Tara M.
Tara M.
Jan 18, 2023

BEP2 vs BEP20: A Free Guide to Binance Tokenisation Standards

#binance#blockchain#centralized#dapp#pow#smart-contract#bnb
tl;drBinance, the largest crypto exchange, will make every investor’s dream come true as it aims to take over Ethereum blockchain with faster transactions and lower fees. It strives to do so with its two tokenisation standards, BEP2 and BEP20. But how do they differ? In this article, we’ll read about BEP2 vs BEP20 to overview their differences and see which standard operates better. Let’s dive in!
BEP2 vs BEP20: A Free Guide to Binance Tokenisation Standards
BEP2 vs BEP20: A Free Guide to Binance Tokenisation Standards
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What Is Binance Chain?

First, let’s find out where BEP2 and BEP20 come from and then we will take a closer look at BEP2 vs BEP20 to see what these two popular tokenisation standards bring to the table and how they differ.

Binance, the largest cryptocurrency exchange in the world, was developed by Changpeng Zhao in 2017. It features a unique blockchain network with two parallel blockchains, i.e., the Binance Chain and the Binance Smart Chain (BSC).

Binance Chain, also known as BNB Beacon Chain (BNB), was developed by the Binance team in April 2019, just two years after the company was founded.

Binance Chain’s native token, BNB, a BEP2 token, can be traded and is used to pay transaction fees on the Binance cryptocurrency exchange.

In addition to Binance Chain, the first Binance blockchain, Binance also developed another blockchain in September 2020, known as Binance Smart Chain, which we’ll explain below.

What Is Binance Smart Chain?

Launched in September 2020, Binance Smart Chain is the second blockchain created by Binance. Binance Smart Chain is not a replacement for Binance Chain, but a completely different blockchain running parallel to the Binance Chain (Binance Beacon Chain).

Why did Binance launch another blockchain? Since the Binance Chain didn’t support Ethereum’s decentralised application (DApps), Binance strived to tackle this issue and developed Binance Smart Chain, which is compatible with all DApps built on the Ethereum blockchain. It means it hosts DApps, and Binance DEX is the first DApp running on it.

Binance Smart Chain uses the BEP20 standard token, which is compatible with both BEP2 and Ethereum’s ERC-20 tokens. In fact, the BEP20 format allows Binance to get into the Decentralised Finance (DeFi), NFT and wider Web3 industries more easily.

What are BEP2 and BEP20 doing in Binance’s chains? They are the tokenisation standards of these chains, i.e., BEP2 in the Binance chain and BEP20 in the Binance Smart Chain.

These two standards include rules and technical fundamentals the developers need to follow to create new tokens on Binance Chain and Binance Smart Chain blockchains. Let’s learn more about each one below.

What Is BEP2?

BEP2 is the fundamental tokenisation standard for the Binance Chain and its native coin, BNB. BEP2 stands for Binance Chain Evolution Proposal 2 and is exclusive to the Binance Chain.

It means that the BEP2 tokens only work for transactions on the Binance crypto exchange and cannot be used in any other blockchain beyond Binance.

Since the BEP2 standard is not compatible with ERC-20 and suffers from programmability issues, it can’t be used to build smart contract applications. Therefore, anyone who holds BEP2 tokens can convert them into BEP20 tokens, which can be used on both the BNB Smart Chain and Ethereum. Let’s learn more about BEP20 and see why it was developed and what problems it aims to solve.

What Is BEP20?

Binance Smart Chain was created to fill the gaps in Binance Chain and facilitate all transaction needs on different DApps. To achieve this goal, it uses the BEP20 standard, which is completely compatible with Ethereum’s ERC-20 standard.

Inspired by Ethereum ERC-20, the BEP20 standard leads to the development of tokens known for their interoperability, meaning they can easily be converted to ERC20 tokens.

Moreover, compared to ERC20 tokens, the BEP20 standard leads to lower fees and records more transactions in each block per second.

BEP2 vs BEP20

To help you understand the differences between BEP2 and BEP20 in a visual and digestible way, we have summarised their networks, consensus mechanisms, transaction fees, smart contracts, token addresses and compatibility with Ethereum in the following table. Detailed explanations of each are provided in the sections following the table.

BEP2 vs BEP20
BEP2 vs BEP20

BEP2 vs BEP20: Consensus Mechanisms

In the blockchain world, consensus mechanisms are mathematical and computational algorithms by which a group of nodes on a network determine which transactions are valid and eligible to be recorded on the blockchain.

Different blockchains use different consensus mechanisms; let’s see what mechanisms Binance Chain and Binance Smart Chain use.

