Berachain 101: Everything You Need To Know | Founder Smokey The Bera
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Welcome to Bankless, where we explore the frontier of internet money and internet finance. And today on Bankless, I'm talking to Smokey the Bearer, which is one of BearChain's creators and co-founders.

BearChain is not something that I have deeply investigated prior to doing this interview, but since its mainnet is now launched and the project is real, I felt like it was a good time to get Smokey on the show and have him teach me directly about what BearChain is and what its core innovation called Proof of Liquidity brings to the industry. Before we get started though, a message from our friends and sponsors over at Morpho. Morpho is a borrowing and lending application on Ethereum, also on Base. That is the first and only DeFi protocol that has been integrated into Coinbase.com.

which is a pretty crazy concept. But if you're a long time bankless listener, you know this concept as the DeFi mullet. Fintech in the front, DeFi in the back. Coinbase is using Morpho to offer its users Bitcoin backed loans, which is actually how I'm also personally using Morpho as well.

It feels good to have an app that I'm an ongoing customer of to sponsor the podcast. So I appreciate you Morpho. There is a link in the show notes if you just got peaked. So go check them out. Proof of liquidity from BearChain. I think it's a pretty interesting concept. I'm definitely putting it into the category of valid economic experiment with uncertain and unproven outcomes. I think the success of proof of liquidity will have to come with some relatively heavy top down control and influence in order to make sure everything is balanced correctly.

I'll quickly illustrate proof of liquidity. Smokey the Bear, we spend like 20, 30 minutes on this in the podcast, but just to really prime you as you go into it, I'll quickly illustrate proof of liquidity as a three-way relationship, like a three-party flywheel between one, BearChain's app layer, two, the validator set, like the stakers, and three, a new economic actor that holds a non-transferable BearChain governance token. So an additional token that is a core part of the blockchain. Okay.

That's the big new thing that breaks the model for the typical proof of stake blockchain. In addition to the regular currency of the blockchain, like the ETH for Ethereum, which is the BARA for BARA chain. In addition to BARA, there's an additional governance token called BGT in the mix that helps direct economic resources between validators and the app layer.

Is this additional mechanism a missing piece of the puzzle that truly unlocks economic resourcing for the blockchain economy? Or is it a chaotic introduction of an unnecessary variable that undermines the security and sustainability of the bear chain system?

I don't know. Only time will tell. But until then, I'm here for it. So let's go ahead and chat with Smokey the Bearer from BearChain right now. But first, a moment to talk about some of these fantastic sponsors that make this show possible. Ondo Finance is leading the way in the tokenization of real world assets with a mission to accelerate the transition to an open economy by building the platforms, assets and infrastructure that bring financial markets on chain.

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Bankless Nation, I'm here with Smokey the Bearer. Smokey the Bearer is the co-founder of Bearer Chain, which is a brand new layer one on the scene, which a different flavor, a different flavor than I think we've ever really seen before. Smokey, welcome to the podcast. Hey, man. Good to be here. Thanks for having me. I think just to really set the table, I kind of need to hear the whole Bearer explanation. Bearer Chain and Bearer has been positioned as like a more...

mimetic styled layer one, which is not a style that we've really seen before. Can you just kind of elaborate on this unique positioning that BearChain has? Yeah, for sure. I'd say that the mimetic, you know, positioning was a little bit of a happy accident and we'll find out if it's happy over the long term. But, you know, we'll see where we are. It actually started because BearChain didn't really start off as a chain. It started off as a whole bunch of NFTs of bears with bongs. And that, you know, I think gives it some somewhat hilarious, somewhat cursed roots.

For deep context, myself and my co-founder Papa had been in the space for close to a decade now, but most active since like 2015, 2016. Then again, DeFi summer, and then again, sort of as NFTs and stuff like that became fun again, or DeFi 2.0 in 21st.

And as we were hanging out in a whole bunch of these DeFi native disc boards, we found that NFTs were getting interesting again and a little bit beyond like the 10,000 pictures of monkeys, et cetera. Stuff like Parallel Prime and whatnot was starting to actually see, I'd say, more nuanced applications. And we said, hey, it'd be kind of cool to see what happened if we took an NFT project and saw what we could do with it. That first has completely started out as a bit of a joke and just 100 NFTs of bears with bongs aptly named the bong bears.

Then we decided to make these bears effectively multiply or rebase. If those of you from back in the day are familiar with sort of Olimpist style mechanisms, certainly nowhere close to four or five figure APYs, but rather just sort of multiplying collections that reduced in scarcity and price over time and allowed more and more folks to enter that ecosystem. And what was interesting, I guess, is that having come from these DeFi native discord's,

and sort of like your Olympus, Frax, Curve, Alchemix type communities, you had a lot of folks who were pretty far left curve and pretty far right curve in parallel. So you just sort of have these guys who are on one hand, funny JPEG of a bear, I'd like to interact with this. And on the other hand, we're like, okay, these guys have some kind of fun game theory or liquidity mechanisms here. Let's see what happens next.

And at some point the joke was just, let's call it bearers instead of bears. And that just sort of stuck. It was just someone in the discord. And over time, I think that what we really saw was from talking to a lot of those folks who joined the ecosystem from the NFT point of view was that there were a lot of ideas that they put forward and a lot of, I'd say, productive conversation given that commingling of intellectual disparities, I should say. And it was more like, hey, what can we do that goes a little bit beyond a classic, you know,

animal themed NFT project. And how can we do something a little bit more interesting here? And I think one sort of narrative at the time that was just gaining popularity and interest was just sort of, you know, on one hand, the broad concept of capital efficiency and maxing that out within crypto, but then also just liquid staking, I think, was really having a heyday. People were understanding Lido, Rocketpool, you know, DVTs, everything in between.

