Kodiak Explained: Berachain's Native Liquidity Hub

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1. Introduction: Why Kodiak is interesting in the context of a project from the Berachain ecosystem
2. Kodiak Review
3. Kodiak and Berachain synergy
4. Partnerships and Integrations
5. Backers
6. Conclusion

1. Introduction: Why Kodiak is interesting in the context of a project from the Berachain ecosystem

Kodiak is a project built on a particularly interesting blockchain—Berachain. The Berachain ecosystem is one of the most community-driven, with a highly active base of users, fans, and developers. One of the distinguishing features of Berachain is its focus on liquidity, which, alongside community, serves as a key lifeblood of the web3 space. To enhance liquidity management, Berachain introduced a consensus mechanism called Proof-of-Liquidity (PoL), designed to align network incentives and create strong synergy between the chain’s validators and the ecosystem’s projects. In 2023, Berachain completed a Series A funding round, concluding on April 20 (4/20), raising a total of $42 million at a valuation of $420.69 million. In April 2024, Berachain closed a Series B round, raising $100 million led by Framework Ventures and Brevan Howard Digital, bringing the total funds raised to over $142m, which highlights significant resources for further ecosystem and community growth.

Another factor that draws attention to the Berachain ecosystem and its projects is the activity in its testnet, which continues to show positive momentum thanks to its strong and engaged community:

According to Bartio Testnet Explorer data, in September 2024, along with an increase in addresses, there was a sharp rise in the number of transactions and verified contracts, signaling high network activity. The number of unique addresses surpassed 13 million:

In a short time, Berachain V2's testnet has seen tremendous growth in transactions, smart contract deployments, active addresses, staking activity, and more.

It's also worth noting that Kodiak holds a key position within the Berachain ecosystem as the only DEX created through the Build-a-Bera accelerator program. This was done to provide Berachain with a suite of solutions for token launches, trading, and liquidity provisioning. A reasonable question might arise: how does this differ from BEX, the main official AMM? And how did one DEX get integrated into another? Let’s delve into what Kodiak really is.

2. Kodiak review

As mentioned earlier, Kodiak offers several products. By integrating multiple layers of DEX functionality, it provides a comprehensive suite of trading and liquidity solutions. These solutions encompass the following components:

1. Decentralized Exchange (Kodiak DEX): This offers users a non-custodial, capital-efficient trading and liquidity provisioning experience through its concentrated and full-featured AMMs. The DEX operates on its AMM V2 (full-scale) and V3 (concentrated) models, both based on the corresponding AMM designs of Uniswap.

1. Automated Liquidity Manager (Kodiak Islands): Designed to attract sticky deposits from everyday users through our "set it and forget it" automated concentrated liquidity strategy vaults. The Kodiak core team has worked closely with Berachain’s development team to ensure Kodiak Islands are compatible with Berachain’s Proof of Liquidity (PoL) consensus mechanism. Technically, Kodiak Islands are automated vaults built to dynamically adjust concentrated liquidity based on market conditions, optimizing yields and maximizing liquidity uptime within the desired range. Each Kodiak Island represents a tokenized V3 liquidity position within the base liquidity range on Kodiak DEX, facilitating the automated management of this liquidity position. As a result, providing liquidity to one of the Kodiak Islands is the easiest way to supply liquidity on Kodiak DEX.

1. Integrated Incentive Layer (Sweetened Islands): This leverages Berachain’s Proof of Liquidity (PoL) mechanism to sustainably incentivize liquidity provision for Kodiak Islands.

1. Kodiak Validator: maintaining and supporting the overall security and value flow of Berachain.

2. No-Code Token Deployment Factory (Panda Factory): This simplifies permissionless token deployment and initial liquidity provision (e.g., for memecoins) on the full-range Kodiak AMM—ideal for highly volatile assets with uncertain price behavior.

We can now return to the question of why BEX and Kodiak are not competitors. BEX is an AMM-based DEX and Kodiak offers an additional component for BEX that complements it - the aforementioned Kodiak Islands, which allows the addition of a concentrated liquidity solution and a tokenised V3 liquidity position.

