Executive Summary
Infrared Finance is positioning itself as a cornerstone liquid staking protocol within the Berachain ecosystem, addressing fundamental liquidity challenges inherent to Berachain's novel Proof of Liquidity (PoL) consensus mechanism. With significant funding of $18.75 million from reputable investors including Framework Ventures and Binance Labs, Infrared offers innovative solutions through its flagship products iBGT and iBERA. These liquid staking derivatives enable seamless participation in Berachain's ecosystem without requiring technical expertise. As Berachain's mainnet launched in February 2025, Infrared Finance stands poised to capture substantial market share in the $34 billion liquid staking sector by bridging accessibility gaps for both retail and institutional participants.
Protocol Architecture
Infrared Finance has developed a sophisticated architecture that creates a bridge between Berachain's unique Proof of Liquidity consensus mechanism and traditional DeFi functionality:
- Foundation Layer: Built on Berachain's Layer 1 infrastructure, Infrared leverages the blockchain's EVM compatibility while addressing the inherent illiquidity challenges of BGT (Berachain's governance token).
- Core Protocol Components:
- Validator Infrastructure: Operates a set of validators to participate in network security and earn rewards
- Staking Mechanism: Enables users to stake assets through simplified interfaces
- Vault Management: Aggregates liquidity from users to maximize capital efficiency
- Auto-compounding: Automatically reinvests rewards to optimize yields
- Liquid Staking Derivatives:
- iBGT: Transforms illiquid BGT into tradable assets with 1:1 backing
- iBERA: Provides liquid staking solutions for BERA (gas token) with validator exposure
- Integration Layer: Connects with ecosystem partners like Berabuzz and Beraborrow to enhance utility
This architecture addresses the fundamental challenge of Berachain's PoL mechanism: while the consensus model creates strong alignment between liquidity provision and network security, it also introduces complexity and illiquidity that would otherwise limit mass adoption.
Product Analysis
iBGT (Liquid Governance Token)
| Attribute | Details |
|---|---|
| Definition | Liquid wrapper for BGT tokens |
| Backing | 1:1 backed by BGT earned from liquidity in vaults |
| Native Yield | No, unless staked (as siBGT) |
| Redeemability | Not directly redeemable for BGT |
| Key Use Cases | Trading, DEX liquidity, lending collateral |
| Competitive Edge | Unlocks value from otherwise illiquid governance tokens |
iBGT represents a fundamental innovation within the Berachain ecosystem by transforming the non-transferable BGT into a liquid, tradable asset. This creates significant value by allowing users to monetize governance rights without sacrificing ecosystem participation. The dual-token model (iBGT/siBGT) provides flexibility between liquidity and yield optimization.
iBERA (Liquid Staking Token)
| Attribute | Details |
|---|---|
| Definition | Liquid staking token for BERA |
| Backing | 1:1 backed by BERA staked with Infrared's validator set |
| Yield Source | Validator rewards from securing the network |
| Key Use Cases | Lending, borrowing, trading while maintaining staking exposure |
| Competitive Edge | Lowers technical barriers to validator participation |
iBERA follows established liquid staking patterns similar to Lido's stETH on Ethereum but tailored specifically to Berachain's unique validator requirements. By abstracting away technical complexities of node operation, iBERA democratizes access to staking yields while maintaining asset liquidity.
Market Opportunity & Competitive Analysis
The liquid staking derivative (LSD) market has grown to approximately $34 billion across various ecosystems. Berachain's unique PoL mechanism creates both challenges and opportunities:
| Ecosystem | Leading LSDs | Market Share | Competitive Dynamics |
|---|---|---|---|
| Berachain | Infrared Finance | First mover | Limited competition in early ecosystem |
| Ethereum | Lido, Rocket Pool | 33.7%, 2.1% | Mature competition with regulatory scrutiny |
| Solana | Marinade, JitoSOL | 30.2%, 8.4% | Growing diversification among providers |
| Cosmos | Stride, pSTAKE | 18.5%, 3.2% | Focused on interchain liquidity |
Infrared's positioning as an incubated protocol through Build-a-Bera provides significant advantages:
- Early Ecosystem Advantage: Being among the first liquid staking solutions on Berachain enables early market capture
- Infrastructure Positioning: Core integration with Berachain's fundamental mechanisms creates strong product-market fit
- Focused Strategy: Specialization in Berachain's unique needs versus cross-chain competitors
As the Berachain ecosystem matures, we anticipate increasing competition from cross-chain LSDs seeking to enter the market, but Infrared's specialized design provides substantial defensive moats.
