What are BEP-20 tokens?

Detailed summary

The token standard in cryptocurrencies helped build the foundation for the entire blockchain ecosystem as we know it.

Smart contract platforms like Ethereum and Binance Smart Chain (BSC) allow you to build and launch your own decentralized applications (DApps). Each DApp comes with a unit of value and a tradable asset called a "token," which is used to provide a service or perform certain economic and governance activities.

These tokens follow a specific framework called the Token Standard, a set of rules and guidelines that must be integrated into smart contracts. If a token does not follow and adhere to the required Token Standard, it will be incompatible and will not interact with the rest of the ecosystem's applications, such as wallets and exchanges.

Each blockchain platform has its own set of token standards that smart contracts must follow. You may be familiar with ERC-20 tokens; these are Ethereum-based tokens that follow the ERC-20 token standard. Similarly, Binance Smart Chain (BSC) comes with a token standard called BEP-20, which all BEP-20 tokens launched on the Binance Smart Chain platform must follow.

This guide will discuss and simplify the BEP-20 token standard and explore some of the most promising BEP-20 tokens on the Binance Smart Chain platform.

What is Binance Smart Chain?

Binance Smart Chain (BSC) is a blockchain platform capable of running smart contracts. It runs in parallel with Binance Chain, a separate blockchain platform optimized for ultra-fast trading with a significant increase in transaction volume.

Binance, one of the largest centralized cryptocurrency exchanges, launched Binance Chain in 2019 to support its decentralized version of the exchange, Binance DEX. The Binance Chain was explicitly designed for fast, non-custodial (decentralized) trading. It came with a native utility token called BNB, with a fixed quantity of 200 million BNB tokens.

However, the Binance Chain does not provide sufficient flexibility due to its lack of support for smart contracts. This lack of flexibility was a deliberate design approach to the system to avoid congestion on the network.

If a platform is optimized for fast, non-custodial trading, the ability to host and run smart contracts can bring significant congestion to the network. A famous example of this is the blockchain game CryptoKitties, which choked the entire Ethereum network at the height of its popularity.

Binance Smart Chain (BSC), a programmable smart contract blockchain platform that runs parallel to Binance Chain, has been launched. BSC is fully compatible with the Ethereum Virtual Machine (EVM), so developers can port their EVM-based applications directly to the BSC platform.

Even though BSC operates in parallel with the Binance Chain platform, it should not be classified as a sidechain or a layer-2 scalable solution. BSC is an independent, autonomous blockchain that can continue to operate even if Binance Chain ceases to operate.

Because BSC is compatible with the EVM, developers can not only easily port their dApps, but users can also use their favorite tools like Metamask to interact with BSC. This native compatibility will help BSC leverage the rich Ethereum ecosystem that exists today.

BSC uses Proof of Stake Authority (PoSA), a type of Proof of Stake (PoS) consensus algorithm, and achieves an average block time of around 3 seconds, making it significantly faster than Ethereum. With PoSA, validators ensure the security of the network by distributing their BNB tokens. Validators also receive transaction fees accumulated from each block they validate.

It's worth noting that there are no block rewards for validators. They can only accumulate BNB tokens and collect transaction fees from the blocks they validate on the network. BNB is a deflationary token, with a fixed supply, and the Binance team regularly burns coins.

Binance Chain and BSC have a dual-chain architecture with cross-chain compatibility. These platforms complement each other. Users can transfer assets seamlessly and quickly across the two chains using a supported wallet, such as Binance Chain Wallet or Trust Wallet.

Another important aspect of major assets like BTC, ETH, and others is that they already exist on Binance Chain as BNB tokens (BNB tokens pegged to external assets). You can seamlessly transfer these pegged tokens to BSC and use them in various DApps on the BSC platform.

What is BEP-20?

BEP-20 is the Binance Smart Chain token standard that extends Ethereum's ERC-20 standard. The BEP-20 definition includes a framework and set of rules that tokens built on BSC must follow. BEP-20 is fully compatible with the ERC-20 token standard and Binance Chain BEP-2.

The BEP-20 token standard applies to all types of tokens launched on the BSC platform, such as convertible securities and stablecoins. "Biggie Coins," which are BEP-20 tokens pegged to other crypto assets like BTC and LINK, also follow the BEP-20 token standard.

Transaction fees for all BEP-20 tokens are paid in BNB, the native token of the Binance Chain. This mechanism is part of the PoSA consensus rules and provides an incentive for validators, who collect transaction fees for the blocks they validate on the BSC network.

Because the Binance Chain and BSC complement each other and work in tandem, BEP-20 tokens on the Binance Chain can be used for fast trading on the Binance DEX. However, BEP-20 versions of tokens linked outside the Binance ecosystem must be swapped with their original source, as cross-chain interoperability is only between the Binance Chain and BSC.

