Author: Luke, Mars Finance

In the hustle and bustle of cryptocurrencies, Berachain has quickly attracted countless attention with its unique Proof of Liquidity (PoL) consensus mechanism and three-token model (BERA, BGT and HONEY). In the past week, Berachain has been among the top chains in net inflows, side by side with giants such as Arbitrum and Solana, showing its ability to attract money. However, the surface scenery cannot cover up the undercurrents within the community. FUD's emotions are overwhelming, stemming from doubts about injustice token distribution and insider trading. The beginning of the story starts with this group of doubts.

What happened: The mainnet launch of Berachain and the airdrop of BERA tokens should have been the community's carnival, but reality is like a basin of cold water. After airdrop, BERA prices plummeted more than 50% from intraday highs, and community excitement quickly turned to anger. Some people began to search the data on the chain, trying to find out the truth about the price crash, but it revealed an unsettling secret: the so-called "rat trading".

"Rat warehouse" is a not-so-glorious word in the crypto circle and is often used to describe accounts controlled by insiders or VCs that quickly sell and cash out after receiving tokens in the early stages of the project. According to community posts on X platform, a typical case surfaced: Address 0xbdd634C93482E55361DF328023758Eaf9B3aFc28 received 45,000 BERA airdrops without any testnet or mainnet transaction records and no NFTs, and then immediately deposited the tokens into Binance. Further investigations show that "three no addresses" like this - no NFT, no test network data, and no main network data - have been found about 600, and the number is still increasing.

The behavior patterns of these addresses are highly consistent: they sell immediately after getting the airdrop, with almost no concealment. This naked cash-out behavior has led the community to suspect that these may be accounts reserved by the project party or VC to be used to quickly cash out at market highs. What is even more disturbing is that Berachain's token economic model is likeAlmost gave the green light for this behavior. The project allocates 35% of BERA tokens to private investors and insiders, who can earn BGT (governance tokens) by pledging locked BERA tokens, then destroy the BGT as BERA and sell it. This mechanism forms a cycle in which early investors can continuously generate and sell tokens, causing continuous selling pressure on the market.

The anger of the community can be imagined. On one hand, there are ordinary users who worked hard to participate in the test network, and on the other hand, there is a "rat-handling" account that is enjoying its success. This injustice has made many people doubt Berachain's original intention.

Lianchuang's "Confession"

When the community's dissatisfaction grew, Berachain's anonymous co-founder Smokey the Bera had to come forward to respond. In an interview with Un Chained on March 5, Smokey admitted: "I don't think the community's criticism is completely wrong. If we could do it again and the team could start from scratch, we probably wouldn't have sold that much supply to venture capital firms." He further explained that the seed round in early 2022 was completed when the project had not yet taken off, when the team did not expect Berachain to grow to its current size, so it sold a large number of tokens to VCs.

In order to calm public anger, Smokey also proposed a solution: "We have been working hard to repurchase supply of seed rounds and round A rounds, so as to minimize dilution that the community suffers." These words sound quite regretful, and seem to indicate that the project party is willing to pay for past decisions.

However, the community did not let it go. Although Smokey's response seems sincere, it is regarded by many as a "rationalization afterwards" PR performance. The community heard the voices of the project party, but from the response, they seemed to have not heard real reflection. The light words "If you can do it again" are more like a hypothetical excuse than an attitude towards facing the problem. As a member of the community said, "What is the difference between this and a scumbag confession? A sentence 'If you can start over' will completely blame it."

In psychology, this statement is called "counterfactual thinking" and "cognitive dissociation" - weakening one's own responsibility by assuming an impossible scenario (starting over again), making mistakes no longer important. Correct reflection should be honest with the decision-making motivation at that time, such as admitting that it is a quick success or instant benefit choice., instead of using hypothetical words to gain sympathy.

Buying it back with what?

Smokey's repurchase plan should have been a good medicine to appease the community, but it has become a new focus of controversy. The community's first reaction is: "Where does the repurchase funds come from?" If the funds come from additional tokens or user contributions, it is just to make the community pay for the VC's cash out again and replace the pillars. This "symbolic compensation" is also psychologically traceable - covering up the problem through a seemingly positive posture without providing real equivalent returns.

The deeper problem is that Berachain's token economic model and unlocking model have long laid hidden dangers. It is understood that the final round of project tier 1 financing is approximately US$1.5 billion, while the current fully diluted valuation (FDV) reaches US$4 billion. Even after the price plummeted after the opening high, early investors still made more than 2 times the return. For VCs, after TGE (token generation event), they have already stood opposite to retail investors and became the source of selling pressure in the market. The community gradually formed a consensus: this "VC currency" model is essentially aimed at shipment, and even if the subsequent ecological flywheel runs, it will only provide a higher selling price for VCs.

Look at the data. BERA expects an annual inflation rate of 10%, coupled with the continuous generation of sellable tokens through internal personnel through staking mechanisms, this model is destined to dilute the interests of retail investors. The community even questioned: "What about Bera(3,3)?" - refers to the fair distribution concept promoted in the early stages of the project, which now seems more like a empty talk. A user commented on X: "After reading the analysis, I believe that they are not reflecting, but using PR to sell tokens to higher prices. "If you can start over" and the repurchase plan are just smoke screens, and in the end they will let the community take over."

This model is not unique to Berachain. VC heavy-holding projects such as Aptos, Sei Network, and Starknet have all faced similar criticisms: Early investors quickly cash out through opaque distribution and high unlocking ratios, leaving retail investors facing a collapsed market. Berachain is just the latest case of this phenomenon.

Nevertheless, there are people who defend the project. Ed Roman of Hack VC has said that FDV is market-based, with Berachain's circulation supply (21%) higher than Starkware (7.28%) and Sui(5%), should not be completely denied. But this defense did not dispel the community's doubts, because the core of the problem is not the circulation ratio, but the fairness of distribution and the original intention of the design of the economic model.

Conclusion: The crossroads of trust

Berachain's story is not yet completed. Its PoL mechanism and ecological potential are still exciting, but the current controversy is like a big test, testing the sincerity and ability of the project party. Smokey’s confession is the first step, but if it is stopped by verbal commitment without concrete actions and transparent disclosure, the trust of the community will only continue to be lost.

In a decentralized world, the community is the real king. Whether Berachain can get out of the doubts about "rat warehouse" and get rid of the infamy of "VC coins" depends on whether it is willing to face its mistakes and redesign a fair future. Otherwise, this new star may only be a flash in the pan and become another footnote in the history of crypto.