And a question that kept on coming up, especially as new alt layer ones went live, like think your avalanches and nears, et cetera, was, okay, there's hundreds of millions, if not billions of dollars securing this chain, but there's really not any liquidity present on the network itself.

And how you sort of solve that dichotomy, because if you have the most secure network possible, that's great. But if no one uses it and transacts upon it, then it's a bit useless, right? So the whole idea of bear chain, as much of a joke as it might sound on the top, was actually to build a chain that allows you to align liquidity and security at the protocol level.

helpful, such as those incentives when a user is allocating capital sort of points in the same direction as opposed to somewhat different ones as they do right now. And we think that in many cases with proof of stake, there's stuff like Lido, there's stuff like Eigen layer, et cetera, that very much feel like extensions of this in the right direction.

But we wouldn't say they're as opinionatedly built into the protocol layer in the same way as they are in BearChain. So I think we hope to cover both the left and the right curve. And that on one hand, it's like, hey, here's a chain powered by proof of liquidity. And that's really meant to build liquidity and security in parallel. And perhaps most importantly, use that to actually power the application layer. So there's a differentiated economic reason as well for applications to exist on that base layer.

But on the other hand, there's a bunch of bears and it's kind of funny. So, you know, trying to go full range. So a little bit long winded there, but I hope that that gives you a little bit of like the context on why this has occurred as it has.

That was amazing context. I actually just answered a lot of questions that I had about BearChain. The typical path, the typical community creation story is that there's a few founders, maybe one very technical founder who comes up with some zero to one innovation, and then they make a chain around that or they make a project around that.

that technical breakthrough. And then that technical breakthrough gets broadcasted to the broader crypto community. And then many people in the broader crypto community become like pilled. They become nerd sniped about that one technical breakthrough. And then they decide to form a community around that project. That's like the normal path.

It's like first there's technical breakthrough. Then, uh, that technical breakthrough turns into a shelling point that many members of the community find interesting and want to become a part of that community. Want to become more involved. Want to become like, you know, inside of that inner circle. That's about that one technical breakthrough. This seems to have like flipped things where first you had the community brought around these NFTs and, and a variety of different factors and the community had its own flavor and, uh,

insights and there seemed to be a lot of intellectual capital that was created and then a bunch of social capital as that community grew kind of more tight-knit and then they collectively with you and the co-founders created more of a technical breakthrough with proof of liquidity which we'll talk about

But it was the community that came first rather than the technical breakthrough that came first. Do you agree with this illustration? 100%. And I think that's actually sort of the model that we've taken internally as well. And it's exactly as you said, right? There's a large institution or research group, whatever that might be, that spins out

you know, an interesting new concept, snowman consensus, you know, sweet, whatever it could be. And then it's like, okay, cool. How do we make people care about this? We get a whole bunch of money behind it. We start, you know, talking to KOLs. We start building quote unquote community around it. We, we nerd type some people and we run at full speed. I think that we, we,

took a largely opposite direction. And of course, I would love to be able to say, and I can say that a lot of the technical innovation that underpins BearChain was built internally. We've been really thankful to have input from the community along the way and just a large ecosystem of application builders that's sort of been there while we build so that we can get their input live, which I think has also been incredibly helpful for us. But yeah, I think that the model was kind of flipped on its head a little bit and we'll get to see how that ages. To date, I think it's been really good to us.

us. But the open market and a liquid token always has a different story to tell. And I don't believe in calling shots until I'm sure of it. So there's going to be a bunch of technical questions that I have for you. And I'm going to ask you about just like proof of liquidity and

and the EVM and, you know, a technical roadmap. But since this is a community like bootstrapped project or like a community first project, memetic first project, is there such thing as like a memetic roadmap? Because the memetics of BearChain has gotten us to this point today where we have like the layer one, it's launched, the token's out, the network's up and running and the community's there. But like what's next for like the memetic side of things? What's next for the bearer side of things instead of the chain side of things?

No, good question. I think the bear chain has developed its own culture. Some people really don't like it. Other people do. And I have no dislike for those who hate it, if you will. I think everyone's intelligent opinion. And I think that on my side, we can't exactly...

I think that planning a memetic roadmap is sort of a recipe for disaster because trying to force a meme or trying to force a narrative or trying to force some like, you know, sphere of existence from a cultural point of view often ends with getting your face punched. But I do think that finding ways to run with existing new things and then to have fun with it is kind of what it comes back to.

And I think that a lot of what we thought about as building BearChain is, okay, how do we build something that is both robust and excellent and fun at the same time? Which is, of course, easier said than done, but the end game, what people are looking for, right? I think a lot of people want to be on-chain to, of course, make money, but also to have a good time while they're doing so.

So for us, it's not like, ah, man, we got to make sure that people laugh about this next month. You know, this is the joke of the week. I think it's actually just sort of on one hand leaning into FUD and being like, cool, man, if like Suzu and Arthur are going to like dump my coins, I'm sure that that has always worked well for their other ones in the past. Right. Or like, you know, it's going to be like, yeah, we're not launching Q4, we're launching Q5.

I mean, like that kind of stuff is I'm quite okay. And I'm an advocate for, you know, I'd say friendly fire humor. Because I think that, you know, if you look at like, I think a lot about the concept of eight miling oneself. You know, if one's just to think about like the callback to the old M&M movie, it's like, if you say all the shit that's going wrong or that people can like, that people can call you on in public, then I think that it becomes a lot less fun to FUD.

