The DeFi-focused Layer 1 started out hot, but is struggling to retain users.
Berachain, the hyped DeFi-focused Layer 1 blockchain that launched in February, is struggling, with its key metrics in free fall.
Berachain launched its mainnet and token on Feb. 6, with the token opening at a $900 million market capitalization, and the chain’s total value locked (TVL) reaching $3.5 billion within two months of its launch.
Since then, Berachain’s TVL has decreased by 71% to $990 million, its token price has dropped by 72% to $2.4 from its opening day all-time high of $8.6, and monthly active users have declined by 85% from 2.2 million in February and March to just 330,000 today.
The ecosystem has been suffering significant outflows since April, potentially due to a reduction in incentives and rewards intended to attract users to the network.
Berachain also relies on a token flywheel effect through its Proof-of-Liquidity mechanism, which means that a falling token price results in less generous incentives.
The complexity of the Proof-of-Liquidity design may also contribute to the lack of interest in the chain, as it involves multiple tokens and moving parts within a DeFi ecosystem, which could prove complicated for users who prefer a simpler design.