Creating your own BEP-20 token is relatively simple and straightforward, even if you don't have any prior programming experience. CoinTool provides an intuitive user interface for creating your own BEP-20 tokens. You only need to provide your token name, symbol, and a few other parameters to successfully generate your BEP-20 token.

Let's briefly discuss these standards to better understand the BEP-20 token standard.

Burnability — This criterion determines whether BEP-20 tokens can be burned to reduce the supply over time, making them inflationary.

Mintability — This criterion is the opposite of burnability, and determines whether new BEP-20 tokens can be minted to increase supply over time, making them inflationary.

Stoppability — This parameter is essential in the event of a malicious attack or software vulnerability. It determines whether all operations associated with your tokens can be stopped when necessary. Only the token creator or any address with the necessary permissions can stop all operations.

Blocklist — This standard is similar to StopPossibility. It gives you the ability to blacklist specific addresses if they behave maliciously. Both of these standards give too much control to the central authority (the originator), so they won't be suitable for many use cases.

Once all the criteria are defined and the token is created, you will gain full ownership of the token, and it will be distributed to your designated address. The token's smart contract will automatically deploy on BSC, and all you need to do is pay the required transaction fees.

BEP-20 vs. other tokens

There are many programmable blockchain platforms with the ability to run smart contracts, each with a different token standard. This section will compare BEP-20 with two of the most prominent token standards available today: ERC-20 and BEP-2.

BEP-20 vs. ERC-20

The BEP-20 and ERC-20 token standards share many similarities. BEP-20 is an extended version of the ERC-20 standard and has the same functionality, providing core elements such as token issuance, token transfer, and token ownership.

Binance recently introduced an interchain bridge service called Binance Bridge, which provides interoperability between different blockchains. Currently, the project supports interchain transfers for ERC-20 and TRC-20 tokens.

With the Binance Bridge, you can convert your native cryptocurrency assets into BEP-2 or BEP-20 tokens. Let's explain this with the following example: If you're transferring an ERC-20 stablecoin to BSC, the Binance Bridge will perform the interchain conversion, from ERC-20 tokens to BEP-2/BEP-20 tokens, which can be used either on Binance Chain or in decentralized applications (DApps) running on BSC.

Binance Bridge does not charge any transfer fees; you only have to pay the associated blockchain network fees. You should be patient while waiting for the transfer to complete, as it can take a few minutes.

The process of converting from the original blockchain (ERC-20) to BEP-20 is called an in-bound staking. This conversion also works in the opposite direction (called an out-bound staking), i.e., converting back from BEP-20 to the original blockchain (ERC-20). You need a compatible wallet such as Binance Chain Wallet or MetaMask to complete the in-bound and out-bound staking process.

Comparison between BEP-20 and BEP-2

BEP-2 is the token standard on the Binance Chain. The BEP-20 and BEP-2 standards operate in parallel and are fully compatible with each other. BNB, the native token of both Binance Chain and BSC, powers BEP-20 and BEP-2 across the network.

Binance Smart Chain can be considered an extension of Binance Chain. Both follow a dual-chain architecture and are fully interoperable with each other. Users can easily swap BSC BEP-20 tokens for BEP-2 tokens on Binance Chain directly from their supported wallets (Binance Chain Wallet, Trust Wallet).

Even if Binance Chain and BSC operate in parallel, you must use their native tokens. If you're on Binance Chain or Binance DEX, you can only use BEP-2, and if you're interacting with a dApp on BSC, you can use BEP-20 or a wrapper implementation (anchor assets).

The Binance Bridge project also provides cross-chain liquidity on Binance Chain and Binance Smart Chain. Users can easily enter and exit BEP-20/BEP-2 wrapped assets. Switching between BEP-20 and BEP-2 occurs seamlessly directly from the supported wallet.

BEP-20 Key Codes

The Binance Smart Chain ecosystem is thriving, and the platform is gaining tremendous traction. This section will discuss some of the most notable and popular BEP-20 tokens launched on the BSC platform.

Binance Hedged Tokens (Peggy Coins)

Piggy Coins is a BEP-20 token class on the BSC platform that is fully pegged and backed 1:1 by digital assets. As of this writing, there are a total of 34 of the most popular pegged BEP-20 tokens available on the BSC platform, including ETH, BTC, USDT, LTC, and ADA.

Users can either purchase these pegged tokens or exchange them for their existing tokens to use on the BSC platform. Additionally, users can redeem these pegged tokens for native digital assets. Many DeFi applications are launching on the BSC platform, and these pegged tokens allow users to interact with them and benefit from their offerings.

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