And other times you can actually kind of weaponize that fun into something a little bit more entertaining. So sorry about my alarm going off. But yeah, TLDR, no exact dramatic roadmap, but keep on doing what we're doing in terms of leaning into fun shit. And I think not taking things exceptionally seriously when it comes to the way that people might view us.

All right, let's dive headfirst into proof of liquidity. And from what I gather, from what you're saying to me just now, this is kind of like the North Star of Barachain. It's like the thing that you guys are really bringing to the table and the innovation that you guys are really trying to squeeze the juice out of. Just give us a download on proof of liquidity. 100%. So, you know, proof of liquidity basically means that as a block is built on Barachain, there's two factors that go into it.

One is the bearer token itself, which is the gas token and the staking token of the network. There's a bearer chain is the ETH of bearer chain. A hundred percent. And then there's also a token that is non-transferable and soulbound called BGT, which perhaps, you know, on the nose stands for the bearer governance token.

And BGT is really what, in my mind, the network circles around, if you will, in that it cannot be earned by, you know, just you can't stake BGT to get more BGT, if you will. You effectively have to do the work of providing liquidity on the network.

And the way that this works is that, going back to my original point, when a block is built, there's two factors that affect, I say, that block building process and the size of the reward. On one hand, the amount of bearer that a validator has staked with it is effectively increasing or affecting the frequency of its block production. So it's linear weighted block production on one hand. On the other hand, the amount of BGT that a validator has delegated towards it is actually what affects the size of its block reward.

And each block reward or each block is effectively built with a reward based on a formula that sort of has a constant that's based on, you know, effectively just there's a there's a Y equals MX plus B. There's a B type value. And then there's a more complex equation that I could probably touch on in more depth, like quants might kill me. That is basically meant to avoid the centralization of BGT, but nonetheless allow validators to have more BGT directed towards them to produce larger blocks.

So can I just check my understanding really quick? So we have just normal proof of stake on the one layer, which is, you know, for the Ethereum minded people, you know, ETH staked to a validator. And the more ETH that you have staked, the more frequently you are going to validate a block. And so that's the bearer token. The more bearer that is staked, the more frequently you are going to add a block to the network. Like nothing changes there.

But the new thing is that the governance token, the BGT governance token, determines the amount of rewards that a validator gets for proposing a block. So if you propose it, maybe you're proposing a block very, very frequently because you have a lot of bearers staked.

But you could have not very much rewards if you do not have a lot of governance tokens pointing towards your validator. Is that correct? Yeah, you've totally got him in. And I'd say that from there, the part that is most interesting and most important, in my opinion, is that those emissions, those BGT block rewards, are not primarily being actually reaped by the validator per se. Those are actually primarily being emitted into the ecosystem.

As in, there's a set of pools, you can think of them as reward vaults or a cutting board of sorts, like one might have been familiar with in like curve type ecosystems.

that validators can choose to direct those emissions towards. And these are often either pools or vaults or any form of stakeable token from applications on the network. What gets kind of interesting there, in my opinion, is that you actually have the opportunity for the first time for applications and validators to work together to bootstrap liquidity and effectively build a marketplace for the emissions of the chain.

So what that means is that, you know, whether that is the native DEX that is built into the chain or, you know, a random money market that might come up or even a gaming project, a structured project, a product, whatever it might be, they can actually work through effectively an incentive marketplace that's also built into the chain with this validator and say, hey, in exchange for you giving me X dollars worth of BGT or, you know, 100 BGT emissions, I will give you 125 of my token or whatever that might

And they can actually look to find that market optimal rate, if you will, that allows them to price their liquidity and do so in a manner that is, I'd say, meaningfully more cost effective and efficient than sort of a standard liquidity mining program. And in this way, validators and their delegates and the BGT delegates are effectively able to earn a diverse portfolio of these different ecosystem projects or these different projects on the chain and their governance tokens.

And the applications themselves are actually able to, on one manner, effectively subsidize or boost their own incentive profiles through the chain itself. And I think what this sort of goes back to for us is that when we look at the majority of networks today, there's very little that's done, I'd say, at the protocol level to actually support the application layer.

And one can certainly look at CSR type gas rebate programs or STIP type programs or like avalanche rush grant type programs, whatever that might be. But we don't really see these as things that are necessarily always sustainable or enshrined into the chain. They're rather things that are bursts of nitro, if you will. While on this side, the whole point of BearChain's application layer is to drive value back to the chain and the whole point of the chain is to drive value back to the application layer.

So what you're really looking for here in a perfect world is for people to be providing liquidity onto pools that they'd like to use on the network, then taking that BGT that they have earned for providing that liquidity to a set, there's only a certain set of white listed pools that grows over time by governance.

And then to take that BGT and say, hey, I'm going to delegate this to a validator that is in turn effectively incentivizing pools that I care about. And that allows me to auto-compile my rewards to some extent, or perhaps I'll delegate it to a completely different one that is working with a set of other projects in the ecosystem whose incentives I'd like to get exposure to as the validator takes a cut of that. So in short, the way we see it is another degree or another degree of freedom for interplay between the application layer and the validators on the network.

that effectively means that their liquidity helps to boost the security over time. Okay, so is it correct that there is a triangle-based loop here? One is the application layer, one is the BGT governance token stakers, and then the third is the validators who are staking Bera, the gas token. Is that correct? Yeah, that's correct. The only thing I would sort of add there is that when you think about the BGT token holders,

They're not quite staking it. I'm just kind of nitpicking on the terms. But they're delegating it to a validator. And each validator will basically have both a bearer stake and a BGT delegation.

Okay. Okay. So I really like this. I want to try and nail down this triangle. So validators have bearers staked. Yep. And then they have an amount of BGT delegated to them by BGT stakers. Just basically farmers, anyone who has acquired BGT on the network largely by providing liquidity. But yeah, you're good so far.

