One of the things Berachain does differently is the enshrinement of core DeFi primitives. Namely, a spot DEX, a lending market, and a perps DEX.
The aforementioned 3 are complemented beautifully by the final primitive enshrined by Berachain: the native gauges controlled by $BGT holders.
The spot DEX, perps DEX, and lending market alone form the backbone of any healthy DeFi ecosystem. Not only are they the apps that users usually interact with most in any ecosystem, they also lay the financial infrastructure for countless other DeFi products and protocols to be built on top of.
For example, lending markets are a prerequisite for the existence of leverage, perps are needed for a plethora of structured products, and how could we ape and yield farm our favorite shitcoins without an AMM?
Here is a quick look at the top 3 protocols on Arbitrum by TVL.
What do you see? Look at any TVL/revenue/fees rankings of different protocols in different ecosystems on Defillama and you will spot a trend.
Three reasons:
Capturing revenue to primary chain stakeholders (validators and delegators)
Capturing value in the native token that might otherwise get leaked to protocol governance tokens
Pushes builders to build more innovative, instead of just deploying the unusual Uniswap and Aave forks
Firstly, lets break down point (1) and take a look at the fees generated by these types of protocols on other chains
As you can see, they make money, especially on chains with thriving ecosystems. By ‘enshrining’ these apps - a fancy term to say bringing them in house, and launching them under the same brand as the chain itself - the revenues generated from these fees can now be captured by the chain itself.
On Berachain, fees paid by users when using BEX, Bend, and Berps (spot DEX, lending market, and perps DEX) are awarded to validators and $BGT holders,
When validators include a transaction that interacts with one of these enshrined primitives on Berachain, part of the fee paid by the user when using that app is awarded to the validator that added that specific block to the chain, and the remainder of the fee is awarded to BGT delegators.
A nice byproduct of this is that validators have more of an incentive to include these transactions as opposed to others.
Alrighty then, on to point (2).
Here are the market caps and onchain liquidity data for some protocol tokens.
*Liquidity pool TVL usually includes the native token itself, not only the stables/ETH it is paired against, so I have halved these numbers to approximate the $ value of the liquidity the tokens above are paired against.
Notes on methodology:
I only looked at onchain liquidity, i know most liquidity for these ‘big’ tokens are offchain, but I am lazy
I only looked at the main pool for these tokens. They also have various other smaller pools with some TVL in them which i have not accounted for here
Shut up nerds in the back yelling about how “tHe tOkEn tO eTh RaTiO in V3 pOoLs iSnT nEceSsAriLy 50/50 yOu CaNt jUst NorMaliZe LyK tHaT”. I know. And again, i’m lazy.
The numbers are here to show how much value and liquidity is locked behind the tokens of these top DeFi primitives, and serve to illustrate the point that this is value that may be captured by the chain’s native value capture token instead, thanks to enshrinement of these primitives.
On any chain, the first protocols usually deployed usually are the forks of the basic primitives. By enshrining them and deploying the basic versions, this pushes builders to move further along the innovation curve and deploy protocols with designs that vary from these ‘basic’ ones and prevents low-effort forks.
Ben, Berps, and BEX do not have complex mechanisms which push the envelope in the mechanism design space, they are simple forks that aim not to stifle innovation, but promote it. Kodiak and Gummi Finance as examples of this - a DEX and a lending market that are launching on Berachain.
The primitives exist to set the groundwork for the ecosystem, and to encourage building on top and innovating. Furthermore, guaranteeing the liveness of these core primitives from day 1 can’t hurt. In addition, these enshrined protocols set a baseline for yield in the ecosystem. Stablecoins and the native gas token will now have a yield bearing reference rate that other protocols can look to as the baseline.
Enshrinement of these primitives leads to:
A lot more value being captured by the chain’s main stakeholders
A lot more value being captured by the native tokens
Prevention of low effort forks
Encourages builders to spend resources building more innovative/sophisticated protocols
This article hasn't even discussed how the native $BGT gauges take this a step further, but we can leave that for another time.
I hope this made sense to you Yeetards. Hit me up on twitter to point out the glaring errors I undoubtedly made, and to argue with me more generally as well.
