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What is BEP-20?
BEP-20 is a token standard for the Binance Smart Chain (BSC). It is designed to offer a format for developers to launch various types of tokens, such as utility tokens, stablecoins, and even tokens pegged to other cryptocurrencies on the BSC.
The standard is an extension of Ethereum‘s widely recognized ERC-20 token standard, with enhancements to support a broader range of functionalities.
BEP-20 tokens are integral to the BSC ecosystem, as they facilitate transactions and interactions within decentralized applications (DApps). They are used for a wide range of purposes, from representing financial assets to acting as governance tokens for decentralized protocols.
Techopedia Explains the BEP-20 Meaning
The acronym BEP stands for “Binance Smart Chain Evolution Proposal.” Since there are several BEP standards, a preceding number is used as a unique identifier, such as BEP-2, BEP-20, BEP-721, and BEP-115, each of which defines a set of rules that tokens must follow in order to be compatible with the BSC network.
For one, the BEP-20 standard acts as a blueprint for tokens created on the BSC, defining how they can be spent, who can spend them, and other rules for their usage.
The design of BEP-20 aims to enhance compatibility with the Binance Chain’s BEP-2 tokens as well as with ERC-20 tokens. This creates a broad range of possibilities for developers, from launching native assets to pegging tokens from other blockchains for use on BSC, known as “Peggy” coins.
What is the Difference Between BEP-20 and BEP-2?
BEP-2 and BEP-20 are both token standards from Binance. BEP-2 is exclusive to Binance Chain and lacks smart contract support, limiting its use to basic transactions within the Binance ecosystem.
BEP-20, on the other hand, is compatible with Ethereum, supports smart contracts, and facilitates a wider range of applications on the Binance Smart Chain.
BEP-20’s design aligns closely with Ethereum’s ERC20, enhancing its interoperability and utility in decentralized applications. This makes the token standard more versatile for developers and users seeking to leverage complex dApps and cross-chain functionalities.
| Feature | BEP-2 | BEP-20 |
| Blockchain | Binance Chain | Binance Smart Chain (BSC) |
| Smart Contract Support | No | Yes |
| Token Address Format | Starts with “bnb” | Similar to Ethereum, starts with “0x” |
| Ethereum Compatibility | Limited to the Binance ecosystem, not compatible | Yes, compatible with Ethereum smart contracts |
| Consensus Mechanism | Proof of Work (PoW) | Proof of Stake Authority (PoSA) |
| Transaction Costs | Fees on Binance CEX and DEX | Lower fees, no transaction fees on Binance exchanges |
| Use Cases | Trading on Binance platforms | DeFi, dApps, cross-chain interoperability |
Parameters of BEP-20 Token Standard
BEP-20 has a number of parameters that help enhance the performance of the token standard. Some of these parameters include Blacklist, Can Mint, Can Burn, and Can Pause, which help manage tokens effectively on the Binance Smart Chain.
The Blacklist parameter allows for the exclusion of malicious addresses. Furthermore, Can Mint enables the creation of new tokens, influencing the token supply inflation.
Can Burn offers a mechanism to decrease the token supply by destroying tokens, which can potentially increase the token’s value. Lastly, Can Pause allows for the temporary halting of token operations in response to security concerns, introducing a level of centralization.
BEP-20 Token
The BEP-20 token standard allows for token transfers, minting, and burning, facilitating a variety of applications, including DeFi and NFTs.
To obtain or send BEP-20 tokens, users need a Web3-compatible wallet like MetaMask or Trust Wallet. To receive, they need to share their BEP-20 address with the sender.
For sending, users can navigate to the token in their BEP20 wallet, enter the recipient’s address, specify the amount, and confirm the transaction. They also need to make sure that they have enough BNB to cover gas fees for the transaction.
BEP-20 vs. ERC-20
BEP-20 and ERC-20 are key token standards for the development and operation of digital tokens on the BSC and Ethereum blockchains, respectively. Each standard has its unique attributes and serves as the foundation for a vast array of digital assets within its ecosystems.
Key Differences Between BEP-20 and ERC-20
BEP-20 tokens operate on the Binance Smart Chain. ERC-20 tokens, however, are native to the Ethereum blockchain.
A notable advantage of BEP-20 tokens is their lower transaction fees and faster confirmation times, attributed to BSC’s efficient consensus mechanism. Ethereum’s ERC-20 tokens tend to have higher transaction costs, especially during periods of network congestion.
BEP-20 tokens use the Proof of Authority (PoA) mechanism within the Binance Smart Chain Protocol. ERC-20 operates on the Ethereum blockchain, which currently uses a Proof of Work (PoW) consensus mechanism.
Ethereum’s ecosystem is larger and more established, offering a broader range of DApps, DeFi projects, and NFT platforms. Therefore, ERC-20 tokens enjoy wider adoption. In contrast, the BEP-20 standard, while growing rapidly, is part of the relatively newer Binance Smart Chain ecosystem.
ERC-20 benefits from Ethereum’s secure and decentralized nature, making it a preferred choice for projects prioritizing these aspects. BEP-20’s association with the Binance Smart Chain introduces concerns about centralization, given the chain’s smaller number of validators compared to Ethereum.
Examples of BEP-20 Based Projects
A growing number of projects are turning to the BEP-20 standard for various functions like liquidity provision, governance, and trading.
Some of the more notable BEP-20-based projects include Autofarm, a yield aggregator and decentralized exchange (DEX), and PancakeSwap, a leading DEX on Binance Smart Chain that allows for token swapping and liquidity provision.
Another example is Venus, a protocol that supports decentralized lending and borrowing, utilizing BEP-20 tokens for transactions within these platforms.
CoinWind, PinkSale, Biswap, the Hooked Protocol, Ren, BinaryX, MOBOX, CoinWind, Acet, Wanaka Farm, and Alpaca Finance are some other popular BEP-20-based projects.
Pros and Cons of BEP-20
As with any technology, BEP-20 tokens come with their own set of advantages and disadvantages.
Pros
- Low transaction fees associated with transactions on the Binance Smart Chain which makes it more cost-effective for users to transfer and interact with BEP-20 tokens.
- BSC boasts high throughput, achieved via the consensus mechanism PoSA, enabling fast transaction processing times.
- BEP-20 tokens are interoperable with both Binance Chain-powered BEP-2 and Ethereum-enabled ERC-20 due to their similarities.
Cons
- BSC is criticized for lower decentralization and censorship resistance compared to Ethereum
- BEP-20 tokens’ success is tied to the continued operation and development of the Binance Smart Chain by Binance; changes in Binance’s policies could affect token functionality and value.
- The BSC ecosystem is relatively young compared to Ethereum and may still be in the early stages of development.
The Bottom Line
The BEP-20 token standard has emerged as a cornerstone of the Binance Smart Chain ecosystem. With its interoperability, low transaction fees, high throughput, and robust security features, BEP-20 tokens have gained traction among cryptocurrency enthusiasts and developers.
However, these tokens also face some challenges, including concerns about centralization, dependency on Binance, and regulatory risks.