Okay, cool. And then validators have a relationship with applications and the app layer. Can you define that relationship? How is, what is the connection between, um, bearer validators and apps in the application layer? Yeah. I would primarily think of it as an order book in that every validator has, you know, emissions that are these BGT emissions that are a function of, like I mentioned, the amount of bearer that they have affecting the number of blocks they're producing.

and their BDT delegation affecting the size of those block awards.

And each application is able to effectively propose a bid in that marketplace, right? Either directly to a given validator or to the set as a whole, if you will, and say, hey, we're looking for 100 BGT for this pool of ours. Like, as in, we want to incentivize it with this. We're willing to give you guys, you know, X amount of our token in exchange. The validator can then take a cut of that commission of, you know, those tokens distributed to their delegates and

and then the epoch of the remainder. So we really think that there's a pretty interesting system there where dApps can effectively price their own liquidity in the form of the emissions of the network.

So the relationship is almost like, yeah, I think that that hopefully comes across clear. I think the thing that I'm hung up on is the BGT emissions rather than Bera emissions. I'm used to like Bera is the token that's being staked and validating the network and in the Ethereum world. For sure. That doing that activity earns you new ETH. But you are talking about BGT emissions. Totally.

And I should add one more thing that, sorry, I didn't mention before, that I hope makes the system come a little bit more full, which is that at any point you can take one bearer and burn it one way into one BGT. And that's how the loop closes a little bit. And the whole point and the whole reason that BGT is sort of non-transferable and that the second token exists is

beyond a regulatory point of view, is that we wanted to enforce, I'd say, not just a social, but also a technical contract, where in order to actually reap the rewards of the benefits of the network in terms of its inflation, that typically goes towards network security alone, if you will. In this case, we wanted to actually enforce the fact that people need to provide a useful service, right, or a useful, I'd say, activity to the ecosystem, which very much starts

in its most basic form, if you will, by liquidity provision, but over time can really evolve into any form of stakeable token incentivization. So just to give you a little bit more of an abstract interpretation of this, right? One could say, okay, there's a game on the chain. And if you play this game, you know, X days a week or spend X amount of fees in the game, you earn this token.

And then there's a way to actually say, okay, I'm going to find a way to propose a governance proposal that says I can stake this token and earn BGT for doing so and earn some portion of the fees from that game, if you will. And sorry, the fees are denominated in Bera. It depends on what sort of fees one would be referring to here. Can you clarify the fees here?

Yeah, so like when I want to make a transaction on Barra chain and I pay gas, that is in Barra, correct? Yep, you got it. Right. And so if I'm collecting fees from the chain, my understanding is that that would be Barra. Yes, and like validators are able to, standard MEV tips, et cetera, et cetera, that all happens in Barra, right? But I guess what I'm getting at is that

folks who are delegating BGT, which they've often earned via providing liquidity or doing some other sort of governance whitelisted approved activity on the network, are then effectively able to just earn a whole bunch of other different incentives from the other applications that are working with validators on the chain. The whole goal here is that the application layer is something that should actually not be value extractive, but value additive to the network.

The general like loose vibe that I'm getting is that we are finding out by tying together the validation of the chain and liquidity to the application layer, we're just bringing these things closer together. We're really dissolving the layer, the separation, the line between the application layer and the actual like layer one infra blockchain itself.

And to be clear, does the Bera token have inflation as well? Well, the Bera token's inflation really is in the form of BGT. So all the emissions in the network are in the form of BGT. But you can't go from BGT to Bera. You can only burn Bera and create BGT? Other way around. Oh, okay. Okay. I see. I see. I see. So that's how you functionally get the inflation.

So you can destroy your governance token and have no governance, but you can get money in the form of bearer. So you give up governance for money, but you cannot buy governance because BGT is non-transferable. You've got it. And I think it looks like it's kind of, you know, one of the things that we need to work on most, and it's tough because there's a lot of different levers here, but we also just need to do a better job of bite-sizing this over time.

Um, and it's a hundred percent of one of our core focuses at the moment, because I think just education is paramount at times like this.

But yeah, you've got it, right? Like we want it to be that if you want to have governance power, the ability to sway incentives on the network and the ability to receive lots of incentives on the network, hopefully as these ecosystem dApps take flight, then, you know, you have to have that skin in the game, if you will. But you always have the optionality to say, okay, I'm just going to play Liquid and I'm going to pick my bear and I'm going to, you know, see the market go up and down, maybe LP it, do whatever I might want. Yeah.

So that's sort of the contract that was looking to enforce there. And I think that when we think about that from just like a cost of security or a cost of liquidity point of view, the real thesis is like, you know, there's many chains. If you look at a suite tech network, right, you might be saying, okay, there's 10% yearly inflation on like what, $40 billion or something like that. And it's like, okay, $4 billion is being used to secure the chain. But there's what, 1.5, $2 billion, something like that in security actually, or in liquidity actually living on the network.

So does it always make sense? And I'm using a facetious example, but does it always make sense to pay a two to one ratio for your security to liquidity? Our thought here is that that can be a lot better over time. Interesting. Interesting. Yeah. So there's there's going to be some harmony, some equilibrium found between the size of governance versus the size of the actual money.

You've got it. And I think that over time, the degree of flow from different incentives on the network will probably also play into that as well, because people might be able to say, okay, I'm earning dollars X from the various incentives that are flowing to BGT.

Maybe it makes sense for me to just maintain my equilibrium here, whereas if the price of Bera crashes or spikes or whatever it might be, that can surely affect that equilibrium. So I think it will be a very economically responsive system, which is also being tied into the security of the network with a strong base plate, I'd say.

