Following the launch of Berachain blockchain, its 'Proof of Liquidity' model has faced criticism, resulting in significant token price drops.
Berachain Launch and Its Features
On February 6, Berachain, a highly anticipated layer-1 blockchain, launched its mainnet, introducing the ambitious 'Proof of Liquidity' mechanism and one of the largest airdrops of the year. Berachain originates from the Bong Bears NFT collection, a cannabis-themed project that debuted in 2021. Major exchanges like Binance, MEXC, Upbit, and Bithumb quickly listed BERA, sparking excitement around its ecosystem.
Criticism of the Model and Community Reaction
Despite initial excitement, concerns arose over airdrop allocations, tokenomics, and potential insider trading activity. Users involved in the testnet expressed dissatisfaction with receiving fewer BERA tokens than anticipated. Analysts uncovered issues in the token structure, highlighting how early investors benefit from the staking mechanics. Private investors, holding over 35% of BERA's total supply, can stake BERA, earn BGT, burn it for additional BERA, and sell it, potentially creating a loophole benefitting early supporters to the detriment of regular holders.
Impact on the Token's Value
Amid these revelations, BERA's price, which peaked at $14.99 on February 6, plummeted 63% to $5.57 by February 11. While volatility is common for newly launched tokens, the rapid decline raises questions about the sustainability of pre-launch hype and whether the token's structure inherently benefits insiders more than retail participants.
The situation surrounding Berachain has raised important questions about transparency in tokenomics and allocation, requiring attention to restore trust.
