In the early days of cryptocurrency, launching a new token was a complex task. It required creating an entirely new blockchain or forking Bitcoin. However, this landscape changed dramatically with the arrival of Ethereum, which pioneered using blockchain as a development platform.
The subsequent emergence of the ERC-20 token standard provided a foundational blueprint for new crypto token creation.
As the crypto ecosystem matured, innovative projects emerged with their own specialized blockchain technologies. One such project is BNB Smart Chain (BSC), which introduced its own token standard: BEP-20.
This guide will explore the nuances of the BEP-20 token, detail its characteristics, and compare it to the well-known ERC-20 model.
Executive Summary
- Creating a new cryptocurrency once required building a new blockchain or modifying Bitcoin's code. Ethereum revolutionized this by allowing developers to build on its platform.
- The introduction of the ERC-20 token model on Ethereum simplified the foundation for creating new tokens, which has since become widespread.
- BNB Smart Chain (BSC) emerged as a new option, enabling users to easily create tokens within the Binance ecosystem. It is similar to Ethereum's ERC-20, fostering greater competition in the DeFi market.
- BEP-20 tokens mirror the functions and purposes of ERC-20 tokens but within their own network ecosystem.
- The upcoming BNB Chain Fusion initiative aims to merge two key Binance networks, enhancing security and efficiency. This is a significant step towards simplifying operations and improving communication within the blockchain space.
What is BEP-20?
BEP-20 is a token standard created for the BNB Smart Chain (BSC). It serves as the technical equivalent of the ERC-20 token model used on the Ethereum blockchain, meaning the two standards are interoperable.
The BEP-20 standard allows users to easily create new tokens on BSC. The process is straightforward and doesn't require extensive programming experience. Developers no longer need to start from scratch by creating a new blockchain or limit themselves solely to Ethereum's token standard.
BEP-20 has been widely used to create utility tokens and launch diverse projects. These tokens are compatible with BSC's smart contract technology, many of which are part of the rapidly evolving decentralized finance (DeFi) space.
BEP-20 tokens are also crucial for the process of tokenization. Tokenization allows real-world assets from traditional finance to be represented on a blockchain. In this way, BEP-20 tokens can act as digital assets that bridge traditional and digital finance. All transactions involving BEP-20 tokens are paid for with BNB, the native token of the BNB Beacon Chain.
The BNB Beacon Chain, Binance's original blockchain, also supports BEP-20 tokens. The two blockchains operate in parallel. As a result, BEP-20 tokens can access Binance's decentralized exchange platform and be traded on the BNB Beacon Chain network.
What is BSC?
BSC, or BNB Smart Chain, is Binance's second blockchain. It was launched in September 2020, following the rise of decentralized finance (DeFi) into the mainstream. Concepts like staking, decentralized lending, and other DeFi services had been available for years but hadn't captured the broader crypto industry's attention.
This ultimately led Binance to launch BSC as a development platform. The idea was to attract users, talent, and projects—a strategy that has proven successful. Today, many consider BSC to be one of Ethereum's largest competitors, with BEP-20 viewed as a direct rival to Ethereum's ERC-20 standard.
BSC also enables users to create smart contracts, opening the door for decentralized applications (DApps), DeFi, the metaverse, and more.
Key Parameters of the BEP-20 Token Standard
The BEP-20 standard includes various parameters that enhance its functionality and control. These standard parameters consist of a blacklist function, minting capability, burning capability, and a pause function.
The first parameter is the blacklist function. It allows for the blacklisting or banning of malicious addresses associated with the token standard. Next is the minting capability, which acts as an inflation parameter. It provides specifications for minting additional tokens, thereby increasing the BEP-20 token supply.
The third parameter is the burning capability, which complements the minting function. Its purpose is to be a deflationary mechanism. It defines the ability to reduce the number of tokens by burning them. This is commonly used in the cryptocurrency space to decrease supply and potentially increase an asset's price.
The final parameter is the pause function, an innovative and highly useful feature. Its goal is protection against malicious attacks. If an attack occurs or if the platform experiences issues, users can pause operations involving BEP-20 tokens. However, this feature does introduce a degree of centralization, which is often frowned upon in the crypto sphere.
Examples of BEP-20 Tokens
The Binance Smart Chain is full of BEP-20 tokens, many of which are projects that launched directly on BSC. However, there are also many projects with their own native networks that have BEP-20 versions of their coins and tokens.
One prime example is CAKE, the native token of PancakeSwap, the largest DEX and AMM on BSC. PancakeSwap is also one of the largest decentralized exchanges in the entire crypto industry. Another prominent example is AUTO, the token for Autofarm, a very popular yield aggregator and another BSC-based DEX.