Right. Yes. Yeah. The whole idea here is by like, I mean, putting things into the same layer from a Bitcoiner standpoint, like putting the security of the chain and the application of the chain into the same spot is like a huge red flag that Bitcoiners will hate this. But then the...

more technologic, the technologist side of things is like, well, you know, if we can balance things right, we can, you know, we can mitigate those weaknesses and really lean into those strengths that that provides. And hopefully this turns into a flywheel that allows an ecosystem to grow.

100%. And like, it's interesting, we've seen both sides in that on one hand, you know, just speaking from that, like, you know, quick offhand, Bitcoin perspective, they're like, actually, you know, we've been looking for so many different ways to actually make Bitcoin assets more productive on chain. And there's the advent of Babylon, etc. There's something interesting to be said about, okay, here's the first way that you could actually have super deep liquidity.

for Bitcoin pairs and think about Lombard BTC pumps or whatever it might be in a manner that allows these Bitcoin players to get a little bit deeper. But of course, folks who are playing with Bitcoin LSTs, et cetera, are probably not your purists, if you will, right? They might be more locked down in cold storage. These guys might be a little more gunslingy and that's totally fine.

But I remember a funny conversation I had like a couple of years ago with Cozy from Premia was he was like, yeah, you guys actually have this. This feels a little bit like proof of work. And I was incredibly, you know, I guess confused by this concept. Yeah, I think what he was getting at was that, you know, the fact is, if you can't buy the important token and you have to, quote unquote, do the work in this case of providing liquidity to, quote unquote, mine it.

then there's a little bit of a very, you know, squint and see the similarity type of thing there. I think we've seen good reception so far, but I broadly err towards the point that you first raised, which is to say, I think this is for the folks who are perhaps, you know, more recent technologists and see themselves thinking, okay, you know, crypto ultimately does come down to the application layer, in our opinion.

and really what can be grown over there. And a chain really is nothing more than the sum of its applications in the vast majority of cases. So we might as well build a system that causes hundreds of millions of dollars to flow into the network in terms of incentives in supporting those applications, as opposed to something that causes it to flow away, if you will.

Right. Yeah, I totally understand. There's been a trope by proof of stakers out there. It's like if you squint at proof of stake hard enough, or excuse me, if you squint at proof of work hard enough, it's actually just proof of stake with extra steps. Whereas the stake is like your ASIC miners, like you are staking your ASIC miners on future bitcoins, future yields. Exactly.

And it's just like all the hardware and all the supply chains is just like kind of just a convoluted means to an end to get to proof of stake. And I think what you're doing is you're finding some like interesting middle ground that also ties into the app layer. Yeah, you've got it. So at the end of the day, we're just like, hey, on one hand, this is a EVM identical L1 that is built to really power the application layer. But at the end of the day, it's meant to be an accelerant.

The best apps will succeed with or without Baruchain. I say that from not a facetious point of view, but simply the fact that I believe that the best apps always win. But I believe that this can very much be a force multiplier and something that helps a lot of them cross that chasm of death, if you will, between like, hey, we're trying to get off the ground and we're at a 10 mil market cap and we've got to find ways to keep our emissions going and keep people flowing in. And hey, we found PMF and we're ripping up into the sky.

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One last hole in my knowledge that I think I have about this whole economic loop between the apps, the governance and the chain is the liquidity provisioning. How does can you connect? That is the...

At what point in the cycle does the liquidity provisioning happen? Yeah, great question. So the way that it starts is that when the chain goes live, each validator has sort of, like I mentioned, this cutting board or this pie chart of allocations where they can say, okay, every time I produce a block, this is where the rewards go.

right and the bgt rewards and they and they select applications to issue their bgt2 you've got it and the way that starts is that you know extremely conservative there's a native dex that is built into the chain to bootstrap this function precisely such that folks don't have to worry like okay am i am i sending my governance awards to a to a rug contractor like right to the 40th unifork etc right um instead over here it's like okay we're going to start with a very basic uh you know a

a very basic battle-tested infrastructure piece. And then over time, via governance, really any application on the network can join that set. So you could have someone who has a money market and then they say, okay, here's a supply-side pool for ETH or whatever it might be, and we want this to be eligible for what we call a reward vault.

And then the reward vault is added to that cutting board that validators can choose to direct emissions towards. So you just think of it as another section of the pie chart, and then each validator can say, okay, cool, I want to direct emissions towards this. I don't want to direct emissions towards this. Sometimes that can be a validator saying, okay, this app has been willing to offer me incentives

in the form of their token and therefore i will choose to direct emissions towards this one other times they might say hey we have a large staker or a large lp or a large delegate that is using this pool a ton and they want us or we think it's a good idea to increase their yields such that they stake will be they stake more bear or they delegate more bgt with us

So there's a few different ways that one can play in that sense. Okay. So this is a, trying to harmonize three different players. We have the app, the app player, the validator player, the governance player. How do you know that when this is all said and done and everything equilibrates that we actually discover a sustainable Nash equilibrium rather than we like

fall off onto like one convex or concave side of things. And like we end up in some equilibrium that's like is stuck. And maybe there's a cartel of people who are voting and all it just gets stuck. And this and the mechanism kind of just like erodes because, you

wherever the value is pointing is pointing into some like, you know, dead end for the chain and things are not in equilibrium and it's actually not doing the mechanism. How do you know that the ultimate end game of this game theory is actually a sustainable place? Totally. And look, I think it's a very prudent question and one where if I told you, I know for sure that it's going to be functional, I think we'd be in a very different place. Hmm.

