PoL Update: Inflation Reduction and Rewards Vault Realignment

Announcements
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Original post from Tio: https://forum.berachain.com/t/pol-update-inflation-reduction-and-rewards-vault-realignment/259

Every chain has a balance sheet in the form of its emissions. Proof of Liquidity has the unique capacity to spend that balance sheet on opportunities outside of validator staking and network security. To this end and in accordance with comms on the Berachain forums, improvements are coming to Proof of Liquidity (PoL) aimed at improving emissions efficiency, reducing dilution, and sharpening how incentives are allocated on Berachain.

What’s Happening

1. BGT Inflation Reduction

  • Annual BGT inflation is being reduced from 8% to 5%.

Emissions should be more deliberate, with less dilution and higher impact per token emitted. This change strengthens the signal of PoL allocation and aligns Berachain’s emissions to comparable L1 networks.

The current proposal is live on the forum here: https://forum.berachain.com/t/proposal-decrease-the-annual-bgt-inflation-rate-from-8-to-5/255

2. Rewards Vault Consolidation

Proof of Liquidity is built to help apps grow; but there has to be a path towards sustainability and growth in the first place, along with value accrual back to $BERA. There are approximately 200 reward vaults on Berachain, of which approximately 50 are actively receiving emissions at any point in time. Our goal is to clean these up and ensure that users and validators are presented with a set of active and growing options when deploying their capital and/or emissions.

Teams have been notified if their vaults will be decommissioned, with a full list to be published in the next few days. Vaults being decommissioned likely meet one or more of the following conditions

  • They are unused for extended periods of time (30+ days)

  • Teams are self farming, especially in the case of “action based” vaults

  • The vault contains “vanity” TVL and provides little to no economic utility (trading volume, fee generation by the underlying application etc)

  • No tangible path to increasing demand for BERA, HONEY, majors, differentiated sources of off-chain yield, etc

Consolidation allows emissions to be focused on vaults that demonstrate real demand and meaningful usage.

Updated Rewards Vault Criteria (Effective Immediately)

Rewards Vaults are evaluated holistically, but the following signals are how the team is going to define continued effectiveness or value add to the chain and ecosystem. Effectiveness is difficult to define - to this end, we’re using some of the criteria outlined in the Berachain EoY update (https://x.com/berachain/status/2011174361206554627) and building these into a framework.

  1. Ongoing Demand

Vaults must show recent, organic demand for emissions, such as:

  • Active BGT allocation

  • Recent third-party incentives

Vaults with no meaningful activity for an extended period (30 days) will be subject to removal.

  1. External Incentive Alignment

PoL is designed to reflect external demand for emissions.

Vaults that depend primarily on self-directed or circular incentives will be subject to removal. Competitive, third-party incentives are a strong positive signal and indicate real interest.

  1. Demonstrated Network Contribution

Rewards Vaults are expected to translate emissions into observable contribution to both usage and network outcomes.

Evaluation considers whether the vault:

  • Is meaningfully used and supports an active product or workflow

  • Converts emissions into sustained onchain activity rather than short-lived spikes

  • Contributes, directly or indirectly, to Berachain’s economic activity, liquidity, or core primitives

  • Drives demand for BERA, HONEY, majors, off-chain crypto-decorrelated yield, or differentiated distribution outside of Berachain’s current userbase

Immediate revenue is not required, but there must be a credible connection between emissions, long-term network value, and sustainability of the vault.

Vaults that consume emissions without producing observable impact may be removed.

What Comes Next

Over the next two weeks, we will:

  • Remove the affected Rewards Vaults from being able to receive emissions

  • Implement the inflation reduction

  • Communicate protocol-level updates related to improving emissions routing

  • Longer term: Outline the structure of PoL pilot programs designed to turn $1 of emissions into more than $1 of protocol revenue.

The direction is intentional and consistent:

PoL emissions are not subsidies, Bera builds businesses.

More updates soon.

The final list of blacklisted reward vaults is available here

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