What is a BEP-20 Token?
If you have been in the crypto space for some time, you must have heard of BEP-20 before. It is not surprising though if you don’t know what it means, a lot of people don’t. This article is meant to educate you about BEP-20 tokens, what they are, how they differ from other tokens, and what you can use them for. Before we go into the discussion proper, it is important for us to explain what a token is.
What is a token?
A token is a cryptocurrency just like any other cryptocurrency like Bitcoin or Ethereum. However they are different in the sense that they are created on an existing, public blockchain for a particular purpose and to function. They differ from coins in that while coins have their own blockchains, tokens are created on blockchains that belong to a coin.
Ethereum for example is a coin upon whose blockchain most of the circulating tokens were built. In fact, it is the platform upon which DeFi as a whole is based, so all the DeFi tokens are developed on the same blockchain. Because tokens don’t need investment in building a blockchain from scratch, they are easier to create, which explains why there are many more tokens in circulation than there are coins.
Also, transactions involving tokens seem to be generally cheaper than transactions with coins, although there are some coins with incredibly low transaction fees too. This article discusses what a BEP-20 token is and other details about it.
When crypto tokens are created, they have to be in such a way that they can perfectly fit into an existing system, say a decentralized exchange. The format for creating such a token to run on a particular platform is referred to as a token standard.
There are many token standards for different purposes, the most popular of which is ERC-20 based on the Ethereum network. As mentioned earlier, most of the tokens in the crypto space are built on this standard. Ethereum also has another token standard known as ERC-721. As you may already know, Ethereum is also a big platform for creating Non-Fungible Tokens (NFTs). The ERC-721 is the standard for creating these NFTs.
BEP-20 is another token standard that is used to create tokens, just like ERC-20. It is newer, but has become a viable competition against Ethereum’s ERC-20 recently. Tokens created on this standard are known as BEP-20 tokens and in this article, we will focus on the BEP-20 token standard and BEP-20 tokens.
The BEP-20 standard
BEP-20 is a token standard based on Binance Smart Chain (BSC). It works like Ethereum in many ways, and is used to build fungible tokens that run on BSC. BEP-20 is compatible with both ERC-20 and BEP-2 which is another token standard on BSC. Developers find it very flexible and effective in deploying fungible tokens that can be used for many purposes including stablecoins.
For example, ERC-20 which is very similar to BEP-20 is the token standard upon which several stablecoins, including Binance USD (BUSD), are built. Therefore stablecoins can be deployed using this standard as well.
BEP-20 tokens are deployed on BEP-20 standard. Because they are built on this standard, they are compatible with ERC-20 and BEP-2 tokens. BEP-20 versions of cryptocurrencies from other blockchains can also be created. These are called wrapped tokens which can be created out of Bitcoin, Ethereum or any other cryptocurrency.
BEP-20 token transactions are basically paid for using BNB. It is similar to how ERC-20 tokens are fueled by ETH. If you wish to send BAT for instance from your wallet to another, you will need to have sufficient ETH in that wallet to pay for gas fees. The rapid increase in gas fees for ERC-20 tokens is why other tokens such as BEP-20 are getting more popular. The same way, BNB is used to power transactions with any BEP-20 token because it is the native token on BSC.
BSC was created to run beside the first Binance Chain, therefore tokens based on BEP-2, the standard for the old Binance Chain can be easily swapped to ensure cross chain compatibility. BEP-20 is primarily for DeFi and of course runs with Binance DEX, the Binance decentralized exchange where DeFi tokens are traded.
Differences between BEP-20 and BEP-2 tokens
As mentioned earlier, BEP-20 and BEP-2 are very similar and easily swapped, but that doesn’t mean they are not different. First, BEP-2 is the token standard for the old Binance Chain while BEP-20 is for the DeFi based Binance Smart Chain. Because of these differences, the two have separate wallets with different address formats.
For BEP2 wallets, the address starts with bnb and requires the use of a MEMO. This is an unique identifier for each account that allows Binance to send funds to the right account. BEP20 wallet addresses on the other hand start with 0x, just like other Ethereum-based addresses. These differences are also apparent when using different wallets such as Trust Wallet and in any other situation that involves distinguishing between BEP2 and BEP20.
Difference between BEP-20 and ERC-20 tokens
For those not familiar with these terms, it can be confusing to distinguish even between BEP-20 and ERC-20 tokens. Well, the obvious difference is that they are built on different blockchains. While BEP-20 are built on Binance Smart Chain (BSC), ERC-20 tokens are built on the Ethereum blockchain. They are however also quite similar in function. BEP-20 tokens are actually compatible with ERC-20 and can be swapped with it easily.
In a way you can say that Binance forked the Ethereum blockchain and created their own platform with it. Of course, they later developed their own features on this chain.
What are BEP20 tokens used for?
Tokens are cryptocurrencies created to be used for several purposes. For BEP20 tokens, they are designed to be fast for transactions with negligible transaction fees. This feature makes them superior for buying and selling when compared to other cryptocurrencies such as Bitcoin which come with heavy fees. At the moment, BEP-20 tokens are among the preferred tokens for transactions on the internet such as funds transfer, payment of salaries and other payments that may involve both small and large amounts of money.
If you didn’t know about BEP-20 before, we hope this article has given you sufficient knowledge about both the standard and tokens so that you can effectively use them and distinguish them from BEP-2 when using a Binance wallet. You can even try to create and deploy your own token on this standard if you like, but deploying a full-fledged one that can be used for transactions will require the help of programming experts.