And I wouldn't be as presumptuous to say that. But what I think I can say is that from all the economic modeling we've done so far, we see a couple of different cases that can be scary for the system. For example, if all those emissions just concentrate on LST pairs, then it's like, okay, cool, we're back to proof of stake, right?

Right, right. And that's when one of the things... With extra steps, actually with extra steps. Exactly. It's pure mistake being able to jump through three hurdles first, and that just seems stupid. So I think a lot of it is on one hand social layer conditioning, which only goes so far, but to be able to say, hey, look, these are the types of applications that seem very interesting here. Here's novel differentiated use cases that actually lean into this around the velocity of capital primarily, using that to bootstrap different derivatives,

and finding ways to actually, I think, focus on applications that have enough fee generation incentives being thrown off and product market fit, if you will, to make something like this sustainable. And then beyond that, there's also sort of a governance like guardian council, if you will, that includes folks from a number of different firms that have worked on proof of liquidity alongside us in terms of auditing, economic audits, et cetera, that are meant to basically help ratify or I would say serve as more than anything else, an emergency break.

for things that can be very wrong there. And this is a council that's made primarily of external third parties, to be very clear. You've got things like folks like Asymmetric or Small Quants, et cetera, that have been pretty deep in the weeds on these sorts of things. I think the goal is to be as far as possible from censoring the system, but moreover to provide a degree of guidance

and to basically say, hey, if someone is going to provide or try to push all the emissions on a network to like a, you know, a mochi curve attack type of thing, or, you know, a Batman pair that's just, you know, meant to extract value, then there should be a manner of intervening on that.

I think beyond that, though, if I'm to be very blunt with you, David, I think it's an economic experiment. And the best way of playing out an economic experiment is doing it. Yeah, doing it like setting the guardrails and saying, hey, here's what we hope happens. And here's how we've talked to a whole bunch of teams about what we think could make a lot of sense. But decentralized network, it's a pretty free flowing ecosystem.

And the best thing that we can do is set it up for success and then do our best to guardrail it in the right direction. But we can't, I don't think we can promise guarantees because that would just be foolish.

Right. OK, so Bear Chain is launching into February of 2025, which is the most saturated that the crypto industry has ever been, which just makes sense because we just get more saturated as time goes on. But nonetheless, it's a difficult time to start a layer one just with how much dispersion there is, how much how many other layer ones and layer twos there are. So what is your plan to penetrate into this market? How do you grow market share?

For sure. I think it's got to be multifactorial, right? I think that, you know, the days of, okay, I'm going to build a bunch of, you know, DeFi products or OpenSea type products that we've seen a hundred times before and then hope that it all works are kind of behind us. And I think that our focus on the application layer is what we hope will very much set us apart and what I think has put us in a decent place from sort of our testnet slash

earlier growth phases. You know, projects within the bear chain ecosystem have on one hand been able to raise a bunch of VC, which is always nice to have just from a social signaling point of view. But more importantly, I think have been able to create user experiences and I'd say usable systems that people love even at the earliest stages of the network.

And there's sort of a big range, whether that is like your next level, like rehypothecating LP type DeFi protocol. So think about something up the range of like HyperPlex or something that allows you to add a whole new dimension of sort of like incentive layers to perps like exponents.

Or, you know, sort of new takes on LSTs like Smiley, etc. Or, you know, things that are very much up the gaming consumer social type angles like HoneyChat or PuffPaw, which, you know, was notoriously viral at one point, like a vape to earn deep in. They're pretty interesting, like long term, you know, health data implications. So we think it's kind of cool.

Or even a squad of layer twos that are actually looking to build on Bearishian as well, which is another entirely wacky part of the system that I think very few people have crocked as of yet, which can be much more, I'd say, app-specific or vertical-specific manifestations of the network.

that can be focused on RWAs, consumer, really anything in between. The reason that those get pretty interesting, and I wouldn't want to tangent too hard on this, is that on one hand, they provide their own clean execution environment, mempool, optionality, et cetera. But you might have heard me mention earlier that BearChain is EVM-identical.

And what I mean by that is that it's not just compatible in the same way that a Phantom or an AVAX, et cetera, might be. But it's actually identical in that when it comes to different EIPs, opcodes, et cetera, you're running the exact same unmodified ETH execution clients.

That means that if one wants to go and build an LP stack rollup or an Arbitrum orbit rollup, etc., it's just about as easy, which makes that quite cool as well, because you can even have a system where L1s and L2s, and we're deciding whether we want to call them L2s, but let's use that word for now, are even more closely intertwined or seem more aligned than there have been on ETHs.

I know there's lots of debate back and forth about L1, L2, parasiticity. I'm not even going to attempt to pronounce the word, but you know what I mean, that relationship. And I think that there's...

That's a contentious one, because I think it all depends on the view of the world that you have and how long-termist you might be. But one thing that is kind of interesting on BearChain is that proof of liquidity can actually form a pretty cool relationship there. And that, for example, you can have a LP that is the native token of BearChain, aka BearA, paired against that L2's governance token, and actually have that pair living on the BearChain network as part of proof of liquidity.

generating different block awards or BGT awards, you could have those rewards being pointed at the bridge contract, for example, for that L2 itself, providing a form of native yield, while at the same time, the liquidity pair living on the L1 is contributing to both the L1's liquidity and the block awards being produced on the network. So I'm giving very high-level examples, but we think that there's some pretty cool unlocks that come down the road here as well.

And we think that the ecosystem itself is perhaps the most robust that exists within an L1 ecosystem at launch.

