Berachain criticized for problems with airdrop and insider trading concerns

Berachain recently faced harsh criticism following the launch of its mainnet on February 6, with the blockchain’s innovative “Proof of Liquidity” model and substantial airdrop drawing attention. Despite early enthusiasm, worries emerged regarding the fairness of the airdrop distributions, tokenomics, and the potential for insider trading. These concerns contributed to a significant 63% decline in the token’s value from its peak.

Emerging from the unique Bong Bears NFT project with a cannabis theme that debuted in 2021, Berachain quickly gained traction by being listed on major exchanges like Binance, MEXC, Upbit, and Bithumb under the token name BERA. The platform garnered a total value locked (TVL) of $3.1 billion within just a few days, making it a highly-discussed project in the blockchain community.

However, issues arose as users involved in Berachain’s testnet reported receiving noticeably fewer BERA tokens than anticipated. Analysts dug deeper into the token’s mechanics, highlighting concerns about its staking system, particularly how it could disproportionately benefit early investors. The system revolves around three tokens—BERA, BGT, and HONEY—each serving a distinct function within the ecosystem. Critics argued that the ecosystem’s design, in which private investors control over 35% of the total BERA supply, could lead to conflicts of interest.

These investors could stake BERA to earn BGT, exchange BGT for more BERA, and subsequently sell the surplus tokens, creating a liquidity draining process that may disadvantage smaller investors. A disgruntled trader commented on the situation, questioning the fairness, “Wait, so insiders can manipulate the token’s mechanics and offload on regular investors? Unbelievable.”

The situation worsened when news circulated that “DevBear,” a crucial developer in the Berachain team, received 200,000 BERA from the airdrop and promptly sold a portion of the tokens post-launch. Observers were quick to criticize this move, with one calling out, “A co-founder selling tokens right after launch? Not a good look.”

Amid mounting concerns over insider trading and tokenomics, the price of BERA, which peaked at $14.99 on February 6, drastically tumbled by 63% to $5.57 by February 11. While price fluctuations are expected in newly minted tokens, the rapid decline brought into question the long-term viability of Berachain’s structure.