This article is from |Ericonomic

Translation｜Odaily Planet Daily (@OdailyChina）_

Translator｜Azuma (@azuma_eth）_

Editor's Note: The king-level project Berachain officially launched last week, but the unclear airdrop rules have faced widespread skepticism from the community. After a short-term surge, the token price has been on a downward trend, and market dissatisfaction is gradually intensifying, even sparking discussions on whether VC tokens are "correct to short."

In this market environment, Ericonomic, an OG community member who has long been deeply involved in the Berachain ecosystem, published a lengthy article on X discussing his views on the current state of Berachain. The content covers concerns about inflation issues, private placement selling pressure, vague staking mechanisms, and the founders' selling behavior, as well as a few positive events in the Berachain ecosystem that cannot be ignored.

Below is the original content from Ericonomic, translated by Odaily Planet Daily.

As many people know, I have always been very outspoken about Berachain and have invested a lot of time and energy into this ecosystem. After everything that has happened in the past few days, I feel it is necessary to share my honest opinions on the project launch, current situation, and my personal views.

I will start with some negative or less favorable aspects.

Some Negative Aspects

BERA Inflation Issues

This is my main concern, as it will directly reflect on the price action (PA).

The annual inflation rate of BGT is 10% of the total supply of BERA (Total supply of BERA = 500 million; Inflation amount in the first year = 50 million).

• Note from Odaily: Berachain adopts a dual-token model of BERA and BGT. BERA will be used for staking and trading, while BGT will be used for governance and rewards. The issuance of BGT is closely related to the staking of BERA, and BERA can be redeemed by burning BGT.

The circulating supply of BERA in the first year is about 21.5% (110 million), plus an additional 2% that will be released from the Boyco module within 30 - 90 days. Therefore, if all BGT were to be burned (which will not actually happen, but I am just showing the worst-case scenario), the inflation rate of BERA in the first year would be about 50%. By the end of the first year, the circulating supply of BERA will reach about 170 million.

In the second year, assuming the inflation rate of BGT remains unchanged (as the total supply of BERA increases to 550 million after the first year, 10% = 55 million), an additional 196 million BERA will enter circulation from different allocations (the largest portion coming from private investors). This means that by the end of the second year, the total circulating supply of BERA will reach 418 million. In other words, the inflation rate of BERA in the second year will be about 150%.

While most Layer 1 projects have high inflation rates in the initial years, Berachain's inflation rate is significantly higher than that of most projects. This comparison is not favorable for Berachain, as the poor price performance of most projects is primarily due to inflation, so this cannot be used as an excuse.

Scale of BERA Private Placement

Berachain sold over 35% of its token supply in private placements (I originally thought it was only 20%). The seed round was sold at a fully diluted valuation (FDV) of $50 million, the second round at $420 million, and the final round at $1.5 billion.

That's a significant number of tokens.

Most projects sell about 20% of their token supply through private placements, which I believe is already a lot and can cause significant harm to the project.

Such a large scale of private placement, combined with a long unlocking period, will create continuous selling pressure until all tokens are unlocked, which usually leads to a price trend of "high FDV, low circulation" where the price only declines.

Staking Issues for Private Investors

While this is not a very bad thing (though I don't like it), it is worth mentioning and explaining better.

Private investors can stake BERA and receive liquidity rewards, which they can then sell.

15% of the annual inflation amount of BGT (about 7.5 million BGT) will be allocated to validators, most of which will be distributed to stakers. If the entire supply (500 million) were staked, the annual percentage yield (APY) would be about 1.6%, but this will not happen.

The actual staking ratio may be about 60% of the total supply of BERA, which means the APY will be between 2.8% and 3.2%.

This cannot be compared to Celestia (which many compare to Berachain) because Celestia's APY is about 20%. However, we cannot say this is a good thing, as most rewards will be sold, creating more selling pressure. It is worth mentioning that anyone can stake BERA and receive rewards, which dilutes the APY for investors.

Temporary Changes and Poor Documentation

What really frustrates me is that the staking mechanism for BERA was only made public a few weeks ago, and now even if you specifically look for information about staking rewards, it takes a lot of time to find meaningful content.

This is a very important topic (especially under current market conditions and the prevailing resentment towards VCs), and it should have been better explained in the documentation from day one.

Before Jack tweeted, this lack of communication even triggered a lot of FUD within the OG community, which again led to poor price performance and made people more angry, refusing to listen to any information about Berachain.

To be honest, this frustrates me because it feels like they have been hiding the staking issues of private investors until the last moment (strangely, this was not well explained in the documentation either). But after learning that the APY is only 3%, I believe this is just a communication error.

Unimplemented PoL (Proof of Liquidity)

The core product of Berachain is Proof of Liquidity. If this is not ready, Berachain is just another PoS fork chain, and that is currently the case.

This situation will not last long (I hope), but since you cannot do anything with BGT at the moment, people's emotions can easily turn to disappointment, and some may refuse to further understand Berachain in the future.

As far as I know, this is a necessary step to ensure Berachain runs perfectly before fully deploying PoL, and I don't even know if there are other solutions. But the fact is, this is just a small episode among all current issues.

Most importantly, they will not spend months to fully deploy.

Founders are Selling

The co-founder of Berachain, Dev Bear, is selling tokens through one of his public addresses. He received about 200,000 BERA from the airdrop and then exchanged some of the tokens for WBTC, ETH, BYUSD, etc. This is a very bad thing because he may have been involved in the design of the airdrop.

Even if he did not sell any tokens, allowing core members to receive such a large airdrop is not a good thing.

He may be testing something in a real operating environment or just adding liquidity, but even so, this should be addressed and explained immediately.

Some Positive Aspects

Large and Strong Community

There is no denying that the Berachain community is one of the largest and best communities in the cryptocurrency space. I have been here for many years, and it is one of the best communities so far. I am confident that even if some mistakes occur, the community and builders will help the foundation in the best way possible.

Numerous DApps

The community is large and excellent, but the builders are even more outstanding. They have built, tested, and deployed a large number of DApps, which will be launched in the coming weeks.

This is an essential element for the success of any chain, and having all these DApps from the start makes me very optimistic about Berachain's mid-term prospects.

Focus on Security

Security is often a major concern for new mechanisms and new blockchains. For a brand new project like Berachain, security needs are even more critical. What I really like is that the foundation takes this very seriously, considering every detail and advancing the network's launch and decentralization in a slow but secure manner.

Even if we don't like the slow process, I believe this expectation value (EV+) is positive.

Proof of Liquidity (PoL)

I still think PoL is a very interesting mechanism, and when it is fully deployed and the flywheel effect starts to take place, we will see amazing APY, which will attract a large number of farmers to join this chain.

Conclusion

I am very certain that due to the various issues I mentioned above, simply holding BERA is not a good idea. But I am also very certain that PoL is very worth participating in.

I see Berachain as a "yield chain" rather than a chain where you just hold a non-productive token. You need to add liquidity, cycle, lend, borrow, find the best strategies to earn BGT, and conduct due diligence (DD) on each validator to decide where to delegate BGT (or whether it is worth burning it for automatic compounding). You need to work hard, not just hold a token.

In my view, the most critical point is to attract liquidity and initiate the flywheel effect. If this succeeds, Berachain will succeed.

Before concluding this reflection, I want to say that I have always seen Berachain as a breath of fresh air in this scam-filled space, with its own culture and good ethics. To be honest, seeing this "bad" launch and "suspicious" things (like changes to the BERA staking mechanism) makes me a bit sad. But ultimately, if the foundation and builders continue to work hard like they have in the past few years, Berachain will succeed and become the best yield place so far.

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