. If proven successful, it could mark the end of “inflation-subsidized liquidity mining” and usher in a new era of “Real Yield Distribution 3.0.”

Risks and Key Challenges

The new revenue model faces three uncertainties:

• Economic Balance: Surging BERA yields may reduce BGT demand, disrupting the three-token equilibrium. Adaptive incentive tuning will be necessary.

• Regulatory Risks: The U.S. SEC may classify BERA’s yield as “unregistered securities income,” placing compliance pressure on the mainnet.

• Security Concerns: The revenue module’s smart contracts had not undergone third-party audits as of July 15, posing potential attack risks.

When token holders evolve from speculators to protocol shareholders, when revenue distribution bypasses elite validators to reach everyday users, the value capture model of Layer1s is fundamentally rewritten. PoL v2 is not just an economic upgrade for Berachain—it opens a new battlefield for Layer1 competition. Its outcome will define the next generation’s principles for token-based value distribution.