From Theory to Practice 2: Exploring PoL with IVX

5 min readAug 13, 2024

This article was first published on X/Twitter.

Henlo, and furthermore, Ooga Booga! In the blockchain world, validators, dApps, and users are essential to the ecosystem. Validators keep things running, dApps drive innovation, and users generate demand and engagement. However, their incentives often don’t align perfectly.

This article dives into why blockchain incentives are so important and how Berachain is changing the game. Plus, we’ll show you how we’re putting these ideas into practice with our new partnership with IVX.

The Heartbeat of Blockchain: Validators, dApps, and Users

The Need for Aligned Incentives

Properly aligning incentives is crucial. If validators don’t benefit from the ecosystem’s success, they might become disillusioned. Similarly, dApps need to feel supported by the network’s stability and the validators’ work. And users need a seamless, rewarding experience that justifies their participation.

Berachain’s Unique Solution

Berachain addresses these challenges with a fresh approach to incentive alignment. At the core of Berachain’s system are BGT and the Proof of Liquidity mechanism, which allow validators to have a say in the network’s direction and rewards. Here’s how it works:

Proof of Liquidity: PoL allows validators to direct BGT emissions to different dApps through reward vaults. These vaults are designed to incentivize liquidity, offering rewards in various ERC-20 tokens. When a dApp sets up a vault, it can propose this vault for BGT emissions via a governance proposal. If approved, validators can direct their emissions toward it, earning rewards based on their contributions.

BGT Station: The BGT Station is the go-to hub for managing these reward vaults. It lists all approved vaults and lets validators choose where to direct their BGT emissions based on the incentives offered. These incentives could be anything from the dApp’s native tokens to fractional NFTs or wrapped tokens from other chains. This flexibility lets validators pick rewards that match their risk tolerance and goals.

Bearchef Contract: A standout feature of Berachain is the Bearchef contract, which manages BGT emissions. Validators can adjust their BGT distribution using the cutting board concept — a percentage-based system for allocating emissions to different vaults. This setup lets validators adapt to ecosystem changes, optimizing their rewards based on current opportunities and risks.

Validators can choose from a variety of strategies:

Diversification: Spread emissions across multiple vaults for risk management and diverse rewards, including stablecoins for steady income and speculative tokens for higher returns.
Focus on High-Reward Vaults: Concentrate emissions on high-reward vaults for short-term gains, requiring up-to-date knowledge of the ecosystem.
Long-Term Investment: Support promising new dApps for potential long-term rewards by backing projects with significant growth potential.
Stable Income: Opt for low-risk vaults offering stablecoins or low-volatility tokens to ensure reliable income.

That’s why we’ve chosen to collaborate with BurrBear and IVX. These partnerships focus on long-term investments and stable income, recognizing the significant market growth potential in stablecoins RWAs (real-world assets) and the appeal of 0DTE (zero days to expiration) options for daily crypto traders.
By working with BurrBear and IVX, we aim to leverage these innovative solutions to provide our validator with robust and sustainable rewards.

Meet IVX: Our Second Partner on Berachain

As part of our commitment to exploring PoL’s practical applications, BlockHunters is collaborating with IVX, a decentralized options AMM built on Berachain. IVX specializes in zero days to expiry (0DTE) options contracts, providing high leverage exposure of up to 200x on various crypto and real-world assets.

IVX Key Features

0DTE Options Market: Trade options on various crypto assets up to one hour before expiration.
Portfolio Margin: Create smart contract accounts for diverse option payoff structures without selling collateral.
Auto-Compounded Real Yield: Provide stablecoins for market trading through IVX’s implied volatility liquidity pool (IVLP), benefiting from compounded trading fees and mitigated market exposure.

Users benefit from high capital efficiency, which reduces slippage and makes swaps cheaper. They achieve high leverage with minimal capital due to the intrinsic nature of 0DTE options. Liquidity pool operators deploy less capital for efficient returns, ensuring stable income.

Collaboration Details

Testing PoL with IVX: BlockHunters will use IVX’s high-leverage options to maximize returns and market stability while managing BGT emissions.
Validator Engagement: Validators will be involved in the PoL process, with BGT emissions directed to IVX’s reward vaults to incentivize liquidity.
User Participation: Users will benefit from optimized BGT flow and stable income through IVX’s efficient trading platform.

Looking Ahead

Berachain plans to improve the user interface for easier BGT emission management and will continue refining the PoL mechanism. Future updates will focus on enhancing reward types and governance processes.

Conclusion

Balancing incentives between validators, dApps, and users is vital for a thriving blockchain ecosystem. Berachain’s innovative approach to incentive alignment empowers validators to influence the ecosystem actively. By diversifying their rewards and directly participating in the success of dApps, validators can help ensure a more resilient and prosperous network.

With practical implementations like BlockHunters’ partnership with IVX, the theoretical benefits of PoL are being tested and realized, setting the stage for a balanced blockchain ecosystem where all participants can thrive. Stay tuned for more updates, ooga booga!

About BlockHunters

BlockHunters supports leading crypto projects with infrastructure services, including active nodes and key components. We drive technology forward, enhancing security, connectivity, governance, and community support with our competitive and practical expertise.

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