I could give you the vanity metrics, but I think that's kind of nonsensical. What I can say is that there's probably between 60 and 75 different novel applications that have interesting twists that we haven't seen on other chains before that I think are all going to get their chance in the limelight. But we've advised many of them to be thoughtful about timing and making sure they give themselves the best shots on net. Because as you can also imagine, in markets like this,

I think there's like two responses, right? It's either, okay, let's like get out the door as soon as possible and try to grab as much liquidity as we can. And then, you know, be the, the, you know, the one that makes it out of the nest and

Or there's a response to say, okay, let's stay a little more heads down, look for a period where we can be oxygen to a flame, as opposed to squashed out by a redder market, and then capture that opportunity. So I've gone on for a while, but the TLDR is that I think there's a number of different directions for applications building on BearChain, and they're already much better set up for success, both from previous work done over the last year or so on testnet,

and proof of liquidity than I think you'll find in many other cases. And I think that despite the red market, one of the things that I worried about most was our application builders, you know, just saying like, oh no, like fuck this, like time to hop over to the next shiny new thing. We haven't seen that as of yet. I hope that we continue to not see that. And, you know, ourselves as a team are very much in the trenches, in the discords, in the telegram chats, working alongside them to make sure that they have all the resources they need to do well.

I think many people will place BearChain next to Monad just simply due to the proximity of when these things are gaining attention and due to the fact that both of these things are EVM identical. Monad will love to, I'm sure, talk about its parallelism and its parallel database and how fast it's going to...

how fast it's going to go. To my knowledge, BearChain is also very fast. Maybe you can just talk about the technicals behind the scale of the Layer 1 and just any thoughts and directions about L1 scaling as it relates to the project. 100%. Yeah. Look, on our side, I think that what's pretty cool is that BearChain has been built on a framework called BeaconKit that we've developed in-house. And that effectively means that you can have a meaningful degree of plug-and-play between the consensus layer and the execution layer. Right now, it has been very much optimized for...

Tendermint consensus, which is a gift and a curse. It's a gift in that we have single slot finality, which is wonderful, and something that we believe has a lot of upsides over time. It's a curse in that you do hit sort of fundamental scaling limits from a BFT point of view. It's a validator set, right? So right now there's a set of about 69 validators that we expect to expand to a cap of 200 and change over time, at which point you'll need more fundamental up

Or, you know, I'd say more robust thoughts around consensus upgrades to the mechanism over time that could actually cause that set to scale even further and decentralize even more. When I think about L1 scaling as a whole, I think that I think about it a lot as a function of, you know, user experience. I think about it to some extent as just, you know, what does gas per second feel like and what does finality feel like?

because I think at the end of the day, people are chasing a feeling, if you will, as silly as that might sound, but they want to say, hey, I clicked this button and the thing happened.

And a lot of that can be simply a function of user experience and abstraction on the front end and making sure that your apps are excellently built from either an AA point of view and EIP-7702 type stuff. Or it can be a matter of just making sure that your chain itself is really fast. Being really fast has not been our North Star or our focus, I'd say, but we have sort of like sub-two-second block times. And with near instant finality, it just means that when you click that button, it does feel pretty good.

And we hope to maintain that over time. But I think that when we think about L1 scaling as a whole, I think it really just will come down to those things. It'll be, okay, how decentralized can you ensure that your network is? And I'd say that Tendermint has certainly options for doing that over time. I should say Comet more than Tendermint. Easier said than done, but nonetheless something where there's a lot of room to push the boundaries. And especially with the new leadership at the ICF, I believe that they'll be thinking a lot more about the practicality of this over time.

On the other hand, our framework is actually optimized for the ability to upgrade or swap out consensus engines over time. We've also looked at other forms of that that can be quite interesting for us as the network scales or perhaps reaches certain limits.

So I think it's go faster, be more decentralized. I optimize for user experience. I'm excited and hope to see good things from Monad guys. They're friends and I hope friendly competitors and groups will end up doing good things with down the road.

I had no idea about them being EVM identical. So I think that's super cool if they're able to enable the same stuff. I wasn't sure to what degree their version of the EVM sort of differs from what we currently see on Ease, et cetera. So it should be very cool to see where all that plays out.

So last week, Smokey, was Bearer Chain launch day. And whenever a token gets minted, at least in the current milieu of crypto Twitter and crypto sentiment, whenever a token gets minted and it's a very high price, there seems to just be a ton of...

angst, vitriol, like toxicity, anger about the launch of tokens these days. And BearChain was no exception. There were like critiques, criticisms, accusations of like BearChain being a VC chain, that VCs were...

were locked up, but they were going to be able to sell their inflation, a bunch of things. I personally am giving less and less weight to these critiques of just like somebody else printed a bunch of money and I wasn't a part of that. And so therefore I find it gross. But nonetheless, I do want to kind of just like carve out a place in this podcast to elevate those opinions. Now, granted, you

a lot of this, the general vibe was that this is a VC chain and it's going to make a bunch of VCs a bunch of money and it's not going to make the retail or the consumer or like everyone else a bunch of money. It's just only for VCs. And I was listening to Vance Spencer on the Friday Bell Curve podcast

address some of these things head on in what I consider a pretty effective way. And I would encourage anyone who's interested in that, this part of the conversation to go listen to that. Now, Vance Spencer Framework is one of your guys' VCs. And so they are on that side of the conversation. In my opinion, after listening to Vance, I think that the burden of proof is on anyone who is antagonist or on the opposite side of that. But nonetheless, I just want to give you an opportunity to kind of just like

address some of the FUD or criticisms of what you have heard over the last week of like bear chain being a VC chain, it's making insiders rich, it's not for the community or blah, blah, blah, blah. Yeah.