Also one major value prop of Kodiak vs BEX is that Kodiak can support many of the high quality projects in their journey of becoming whitelisted for BGT emissions. The reality is that it’ll take time for many projects to start getting BGT emissions. As we saw on testnet, only major pairs were whitelisted for BGT emissions initially. Other high quality projects choose to work with Kodiak and launch their liquidity on Kodiak as we can help co-incentivize with our own emissions, helping them grow their liquidity before their liquidity pools are whitelisted for BGT emissions. This makes Kodiak somewhat like an incubator for projects pre-BGT whitelisting.

3. Kodiak and Berachain synergy

Kodiak is deeply integrated with Berachain's Proof of Liquidity (PoL) mechanism and its unique tokenomics, where the liquidity provided by validators directly impacts the DEX liquidity pools, enhancing trading efficiency. This validator-powered structure optimizes the network's performance, offering liquidity providers higher reward opportunities. Additionally, the team plans to integrate Infrared and iBGT, activating not one, but two flywheels in the ecosystem for both its treasury and community.

The Treasury Flywheel uses Infrared and iBGT to grow Kodiak’s Protocol-Owned Liquidity (POL). POL refers to strategic ownership of a significant portion of the project’s liquidity, serving as a hedge against rented capital. This liquidity is typically managed within the project's treasury—such as in Kodiak’s case.

Looking at other synergies and integrations reveals even more interesting and complex dynamics. For instance, the BERA-YEET Kodiak (LP) liquidity pool, when staked in the Liquidity Trifecta indicator within Beradrome, offers multi-tiered rewards to both liquidity providers and voters.

• Liquidity providers (LPs) receive oBERO emissions, which can be converted into hiBERO, giving holders the right to vote on emissions for future rewards or sell tokens for profit.

• LPs earn KDK and xKDK incentives, Kodiak's native tokens, in addition to trading fees from swaps.

• Furthermore, participants earn $BERA from the Beradrome validator, $HONEY from Beradrome swap/borrow fees and validator rewards, and $YEET as bribes provided by Yeet.

Another unique synergy further propelling both the Berachain ecosystem and Kodiak is the flywheel involving the NECT stablecoin—a brilliant integration between Kodiak and Beraborrow Infrared, offering a profitable strategy for dominating upcoming Proof-of-Liquidity games. Here’s how it works:

• Users provide liquidity to the NECT-iBGT Island on Kodiak, triggering the flywheel. Kodiak LP tokens are then staked on Infrared, allowing users to earn iBGT and IRED tokens.

• As users accumulate iBGT emissions, they use a portion to mint NECT on Beraborrow Den, increasing their LP position without selling off their valuable iBGT assets. Additionally, iBGT in the Den is staked with Infrared for further profit.

• The minted NECT is paired with retained iBGT and redeposited into the NECT-iBGT pool on Kodiak, completing the initial cycle. This self-sustaining process perpetuates liquidity growth and yield generation.

Thus, other protocols such as lending protocols, perps dexs and options dexs are integrating Kodiak LP tokens to be used as collateral. This is unique as providing liquidity will be more prevalent and the initial action of most users on Berachain given the design of the Proof-of-Liquidity system. As such, with these integrations, users don’t have to choose between providing liquidity on Kodiak vs. other DeFi protocols. Instead, they can start with providing liquidity on Kodiak and then rehypothecating their LP tokens as collateral on our partner DeFi protocols.

4. Partnerships and Integrations

Kodiak has announced that its Kodiak Islands solution is integrated with several platforms, enhancing its offerings and liquidity depth.

Other notable partnerships include:

• Stakestone – a multi-chain protocol for liquid assets with products STONE and STONEBTC, launched on 11 chains. Berachain network participants will gain direct access to STONE and STONEBTC, allowing them to stake ETH or BTC from any supported chain to directly receive STONE or STONEBTC on Berachain.

• Ramen – a comprehensive white-glove service for protocols launching on Berachain. Ramen provides various innovative launch options, including classic IDOs with fixed prices, liquidity bootstrapping pools (LBP), and token airdrop infrastructure.

• Beraborrow – mentioned earlier as a pioneer in zero-interest loans collateralized by iBGT, a liquid version of Berachain’s governance token BGT from Infrared. Ecosystem participants can leverage their iBGT assets up to 11x.

