Just when you thought you had your head around all the different types of cryptocurrency, along come three more acronyms to add to the mix. BEP2, BEP20, and ERC20 tokens are all built on different blockchain protocols, but what does that mean for you and your investment? In this blog post, Cove Markets will break down the key differences between these types of tokens: BEP2 vs BEP20 vs ERC20, so that you can make the best decision for your portfolio.
What Is a Token Standard?
Tokens are digital assets within a blockchain platform that are frequently unique to a particular application and are used for things like the following:
- Making transactions
- Preserving value
- Purchasing digital assets like game credits
- Gaining access to the related platform or application’s voting or governance rights
On blockchains like Ethereum and BSC, hundreds of new decentralized application (dApp) initiatives release their own coins each year. These tokens must follow the platform’s token guidelines in order to be interoperable with the underlying network.
The guidelines for creating and using new tokens are set forth in token standards. The standards frequently call for the following to be specified:
- The token’s maximum overall supply
- The production of the token
- The burning of the token
- The procedure for executing token transactions
The standards are intended to prevent fraud, technical incompatibilities between tokens, and the issuing of tokens that are incompatible with the tenets of the blockchain. For instance, the restrictions on the overall supply and the production of new tokens serve to limit the potential decline in token value.
What is BEP2?
The definitions would be the obvious focal point of any BEP20 vs BEP2 comparison. First and foremost, BEP2, the fundamental token standard for the Binance native coin or BNB, should be noted.
All transactions on the Binance cryptocurrency exchange successfully used the standard token format. The BEP2 token standard was created with both centralized and decentralized exchanges in mind.
However, using BEP2 coins in a blockchain other than Binance is significantly restricted by the standard token format for BNB.
Therefore, BEP2 tokens can only be used as transaction fees for the centralized and decentralized crypto exchanges run by Binance. Token holders, however, can change BEP2 tokens into BEP20 tokens for use in other Binance ecosystems.
- Bybit Vs Binance: Which Crypto Exchange Is Better For You in 2022
- Coinbase vs Binance: Which Crypto Exchange is Best?
Binance Chain vs BEP2
The fundamental description of BEP2 provides a solid framework for explaining the distinctions between BEP2 and BEP20. It is crucial to remember that BEP2 coins are a crucial component of Binance Chain, the company’s first blockchain network.
The Binance decentralized exchange, which specialized in processing decentralized cryptocurrency transactions, was built on the Binance Chain.
Along with the ability to communicate with Binance Smart Chain, Binance Chain can operate as part of the entire Binance ecosystem. It’s crucial to keep in mind, however, that Binance Chain does not facilitate the execution of smart contracts.
A dApp ecosystem cannot be created using Binance Chain. Binance Chain employs a Proof of Work (PoW) consensus algorithm on top of it, which is very similar to Bitcoin’s.
What is the BEP20 Token Standard?
A token standard for the native Binance coin, BNB, on Binance Smart Chain is the following rival in the BEP2 vs. BEP20 argument. The native coins for the Binance Smart Chain are BEP20 standard BNB tokens.
Its most significant feature is the BEP20 token standard’s inspiration from the Ethereum ERC20 token standard. The BEP20 token standard offers compatibility with Ethereum smart contracts and shares many characteristics with the ERC20 token standard.
Additionally, BEP20 has an advantage over BEP2 in the BEP20 vs. BEP2 comparison thanks to its support for the Ethereum Virtual Machine. Interoperability, which makes it simple to convert BEP20 tokens to BEP2 tokens, is another noteworthy feature of BEP20 tokens.
It’s interesting to note that the BEP2 to BEP20 Bridge is a crucial tool for converting BEP20 to ERC20 compatible tokens so that they can be used to connect to other blockchain networks.
The primary focus of BEP20’s fundamental goal centers on all of the transaction needs for various decentralized applications on the Binance Smart Chain.
BEP20 vs BSC (Binance Smart Chain)
Binance Chain and BSC would naturally be the main differences between BEP2 and BEP20. BSC was developed by Binance and launched in September 2020, as stated in April 2020.
In reaction to Ethereum’s enormous success and the related dApps ecosystem, the Binance Smart Chain was created.
Additionally, one of the key factors that motivated Binance to create BSC was the emergence of new decentralized industries like NFT, crypto gaming, and NFT.
Binance would require a blockchain network that can support smart contracts if it were to enable all of these functions.
Although Binance Chain sounded like a good idea, it was unable to assist smart contracts or sophisticated programming languages. As a result, Binance Smart Chain emerged as an advantageous response to the Binance Chain’s restrictions. BSC uses the Proof of Stake Authority or PoSA, consensus mechanism in place of the Proof of Work consensus process.
