What Is Proof of Liquidity?
Most chains rely on established consensus models like Proof of Stake (PoS), which reward validators simply for staking, raising questions around fairness and utility. Others still use Proof of Work (PoW) , the original model focused on computational power.
Introduces Proof of Liquidity (PoL), a first-of-its-kind consensus model that ties emissions directly to on-chain liquidity activity.
PoL shifts the focus from passive token lock-up to active liquidity. It rewards validators, users, and protocols based on how liquidity moves through the system, promoting usage and flow of capital.
Passive Chains
In traditional PoS models, validators can earn emissions regardless of network usage. This can result in high rewards but low participation, with liquidity sitting idle.
PoL addresses this by tying rewards to real, measurable activity. It creates a tighter alignment between validators, protocols, and users, driving more dynamic engagement across the ecosystem.
How PoL Works (In Simple Terms)
Two-Token Model
Berachain's consensus borrows from the Proof-of-Stake (PoS) model and contains two key components:
$BERA- Validators secure the chain by staking the native gas token$BGT- A soulbound governance token distributed by validators for proposing new blocks, which is ultimately rewarded to users who provide ecosystem liquidity
This model creates meaningful economic alignment between previously isolated groups. Validators who return the maximum value to their $BGT delegators are likely to receive more delegations. This alignment drives healthy competition among validators to serve their delegators best, further reinforcing the PoL flywheel.
Validators mint $BGT each block and direct those emissions to Reward Vaults based on delegated $BGT and vault bribes. $BGT also powers on-chain governance.
The PoL Flywheel
Protocols fund Reward Vaults with $BGT bribes to attract emissions.
Users provide liquidity to supported protocols and receive LP tokens representing their share of the pool.
These LP tokens can be staked in Vaults or other DeFi activities, where users earn $BGT based on their contribution. The type of vault or activity defines what behaviour is being incentivized — from liquidity provision to even trading or lending, depending on the protocol’s design.
$BGT holders can delegate them to validators showing them support.
Validators with more $BGT delegated receive a higher “boost,” increasing their $BGT block rewards.
Validators redirect those emissions to specific Reward Vaults, and protocols offer incentives (bribes) to attract emissions (Rewards).
The result? Emissions follow liquidity, and liquidity drives network activity. This is known as the PoL Flywheel.
Why It Matters
PoL brings purpose to emissions, rewarding those who contribute to the network’s growth.
Whether you’re supplying liquidity, staking LP tokens in vaults, delegating $BGT or using your favorite dApp, you’re part of a feedback loop that powers the ecosystem.
As Proof of Liquidity evolves, it may offer new ways for protocols to design incentive structures directly tied to on-chain usage — pushing DeFi toward a more sustainable and utility-driven future.
About Kuma
Kuma is a double-down bet on what works for decentralized trading: speed, security, and transparency. From the team behind the No.1 DEX from 2017-2019, and powered by Berachain’s Proof-of-Liquidity, Kuma delivers one-click onboarding, seamless mobile trading via Kuma Connect, and gas-free settlement. Traders of all sizes have an edge thanks to millisecond execution and complete control of their funds.
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