There's a lot to unpack there. And part of my work over the next little while is going to be unpacking that properly. And I think that there's so many different ways to look at it, but I'd rather own things than not, right? We raised a long time ago, and we raised in a timeframe where it was quite typical for VCs and team members to be able to stake lock tokens.

Um, do I think that that's a great practice? No. Is that something that I would love to change, uh, entirely? Uh, it's not like it's something that I care about in the slightest. I think I have more than enough exposure to the project and I have not thought about selling tokens, lots or otherwise. Um, and I think that the majority of our VCs are in the same boat and, um,

One kind of hilariously interesting part is that a lot of the cry and outrage is, oh, price is going down because VCs are dumping. But with our custodian, we've been in the process of manually video verifying over time and making sure that people actually get those tokens so they can stake it and create...

make that a little bit cleaner. And through conversations with a number of our largest VCs, they've actually said, hey, we are totally fine if you want to lock our staking slash rewards and have them invest on the same schedule. Like,

I don't, they don't care. We don't care either. And that's issues that we will have to discuss both from a legal, practical, technical point of view. And then, you know, going full circle beyond that, even beyond quote unquote trying to play defense, I think I would simply just say that for us, Bear Chain started as a community project.

We 100% raised venture capital along the way to try to build something that I think is both technically difficult and quite meaningful and hopefully has a major impact on the space over the years to come. But it's always been at the heart of the community, whether that is the NFT projects that started it all and that small Discord server, or whether it be the ecosystem of 200 plus projects that we talk to, interact with, a hot topic item.

for unlaunched networks has been, okay, how do you actually like reward, like how do you actually figure what that distribution should look like? And it's often a bit of a mess. You can reward testnet users that clicked and farmed and tried to Sybil certain things and that's a mess. And, you know, they certainly have their role and that's not to downplay testnet users in the slightest and they're

They're great at things about QA and figuring out all the things that can go right or wrong on a network. Some of the best examples to date have been when there's already some form of a live project and one can say, "Okay, I'll just reward my real users, and I'll reward those who are generating fees or revenue for the network."

In our case, we basically tried to run a pretty thorough program that we called the request for proposal. And that would, you know, both applications, community groups, you know, like whether that be a Thailand builders community that's focused on BearChain or a leading application on the chain could effectively put forward a plan for how they would actually, you know, use the proceeds of an airdrop from the token generation event and direct that primarily into growth for the ecosystem and growth for their own user base on mainnet. And then

And that's actually a little bit later today. And we had 127 teams, I believe, receive that on the application side and 70-something people received on the community side. I guess at the end of the day, what I'm getting at is that the majority of folks that have quote-unquote profited or done well from BearChain are community-related folks at the end of the day. And I think...

We've got the end of the project that is reliant on applications, and we're a project that has a tighter relationship between the application layer and the base layer than just about anyone else. So I think at the end of the day, we are focused on making sure the community eats and the community wins. And if VCs help enable that along the way, that's great. And we have a very strong relationship with our VCs. But I mean, I think the casting is not quite right. But I understand why it's cast that way.

And I don't, I think, dispute the objective points of, hey, they've raised a bunch of venture capital funding and, hey, there's this staking stuff that's annoying and this is all VC chain. I understand why that narrative can exist. I just think that if people

choose to approach, they can probably say, okay, the majority of the airdrop has gone actually to community members, to the folks who helped build this from the ground up. The majority of resources on the chain are going into the ecosystem itself and going to fuel the community in terms of users and applications. And the majority of time and effort spent by the team and the network, if you will, is entirely directed

directed towards all. So I think that we will continue to face the accusations for the time being. And I have no doubt that it'll continue. But I think we're going to do our best to stay, keep our heads above water and continue doing what we can to ensure that, you know, people realize that we're in it for the long haul and that this isn't just about making VCs rich. I mean, that'll be a side effect if we do well. But this is about making sure that we build something that hopefully leaves a mark on crypto for a long, long time frame.

Last question, Smokey, before I let you go. What does 2025 look like for AirChain? What's the roadmap? What's going to happen? What's in store? Yeah, so much to be done, man. On one hand, I think the ecosystem will see a whole bunch of launches of

You know, citing new applications, and we want to be there cheering them along from the sidelines, helping to solve their problems and helping to get ahead of anything that could be going wrong. On the other hand, we want to make sure that there's a lot of things for us to ship on the technical roadmap. That's going to involve a few different things. On one hand, there'll be withdrawals going live later in the year, which will be quite important. We're looking at slashing in the future as well.

And then we're actually looking at making sure that we can ensure that L2 stack is as clean as possible, such that all these folks looking to build hyper-optimized manifestations of their work on BearChain are able to do so with very little to no friction. And then it'll be a lot of growth on the team side, man. I think that we've got a pretty solid push in APAC regions at the moment, but I'd like to continue expanding that, especially as

We look around at East Asia, as we look to Europe, and as we look to more and more institutional partnerships that very few people know much about when it comes to the bear chain side. But also one that I think leans quite well into some of our past lives, where I was sort of previously a founder, you know, worked in VC, worked on, I'd say, the

the capital allocation side and have a number of folks that want to build interesting extensions of barrier chain by taking bets on what they've seen so far. So I think we'll continue to double down on that in the near future. So, okay, this has been really great. This was a ton of information coming very, very quickly from a podcaster perspective. You speak very precisely and quickly, which is just great for content. So thank you for joining me today. Of course. Thanks so much for having me, David. Appreciate it.

Bankless Nation, you guys know the deal. Crypto is risky. L1 economic experiments, also risky. You can lose what you put in, but nonetheless, we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us on the bankless journey. Thanks a lot.