A notable highlight for BSC outside of the BEP2 to BEP 20 Bridge, also known as the Binance Bridge, is the updated consensus algorithm.
The blockchain is more secure because of the new PoS Authority consensus process, which also makes it possible to create and stake dApps. A noteworthy instance of a BSC application is the well-known decentralized exchange PancakeSwap.
ERC-20 Token Standard
ERC-20 is the most popular and used token standard of all time. The majority of the coins listed on CoinMarketcap.com are Ethereum-based tokens. One of the first and most well-known standards for producing tokens is ERC-20.
Ethereum Request for Comment is referred to as ERC. The ERC-20 token standard must be followed by all tokens generated and operated on the Ethereum platform.
To create ERC-20 tokens that may be purchased, sold, and exchanged on exchanges, Ethereum smart contracts are used. The information included in the ERC-20 token standard includes:
- Information on the total supply of tokens
- The method of token transfer,
- How to withdraw the tokens,
- Account balance for a token,
- How to receive the tokens.
It’s simple and inexpensive to create an ERC20 token. Furthermore, transactions involving ERC 20 tokens happen quickly and with very quick confirmation. With the Ethereum network, there is also little possibility of a contract being broken.
Thanks to the strength of Ethereum, ERC-20 transactions are quick, efficient, and internationalized. Due to the widespread use of ERC-20 tokens and their widespread popularity worldwide, you can also anticipate better liquidity and increased revenue.
The creation of ERC20 tokens is inexpensive and quick. This technology produces user-friendly, highly secure tokens that come with specialized wallets. It is the simplest method of raising money for a cryptocurrency business enterprise.
Both the BSC and the TRON networks may accept custom crypto tokens built on the Ethereum network and based on the ERC-20 standard.
BEP2 vs BEP20 vs ERC20: Which is better?
BEP2 vs BEP20
You can consider the distinctions between BEP2 and BEP20 after getting a thorough idea of the Binance Chain and BSC along with their connection to BEP2 and BEP20. A few variances between the two token standards can be seen.
However, the comparison of the BEP2 and BEP20 token standards goes beyond the general distinctions between Binance Chain and Binance Smart Chain. Here is a detailed comparison of BEP2 and BEP20 tokens that takes into account every possible point of distinction.
The difference between BEP2 and BEP20 can be found on the Binance blockchain, which is the first and most obvious response to the question.
The BEP2 and BEP20 tokens are native to the Binance Chain and Binance Smart Chain, respectively. Keep in mind that BNB tokens can be either BEP2 or BEP20.
Smart Contract Support
The support for smart contracts is the second important distinction between BEP2 and BEP20 that deserves special attention. Developers are looking for dependable web3 ecosystems for new initiatives as the need for decentralized applications rises to new heights.
For developers interested in building decentralized applications and smart contract-based solutions, smart contract support is a desirable feature under such circumstances.
Binance Smart Chain’s support for smart contracts provides flexibility for the creation of web3 projects and dApps. When comparing the support for smart contracts between BEP20 and BEP2, BEP20 has the advantage.
The token addresses are also a significant point of contrast between BEP20 and BEP2. A BEP2 token address and a BEP20 token address can be clearly distinguished from one another. The Binance Chain token wallet address begins with “BNB”, indicating the need for a MEMO.
On the other hand, the wallet addresses for the BEP-20 tokens are very similar to those of the Ethereum blockchain. As with Ethereum wallet addresses, the BEP20 token wallet addresses begin with “x0” as you can see.
The interoperability with Ethereum is the second obvious distinction between BEP2 and BEP20 tokens. The BEP2 token standard, which is exclusive to the Binance ecosystem, is the first native token standard for the Binance Chain.
On other blockchain networks, BEP2 tokens cannot be used. The BEP20 token standard, on the other hand, has been designed to adhere to the principles of the Ethereum ERC20 token standard.
As a result, BEP20 prevails over BEP2 in their respective comparisons for Ethereum compatibility. In reality, BEP20 and ERC20 share many similarities, making BEP20 tokens compatible with the Ethereum ecosystem. To provide flexible and simple interactions with the web3 environment, BEP20 has been built.
The consensus mechanisms used by Binance Chain and Binance Smart Chain are also significant differentiators. You’ll see that Binance Chain uses the PoW consensus algorithm.
Therefore, it is more likely that transactions involving BEP2 tokens may result in higher costs and environmental harm. Furthermore, Proof of Work requires a lot of resources and offers few opportunities for extra incentives.
The comparison between BEP2 and BEP20 favors BEP20 due to its Proof of Stake Authority consensus process. The BEP20 tokens’ Proof of Stake Authority consensus mechanism provides access to staking opportunities. Users get faster transaction times and cheaper gas fees at the same time.