Tokenomics & Value Accrual
While specific tokenomics details remain limited pre-launch, analysis suggests:
- Native Token: Likely an INFRARED governance token with utility beyond governance
- Value Accrual Mechanisms:
- Protocol fee capture from iBGT/iBERA issuance and redemptions
- Revenue sharing from validator operations
- Potential liquidity mining programs to bootstrap initial adoption
- Validator Economics:
- Economics aligned with Berachain's validator incentives
- Enhanced yield opportunities through auto-compounding and optimized strategy
- Potential MEV capture and redistribution
The $18.75M funding structured as SAFT (Simple Agreement for Future Tokens) confirms plans for a token, with strategic investors like Framework Ventures indicating confidence in the underlying token model.
Risk Assessment
Technical Risks
- Smart Contract Vulnerabilities: As a protocol managing significant assets, smart contract risks are elevated, particularly given the novelty of Berachain's PoL mechanism
- Validator Slashing: iBERA holders are exposed to potential slashing risks from validator misbehavior
- Bridge Dependencies: If cross-chain functionality is implemented, bridge security becomes a critical concern
Economic Risks
- Liquidity Bootstrapping: Initial iBGT/iBERA liquidity may be thin, creating potential volatility
- Peg Stability: Maintaining the 1:1 peg requires robust mechanisms, particularly during market stress
- Governance Capture: Concentration of governance power could impact protocol direction
Regulatory Risks
- Staking Classification: Evolving regulations around staking services could impact operations
- Securities Considerations: Token distribution models face increasing scrutiny
- Cross-border Compliance: International regulatory fragmentation creates operational complexity
Strategic Partnerships
Infrared has strategically aligned with key players in the nascent Berachain ecosystem:
- berabuzz: Enhances iBGT liquidity and trading infrastructure, critical for adoption
- Beraborrow: Enables auto-compounding functionality, maximizing user yields
- Potential DEX Integrations: Position as liquidity provider for major Berachain DEXs
These partnerships create positive feedback loops that enhance utility of Infrared's products while strengthening Berachain's overall ecosystem liquidity.
Investment Thesis
The investment case for Infrared Finance centers on several compelling factors:
Bull Case
- First-Mover Advantage: As an incubated project through Build-a-Bera, Infrared has privileged positioning in the Berachain ecosystem
- Strong Funding: $18.75M backing from top-tier investors validates the business model
- Product-Market Fit: Direct solution to Berachain's inherent PoL liquidity challenges
- Ecosystem Integrations: Strategic partnerships with berabuzz and Beraborrow enhance utility
- Team Background: Incubation through Build-a-Bera suggests strong technical capabilities
Bear Case
- Unproven Technology: Berachain's PoL mechanism is novel and untested at scale
- Pre-Launch Status: Core products not yet battle-tested in production environments
- Competitive Landscape: Established LST providers may enter the ecosystem
- Regulatory Uncertainty: Evolving regulatory landscape for liquid staking
- Token Distribution Unknowns: Complete tokenomics details not yet public
Valuation Considerations
Based on comparative analysis with other liquid staking protocols:
| Protocol | TVL | FDV/TVL Ratio |
|---|---|---|
| Lido | $21.5B | 0.48x |
| Rocket Pool | $1.3B | 0.67x |
| Stride | $420M | 0.75x |
| New Ecosystem LST (avg) | - | 1.2-1.8x |
Assuming Infrared captures 15-25% of Berachain's total staked value in its initial phase, and applying standard valuation metrics for emerging liquid staking protocols, a potential fair value estimate would position Infrared with strong upside potential relative to its seed valuation.
Strategic Outlook
Infrared Finance's trajectory will likely follow three distinct phases:
Phase 1: Ecosystem Establishment (Q1-Q2 2025)
- Initial product launch following Berachain's February 2025 mainnet
- Community building and liquidity bootstrapping
- Core integrations with foundational DeFi protocols
Phase 2: Market Expansion (Q3-Q4 2025)
- Enhanced product features and yield optimization
- Additional ecosystem integrations
- Potential token launch and governance activation
Phase 3: Maturity & Innovation (2026+)
- Advanced strategies for yield generation
- Potential cross-chain expansions
- Institutional-grade offerings
Conclusion
Infrared Finance represents a compelling investment opportunity within the emerging Berachain ecosystem. By addressing core liquidity challenges inherent to the novel PoL consensus mechanism, Infrared is positioned to become a fundamental infrastructure layer in a promising new L1 blockchain. With strong investor backing, strategic partnerships, and a clear value proposition, Infrared demonstrates significant potential for early adopters.
However, investors should approach with appropriate risk calibration given the pre-launch status, novel technology stack, and evolving regulatory landscape. Strategic allocation as part of a diversified portfolio focused on infrastructure-level DeFi protocols would be prudent.
The protocol's success will ultimately hinge on Berachain's own adoption trajectory, execution of technical roadmap, and ability to build sustainable liquidity for its derivative tokens. With these considerations in mind, Infrared Finance merits close attention as a potential category leader in an emerging blockchain ecosystem.