  • BEP2 tokens, i.e., the tokens following the BEP2 standard, use Proof-of-Work (PoW) consensus mechanism. It allows Binance Chain to operate, verify transactions and create new blocks without involving a third authority.
  • Binance Smart Chain is based on two consensus mechanisms: PoS (Proof-of-Stake) and PoA (Proof-of-Authority). To maintain security all over the network, Binance Smart Chain combines these two mechanisms as PoSA (Proof-of-Stake-Authority), allowing users to stake their tokens and providing better speed and lower transaction costs.

BEP2 vs BEP20: Fees

A transaction fee is one of the most important factors in choosing your network.

  • BEP2 tokens cost nothing for transactions on Binance CEX and DEX, while
  • BEP20 tokens charge a few cents.

BEP2 vs BEP20: Smart Contracts

The popularity and demand for DApps continue to grow, and many developers are getting more interested in blockchains that support smart contracts.

  • BEP2 tokens don’t support smart contracts and can only be used on Binance Chain.
  • BEP20 tokens can easily be executed on the Ethereum blockchain and used to build DApps.

BEP2 vs BEP20: Token Addresses

Another difference between BEP2 and BEP20 is their token addresses. A token address is a unique identifier and a digital destination where cryptocurrency can be sent or received.

  • On the Binance Chain blockchain, all tokens’ addresses start with “bnb”.
  • BEP20 tokens addresses, similar to Ethereum's ERC20 standard, start with “0x”.

BEP2 vs BEP20: Scalability

Scalability in the blockchain is the network’s ability to process and record a large number of transactions and increase the number of nodes in the network. One of the crucial factors affecting blockchain scalability is the consensus mechanism the network uses.

  • As mentioned above, the BEP2 standard is based on the PoW (Proof-of-Work) model, which requires expensive computers and uses up a significant amount of energy.
  • In contrast, the BEP20 standard implements a PoSA (Proof-of-Stake- Authority) consensus mechanism, which is more efficient since it can increase security, reduce energy use, and allow networks to scale more effectively. Additionally, the BEP20 standard includes minting and burning parameters, allowing developers to identify the supply and demand of the tokens. This flexibility and compatibility with Ethereum boost the scalability of BEP20 projects and give BEP20 tokens better scalability.

BEP2 vs BEP20: Staking

Crypto staking is holding your crypto assets in a wallet for a certain time to support the operation of a blockchain. This process completely depends on the network's consensus mechanism.

  • Since the Binance Chain uses a PoW consensus mechanism, BEP2 tokens are used only as transaction fees for Binance centralised and decentralised crypto exchanges.
  • Binance Smart Chain follows the PoSA consensus mechanism. Compared to the PoW model, PoSA is less energy-consuming, enabling users to stake their coins, improve the network’s security and earn passive incomes.

BEP2 vs BEP20: Compatibility with ERC-20

The more a network is compatible with the Ethereum blockchain, the more growth potential it has.

  • BEP2, the tokenisation standard of Binance Chain, suffers from programmability issues and doesn’t support the Ethereum smart contracts.
  • BEP20, the tokenisation standard of Binance Smart Chain, easily opens up the scope for using most smart contract applications on top of the Ethereum blockchain.

In addition to the differences between BEP2 and BEP20 tokens, we’ve provided the best BEP2 and BEP20 tokens along with the top five software and hardware wallets to manage your BEP2 and BEP20 tokens in the following sections.

The Best BEP20 Tokens

The top five BEP20 tokens by market cap include the following.

  • Tether
  • USD Coin
  • Dogecoin
  • Polkadot
  • SafeMoon

The Best BEP2 Tokens

The top five BEP2 tokens by market cap are as follows.

  • BNB Coin
  • BEP2 USDD
  • BEP2 THORChain
  • BEP2 PancakeSwap
  • STEPN

Top BEP20 Wallets

To store and manage your BEP20 tokens, you can use the top five BEP20 wallets listed below.

  • Ledger Nano X (Hardware Wallet)
  • SafePal S1
  • D’CENT (Hardware Wallet)
  • Ellipal Titan (Hardware Wallet)
  • Math Wallet

Top BEP2 Wallets

To store and manage your BEP2 tokens you can use the top five BEP2 wallets as follows.

  • Ledger Nano S (Hardware Wallet)
  • Trezor
  • Coinomi Wallet
  • Trust Wallet
  • Guarda Wallet

Summary

In this article, we've put together all you need to know about BEP2 vs BEP20, the two well-known tokenisation standards on Binance's blockchains.

Considering all the crucial factors, BEP20 performs better than BEP2, as it supports smart contracts and DApps for one thing. Also, BEP20 has more similarities to Ethereum, making BEP20 tokens more compatible with Ethereum's smart contracts.

It goes without saying that the popularity of cryptocurrency, blockchain, DeFi and other decentralised applications keeps rising. The deeper you dive into them, the more profitable investments you will make!

To study more in-depth reviews, track the top 1500 coins and choose the best ones by tracking their changes, you can freely use Cryptologist, its free crypto Screening tool, and make your own crypto portfolio.

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