• PumpBTC – a liquid staking solution for seamless Bitcoin integration into the DeFi ecosystem. Set to launch on Berachain, PumpBTC will allow Beras to issue PumpBTC with WBTC (and other BTC assets) directly from Berachain. In collaboration with Kodiak, PumpBTC will develop deep liquidity within the pumpBTC-WBTC Island, enabling $pumpBTC holders to earn trading fees, participate in Proof-of-Liquidity (PoL), and leverage the Island LP token within Kodiak's trusted DeFi ecosystem.

• D2Finance – an on-chain hedge fund with an advanced vault architecture based on options strategies. D2 Finance will use Kodiak as the foundation for its protocol-owned liquidity and managed trading strategies on Berachain, including the creation of new token liquidity pools and the deployment of a new Berachain-native token, EDA, building a robust liquidity management framework.

• Gummi – enables lenders to create custom isolated lending markets for any token on Berachain. This allows lenders to set their risk tolerance, while traders/borrowers can take leveraged positions up to 100x or borrow up to 99% LTV for any token.

• Ooga Booga – a DEX aggregator that positions itself as a liquidity aggregator. Ooga Booga not only aggregates traditional DEXs but also integrates unconventional options like Exponents, Beradrome, and Goldilocks into its routes. With Ooga Booga, users can access Kodiak Islands in just 1–2 clicks and can make single-sided deposits in Kodiak liquidity pools using assets like HONEY or BERA.

Additionally, Kodiak is actively involved in Berachain's network operations, ranking in the top 3 validators.

Moreover, Infrared serves as a flywheel for Kodiak’s strategy. Kodiak’s plan is to allocate treasury liquidity to Infrared vaults, which generate iBGT and IRED for its treasury. Kodiak then intends to incentivize Infrared holders, encouraging them to vote with their BGT to increase BGT emissions in Kodiak's Protocol-Owned Liquidity (POL). This boosts iBGT emissions and strengthens Kodiak’s liquidity, creating a positive feedback loop.

5. Backers

Kodiak has backers such as: Build-a-Bera, Amber Group, Shima Capital, No Limit Holdings, Ouroboros Capital, Baboon VC, dao5, ODA Capital, Kenetic, Dewhales Capital, Tenzor Capital, Lotus Capital, Owl Ventures, nonce Classic, 3Commas Capital, Wizards Capital, Credo, Blocmates, DoraHacks, Moni, and our valued angels, including Gainzy, Altcoin Sherpa, NaniXBT, Mckenna (Arete Capital), Mr.Block (Curve), Evan Luthra, Ken (Mechanism), Marc (Mechanism), Jerd (Agnostic), Soby (Xai Games), Jani (0xHoneyJar), John Fiorelli (Kenetic), Kirby Ong, Joyce (GCR), and many others who have joined hands to support and contribute to Kodiak.

6. Conclusion

One of the key pillars of Kodiak’s growth is its parent chain, Berachain. Unlike most EVM-based L2 and L1 chains where applications either expand support or migrate to other chains, Berachain offers dApps maximum protocol support, provided they understand its complex tokenomics. Berachain promotes the idea of chain abstraction, not just as a method for connecting chains but as a way to create a new incentivization game and feedback loop for users and developers. In the paradigm of on-chain abstraction, blockchains compete for projects and users through various incentives, typically economic. Berachain seems to understand that the lines between chains are becoming blurred, giving users and liquidity more freedom.

Therefore, success is no longer about having a unique consensus mechanism or faster speeds, which may only be temporary advantages. Nor is it about becoming the sole dominant player in the market. The key is creating an environment that is welcoming, convenient, and enjoyable for both developers and users. This is the strength of Berachain. Kodiak has integrated technology, innovation, and a touch of the ecosystem’s playful madness into its narrative and products, blending seamlessly into the landscape as a natural element. Berachain's position as a significant source of liquidity for DeFi and a relay point for order flows creates the perfect foundation for Kodiak.

In turn, the Kodiak team natively contributes to Berachain’s development, understanding its unique features while elevating their own protocol through a range of diverse partnerships. This deep symbiosis strengthens both Berachain and Kodiak as they grow together in the evolving DeFi space.

Kodiak links: 

Website | Twitter | Discord | Medium | Documentation

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