Users can acquire these and other BEP-20 tokens on the Binance exchange, Binance DEX, or on decentralized exchanges like PancakeSwap.
BEP-20 vs. ERC-20
As mentioned earlier, BEP-20 serves the same core purposes as ERC-20. But what are the differences between them? Can one be said to be better than the other?
These two token standards have much in common, which is unsurprising given that BEP-20 was designed as an alternative to ERC-20. In general, they perform identical functions, serving as token models or blueprints. They also share the same basic elements, including ownership, transfer, and token issuance.
After Binance introduced the Binance Bridge, a direct connection was established between these networks, making them interoperable. Of course, to transfer ERC-20 tokens to BSC, they must be converted into the BEP-20 token model. Once this transfer is complete, they can be used on Binance Chain or in decentralized applications running on BSC.
No fee is charged for using the bridge for conversion, allowing anyone to use it without financial penalty. This process of transferring assets from one network to another is known as "pegging." The process is also reversible, meaning you can transfer tokens back and forth.
From all this, we can conclude that the two token models are not vastly different. They operate on different networks but serve the same purpose. Tokens created on them can even be swapped for one another. In this sense, they could almost be considered twin models.
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BEP-20 vs. BEP-2: What's the Difference?
In a discussion about different crypto standards, it's also useful to compare BEP-20 with BEP-2. Both standards exist within the broader Binance ecosystem. However, BEP-2 is the token standard for the BNB Beacon Chain network. This is the original exchange management network, while BNB Smart Chain is used for development.
So, what is the difference between them? They operate in parallel. Furthermore, they are fully interoperable with each other. Both networks use BNB as the core native digital asset, and BNB supports both token models.
Although BSC operates as a separate network for digital assets, it can be considered an extension of the BNB Beacon Chain network. Both share the same dual-chain architecture designed for interaction. The networks are compatible, and BEP-20 tokens can be easily swapped for BEP-2 tokens.
Of course, this doesn't mean you can use BEP-2 tokens directly on BSC or BEP-20 tokens directly on BNB Beacon Chain. Users must still convert their tokens to the appropriate standard for the network they wish to use. But since the networks are designed for different primary functions, direct swaps are less common. Users choose the network that suits their specific needs.
Those interested in DeFi, GameFi, and decentralized applications will gravitate toward BSC. Those wishing to use Binance's decentralized exchange or the BNB Beacon Chain features will use BEP-2. Because the networks are connected via the Binance Bridge, there is significant cross-chain liquidity, making it easier to deposit, withdraw, and exchange crypto tokens seamlessly.
What is BNB Chain Fusion?
Binance is merging its BEP-2 and BEP-20 networks into one unified system through BNB Chain Fusion. The project aims to enhance security and efficiency. This step, announced on January 8, 2024, consolidates Binance's dual-system into one. Users need to convert their BEP-2 and BEP-8 tokens to BEP-20 to safeguard their assets.
The fusion eliminates operational vulnerabilities present in maintaining two separate networks. It streamlines transactions. Users were encouraged to transfer their tokens by April 2024, as transfers after that period may be limited to operations through a command-line interface.
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Final Thoughts
BEP-20 is a token model on BNB Smart Chain that differs very little from ERC-20 on Ethereum. They are quite similar and therefore compatible. Some perceive the Binance and Ethereum ecosystems as competitive and extend this rivalry to their token models.
On some level, this may have been true at one point. However, with the Web3 concept striving to unify the crypto industry, this distinction matters less.
Fostering connectivity between networks and projects is beneficial for the future, making compatibility a key factor. What matters most is that they can work together to create an innovative environment for development.
Frequently Asked Questions
What is a BEP-20 address?
A BEP-20 address is a destination where you can store BEP-20 tokens. These are tokens that operate on the Binance Smart Chain, Binance's second blockchain. The launch of BSC opened up a space with greater scalability for crypto development.
Is BEP-20 the same as ERC-20?
Like ERC-20, BEP-20 is a token model, and they share many similarities. However, BEP-20 operates on BSC, while ERC-20 exists on the Ethereum network. Therefore, ERC-20 tokens must be converted to BEP-20 tokens when moving from one network to the other.
What does a BEP-20 address look like on Binance?
A BEP-20 address is where you can store or receive BEP-20 tokens. Both Ethereum and BSC addresses start with "0x." This is why it's crucial to specify to the sender which token you want to receive and which network to use to avoid loss of funds.
What is a BEP-20 compatible wallet?
A BEP-20 compatible wallet is one that supports BEP-20 tokens. The OKX Web3 Wallet is a prime example of such a wallet, as it has supported BEP-20 tokens since October 2022. Always ensure your chosen wallet explicitly states support for the BNB Smart Chain and BEP-20 tokens.