Berachain is a new, innovative blockchain for DeFi, and it's doing everything a bit differently. At the heart of it all is $BGT, a governance token, giving you the right to say your word in the future of the platform. But here's the twist: you can't buy $BGT – you have to earn it!This guide will walk you through one of the main ways of earning $BGT: providing liquidity on Berachain's decentralized exchange, BeraSwap (BEX). By understanding and being able to participate in the Proof-of-Liquidity of Berachain, you will be able to start earning $BGT and become an active participant in the "Bera" community.
Key Takeaways
- You cannot just buy $BGT, you earn it by actively contributing to the Berachain ecosystem through mainly providing liquidity.
- Supplying liquidity to the main decentralized Berachain’s exchange, BeraSwap (BEX), is a primary option to receive the reward token $BGT.
- To interact with Berachain, you will be required to have an appropriate crypto wallet and some $BERA tokens.
- Every value a liquidity provider provides further develops a more robust and efficient DeFi experience on Berachain.
If you're interested in Berachain, explore our dedicated section filled with blog posts and comprehensive guides: https://daic.capital/blog/category/Berachain
Getting Started: The Essentials
Before you can begin earning $BGT, let's cover a few basics.
Berachain is a Layer 1 community-focused blockchain, specifically built for DeFi. It uses an innovative Proof-of-Liquidity system wherein you get rewarded for providing liquidity - that is, making sure there are enough tokens available for trading on the platform. One of the main places this happens is on BeraSwap (BEX), Berachain's primary decentralized exchange.
For interacting with this ecosystem and getting $BGT, you will need a few things:
Crypto Wallet: A compatible crypto wallet like MetaMask or Rabby, installed and configured in the Berachain network. You will store your tokens in it and be able to interact with the dApps of Berachain.
Learn more about wallets for Berachain in our article ”Choosing Your Berachain Wallet”.
BERA tokens: $BERA serves as the fuel for transactions on the Berachain. You will need a little to get yourself started on BeraSwap (BEX) and to pay transaction fees, more commonly referred to as "gas."
This article assumes that you have some $BERA in your wallet.
Earning $BGT on BEX: A Step-by-Step Guide
Any DEX needs liquidity pools, and on BeraSwap (BEX), they are your way to rewards. A liquidity pool is like one common supply of two different tokens, such as $HONEY and $WBERA, coming together in a pool so that trading on the platform can go smoothly. By the time you add your tokens to a pool, you contribute to the above-mentioned trades. In return for your contribution, you will get part of the trading fees generated by that pool and some $BGT rewards, if you stake the liquidity token in Berachain’s reward vaults. Now, let's dive into exactly how you would do that:
Step 1: Choose Your Pool
The first step will be to go to Berahub and connect a wallet containing $BERA tokens.
Before participating in pools, it’s important to consider factors like trading volume and potential rewards. Not every pool has a reward pool where you can stake your LP tokens to earn $BGT later!
To check the existing reward vaults for pools on BeraSwap go to the "Vaults" section of Berahub.
Check out all Reward Vaults for HUB pools.
Head over to the "Pools" section on the Berahub. You'll see a variety of pools, each containing a different pair of tokens (e.g., $HONEY-$WBERA).
For this guide, we will use the $WBERA - $HONEY pool.
Step 2: Get the Right Tokens
Liquidity Pools are created with pairs of 2 or more tokens that are deposited into by liquidity providers. This allows DEX users to swap between any of the tokens in that pool. It’s required to have an equal value of both tokens in the pair.
For our $HONEY - $WBERA pool, we need $HONEY tokens, so we simply “Swap” a small amount of $BERA for $HONEY. Remember to keep some $BERA for gas fees!
The steps are the same for all pools.
Step 3: Add Liquidity
After having necessary tokens, return to $WBERA - $HONEY pool in the "Pools" section on BeraHub and click on the pool name.
Now you can see the details of your pool.
Click Deposit and enter the amount of each token you want to add.
You can choose single side liquidity providing or provide liquidity on both sides of the pool (switch the toggle “Keep amounts balanced” if you want to do it in that way)
Once you put the desired amount in, click on “Preview” and then Add the Liquidity by confirming the transaction on your Metamask.
The preview will ask you to select “Approve HONEY” or “Approve Infinite”.
You have the option to approve infinite confirmations to save yourself from having to constantly confirm transactions.
However, you should be careful with this feature, as it gives protocols unlimited access to your assets.
Step 4: Stake Your LP Tokens
After adding liquidity, you'll receive special tokens called LP tokens (or receipt tokens). These tokens represent your share of the liquidity pool. For example, if you provided liquidity to the $HONEY - $WBERA pool, you will get $HONEY - $WBERA LP tokens.
Once you add liquidity, you'll be able to “deposit“ your LP tokens into the reward vault to start earning $BGT tokens, as shown below.
Go to "Vaults" section of Berahub again and select the WBERA-HONEY Reward Vault.
Connect your wallet, enter the amount of your LP tokens and approve the transaction via clicking on the “Stake Button” (you probably need to approve the LP token before, if you didn’t stake before.
Well done!
Step 5: Claim Your $BGT Rewards
Once your LP tokens are staked, you'll start earning $BGT rewards. You can claim these rewards periodically from the BeraHub or another dApps that offer this functionality. On BeraHub go to the “Vaults” section and select “My Reward Vaults” in the tab bellow.
By clicking the “Claim” button you can collect your rewards.
Risk and Considerations
It's a great thing to provide liquidity, but just be highly aware of potential risks that could appear in the worst scenario, including impermanent loss. This occurs with any fluctuation in token prices inside the pool, where you are given a bit less of one token when taking back your liquidity.
Providing liquidity on BeraSwap is a great way to earn $BGT and actively participate in the Berachain ecosystem. You can start your journey as a liquidity provider and be part of the fast-growing "Bera" community by following these steps. You can also get opportunities on the Berachain Lending Platform, along with staking tokens on validators and we'll cover all of these in our next articles! Stay tuned!
The information provided by DAIC, including but not limited to research, analysis, data, or other content, is offered solely for informational purposes and does not constitute investment advice, financial advice, trading advice, or any other type of advice. DAIC does not recommend the purchase, sale, or holding of any cryptocurrency or other investment.
