Why Hack VC Led the Series A for Berachain

Peter Hans, Partner at Hack VC

At Hack VC, we invest in early stage Web3 infrastructure, AI and decentralized finance projects, backing founders that push the boundaries of what’s possible. Berachain is a great example of this dynamic across Web3 infrastructure and a perfect fit for our portfolio.Berachain stands out as one of the most innovative products we’ve seen in Web3 today. 

By addressing some of the biggest pain points across the blockchain ecosystem, Berachain’s architecture and unique mechanisms offer a way forward for scalability, capital efficiency, cross-chain liquidity, and long-term value creation. 

Our investment thesis in Berachain was driven by our views of how the protocol is solving for existing ecosystem alignment challenges. Below we detail the many elements of our thesis at the time of initial investment as defined by the market problems, and the solutions that we felt Berachain could provide.

1. Ethereum’s Scalability Limits Innovation

The Problem:

Ethereum’s EVM remains the gold standard for smart contracts. However, its monolithic architecture limits throughput at 15-30 transactions per second (TPS) and finality times of roughly 13 minutes. Developers are thus forced to choose between EVM compatibility and performance. Other chains competing with Ethereum inherently sacrifice EVM support to achieve speed, fragmenting liquidity and tooling. Even Ethereum Layer 2s inherit slow finality and rely on centralized sequencers, perpetuating a dynamic of high fees, slow transactions, and siloed liquidity.

Berachain’s Solution:

• Modular Architecture: Berachain separates consensus (BeaconKit) from execution (Polaris EVM), enabling parallel transaction processing while maintaining EVM bytecode compatibility.
• Testnet Performance:  We estimate that Berachain’s testnet had been achieving 10,000+ TPS, with 20+ chains connected via IBC and LayerZero, enabling seamless cross-chain asset transfers.
• Single Slot Finality: Berachain achieves a sub-2-second finality by leveraging CometBFT, aTendermint fork. This serves to match Solana’s speed without compromising decentralization.ing 

2. Staked Capital is Trapped in Non-Productive Roles

The Problem:

In proof-of-stake (PoS) chains like Ethereum and Avalanche, over $114 billion in assets are locked in validators, earning minimal yields (typically 3-5% APR) while remaining unavailable for DeFi. Liquid staking tokens (e.g., Lido’s stETH) attempt to solve this but introduce counterparty risk and governance centralization. Further, validators are incentivized to prioritize staking rewards over ecosystem growth, creating misalignment between network security and user utility.

Berachain’s Solution:

• Proof-of-Liquidity (PoL): Validators earn governance power (BGT) by directing liquidity to protocols like BEX (Berachain’s DEX) or Bend (Berachain’s lending protocol), aligning incentives with ecosystem growth.
• BGT Soulbound Tokens: Liquidity Providers are the exclusive recipients of these non-transferable governance tokens, ensuring that influence remains with the participants of the ecosystem (e.g., staking BERA/wETH LP tokens in BEX).

3. Liquidity is Fragmented Across Chains

The Problem:

Cross-chain interoperability remains one of Web3’s weakest links. Bridges are too often unreliable, with billions in exploits stemming from cross-chain bridging activity.  Cosmos’ IBC protocol lacks native EVM support, isolating Ethereum’s $70 billion DeFi ecosystem. This fragmentation forces developers to rebuild tooling for each chain and burdens users with high slippage and fees. Berachain’s Solution:

• Native Integrations: Connections to Cosmos, Ethereum (via Gravity Bridge), and Celestia DA layers enable trustless asset transfers.
• BEX DEX: "Ambient liquidity" pools aggregate cross-chain liquidity, reducing slippage by ~40% compared to Ethereum DEXs. While most liquidity pools are isolated to a specific trading pair (USDC/ETH), ambient pools offer a dynamic where liquidity is utilized across multiple assets and trading pairs across the Berachain ecosystem. Given that liquidity is no longer siloed to a specific pair, price discovery and market making can become more efficient.
• EVM Tooling Compatibility: Full support for Ethereum RPCs, Foundry, and Hardhat offers developers rapid cross-chain dApp deployment.

4. Inflationary Tokenomics Erode Long-Term Value

The Problem:

Most chains rely on inflationary token emissions to bootstrap liquidity. In addition to the dilution, the distribution dynamics incentivize  mercenary capital that can be compounded by insider sell pressure. Even “deflationary” models like Ethereum’s EIP-1559 fail to offset staking emissions, while veToken systems (e.g., Curve) overly concentrate governance..

Berachain’s Solution - The Tri-Token Model:

• BERA: A fixed-supply gas token with deflationary mechanics—users burn BERA to mint HONEY, and 50% of transaction fees are permanently removed from circulation.
• BGT: A non-transferable governance token earned via liquidity provision. BGT can be burned 1:1 for BERA, creating the potential for a deflationary loop.
• HONEY: A USD collateralized stablecoin, backed by yield-generating assets like staked BERA and LP tokens.

With a clear understanding of the critical challenges facing Web3 and how Berachain’s innovative approach addresses them, the next step is to evaluate how this vision translates into tangible results. Berachain has already demonstrated impressive traction, showing that its ecosystem is not only viable but primed for long-term impact. Below we offer a glimpse at how the thesis is playing out.

Traction to Date

1. Developer Activity

Over 200 teams are actively building on Berachain’s testnet, spanning DeFi, AI, NFT, and GameFi. To date, the RFA ecosystem boasts 127 Berachain-supported projects.

2. Community Growth

Berachain’s community has grown exponentially, with over 100,000 Discord and Telegram members and 1M+ X followers. Its pre-launch mindshare also ranks amongst the highest in the space.

3. Boyco: $2.1 Billion TVL

Boyco, Berachain’s liquidity bootstrapping platform, has become a cornerstone of its ecosystem, attracting $2.1 billion in TVL as of January 2025. Projects create liquidity markets where users deposit assets (e.g., ETH, BTC, stablecoins) in exchange for future rewards (e.g., tokens, points, or NFTs). Boyco ensures that Berachain launches with deep liquidity, reducing slippage day one.

Key Vaults:

• Stakestone ETH Vault: allowing users to deposit wrapped BTC (e.g., WBTC, cbBTC) and earn BERA rewards.
• EtherFi BTC Vault: allowing users to deposit wrapped BTC (e.g., WBTC, cbBTC) and earn BERA rewards.

4. Bong Bear NFTs

The Bong Bears NFT collection has become a cultural phenomenon within the Berachain ecosystem. These NFTs serve as a gateway to ecosystem participation, offering holders exclusive access to governance proposals, airdrops, and community events.

Berachain’s innovative approach to blockchain infrastructure addresses critical challenges in scalability, capital efficiency, liquidity fragmentation, and tokenomics. Its Proof-of-Liquidity consensus mechanism and tri-token model align incentives across validators, developers, and users, fostering a cohesive and thriving ecosystem. Hack VC is excited to back this project and look forward to its involvement in the inevitable growth of Web3. 

Footnotes:

[1] Investment memo available upon request: ir@hack.vc

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