In order to support the BEP20-standard token standard when building web3 applications with staking capabilities, developers are turning to Binance Smart Chain. On the other hand, the PoS Authority consensus process guarantees that environmental damage is kept to a minimum.
Transaction Costs on the Binance
The comparison of BEP20 and BEP2 would further highlight the cost of transaction fees. As it can make or break the appeal of their new initiatives, developers are especially concerned about transaction costs.
BEP2 coins significantly increase the cost of using the Binance CEX and DEX by charging transaction fees. Contrarily, BEP20 coins do not suggest that Binance CEX and DEX transaction fees are necessary.
What distinguishes BEP20 tokens from BEP2 tokens is their distinctive specifications, which may be tailored to meet the expanding demands for scalability. In contrast to BEP2 tokens, BEP20 tokens’ minting and burning parameters allow developers to specify how many tokens need to be created or burned.
The scalability of BEP20 projects is undoubtedly aided by the ability to control the supply and demand of BEP20 tokens. Additionally, BEP20 has the benefit of interoperability with Ethereum, supporting its promise of scalability.
BEP20 vs ERC20 tokens
The BEP20 immediately inherits the characteristics of ERC20 because it was created as an extension of ERC20. These two token standards do differ in several significant ways, though.
Requirements for Standard Specifications
The main goal of a token standard is to define the parameters—known as functions in the blockchain community—that smart contracts, wallets, and marketplaces use to communicate with the token. There are six functionalities that can be specified for a token in both ERC20 and BEP20. The following goals are served by each of these actions, respectively:
- Depicting the total supply of the token
- Displaying a network address’s token balance
- Specifying the address-sending process for tokens
- How to send tokens from an address is defined
Defining the conditions under which multiple withdrawals from a single address are allowed.
establishing maximum withdrawal amounts from one address to another
As a more recent standard that builds on ERC20, BEP20 provides four extra functions that each describe one of the following details:
- The token’s name
- The token’s symbol
- The number of decimals for a token unit
- The token owner’s address
In this regard, BEP20 may be said to be more precisely stated.
The gas fees charged by ERC20 and BEP20 represent their primary distinction. Compared to ERC20 tokens, BEP20 coins have lower gas costs. The cost of gas is the main distinction between these coins.
The gas fees associated with using ERC20-standard tokens must be paid in Ethereum, which is a pricey cryptocurrency.
On the other side, while using BEP20 tokens, BNB is responsible for paying the gas costs. The number of BEP20 tickets is constrained due to this notable disparity. With BNB, users can avoid the Ethereum gas fees, which greatly lowers the cost.
The speed of transactions is a key distinction between ERC20 vs BEP20 tokens. Most consumers find BEP20 transactions convenient because they are completed in under three seconds. Compared to BEP20, the traction length for ERC20 is roughly 15 seconds, a significant difference that is five times greater.
While BEP20 tokens have lower gas costs and quicker execution times, the PoSA validation technique used by BSC has been under fire for possible security flaws. The lower levels of network decentralization at the transaction approval are the main source of criticism.
BSC only uses 21 carefully chosen validators to verify blocks. In contrast, Ethereum’s network contains more than 70,000 validators altogether. Potential users may have trust difficulties due to the small number of validators on BSC.
In essence, it may be claimed that BEP20 coins sacrifice security and decentralization in favor of better gas prices and execution times. ERC20 tokens, in comparison, might give a person who is very concerned about security more peace of mind.
Is BNB BEP2 or BEP20?
BNB is the native token of BNB Chain which both tof BEP20 and BEP2 standards work on. In BEP2 standard, BNB coins work as gas fees of Binance Chain. Meanwhile, In BEP20, the tokens have more functions on BSC blockchain.
Is BEP20 same as BSC?
BEP-20 is the token standard of the Binance Smart Chain (BSC). The Binance Smart Chain is a programmable blockchain with support for smart contracts and EVM compatibility. This makes it a good candidate for building decentralized applications.
Is Coinbase ERC20 or BEP2?
Coinbase doesn’t currently support Binance Chain (BEP-2) because it’s a separate blockchain that isn’t integrated with the exchange platform. BEP2 is a blockchain created by Binance specifically for their customers to send assets more quickly.
BEP2, BEP20, and ERC20 are the three most popular cryptocurrency token standards. Our guide has pointed out the key differences between these standards. Hope that you can make an informed decision about which one is right for you. If you have any questions, feel free to leave your comments below. We’re glad to hear from you.
Disclaimer: The information provided in this article is not investment advice from Cove Markets. Cryptocurrency investment activities are yet to be recognized and protected by the laws in some countries. Cryptocurrencies always contain financial risks.