BEP2 vs. BEP20 vs. ERC20: What Is the Best Blockchain Token Standard?
Key Questions Answered
BEP2, BEP20, and ERC20 are blockchain token standards — that is, sets of rules for issuing new tokens — for BNB, BSC, and Ethereum (ETH) platforms, respectively. This article will introduce and compare each of these standards.
What Is a Token Standard?
Tokens are digital units within a blockchain platform, often specific to an application, that are used for purposes such as the following:
- Making transactions
- Storing value
- Acquiring digital assets, such as gaming credits
- Accessing governance/voting rights for the associated platform or application
Every year, hundreds of new decentralized application (DApp) projects issue their own tokens on blockchains such as Ethereum and BSC. In order for these tokens to be compatible with the underlying blockchain, they must adhere to the platform’s token standards.
Token standards define the rules for the issuance and implementation of new tokens. The standards commonly include requirements to specify the following:
- The total supply limit of the token
- The token’s minting process
- The token’s burning process
- The process for carrying out transactions with the token
The standards are designed to help avoid fraud, technical incompatibilities between tokens, and issuance of tokens not aligned with the blockchain’s principles. For example, the rules for total supply and new token minting help contain potential token value depreciation.
Popular Token Standards
BEP2, BEP20, and ERC20 are three of the most popular token standards.
What is BEP2?
BEP2 is the token standard used by the BNB platform; it defines the technical specifications for tokens in order to function in the BNB ecosystem. BEP2 token transactions are supported by many popular wallets, such as Trust Wallet, the Ledger wallets, and Trezor Model T. If you want to transact using BEP2 tokens, you will need to use BNB coins to pay for gas, i.e., transaction fees.
An advantage of BEP2 is the convenience of trading between different cryptocurrencies in the decentralized exchange (DEX) format. However, BEP2 does not support smart contracts, which many tokens and DApps rely on for their functionality.
Top 5 BEP2 tokens
- Fantom (FTM): Known as one of the “Ethereum killers,” Fantom is a Layer 1 blockchain that aims to tackle the issue of scalability and cost efficiency using an aBFT consensus mechanism.
- BTCB: A BNB-issued token fully backed by Bitcoin 1:1.
- BUSD: A regulated USD-backed stablecoin pegged 1:1 to the USD.
- Polkadot (DOT): A sharded multichain protocol that enables cross-chain transfer of any digital assets. Although there is a native DOT token, this can be swapped to BEP2-based DOT through the BC exchange.
- Cardano (ADA): A proof-of-stake blockchain platform that enables the storage and transfer of funds using its native cryptocurrency, ADA. As with DOT, ADA tokens are available in both its native form and as a BEP2 token.
What is BEP20?
BEP20 is the token standard used by BSC, and is a versatile standard designed to be compatible with both BEP2 and Ethereum’s ERC20 standard, ensuring compatibility with the Ethereum Virtual Machine (EVM).
BEP20 and BSC opened up opportunities for users to access the large and rapidly growing number of DApps. Within months of its launch, BSC became the main challenger to Ethereum for the development of tokenized DApps.
Similar to BEP2, transacting with BEP20 tokens requires BNB coins to pay for gas. BEP20 is currently supported by eight wallets, including Arkane Wallet and Math Wallet.
You can also transact between BEP2n and BEP20 using a “Bridge”. This a cross-chain service was designed to facilitate interoperability between several blockchains, including Ethereum and TRON (TRX).
Top 5 BEP20 tokens
- PancakeSwap (CAKE): A leading decentralized exchange (DEX) on the BSC blockchain, it enables the swapping of BEP20 tokens in liquidity pools using an automated market maker (AMM).
- Safemoon (SAFEMOON): An automated liquidity-generating DeFi protocol that aims to ensure “safe” gains through measures such as static rewards, manual burns and automatic liquidity protocols to prevent dramatic valuation bubbles.
- C.R.E.A.M (CREAM): An open-source, blockchain-agnostic DeFi protocol that offers yield farming rewards to both individual and institutional users.
- BurgerSwap (BURGER): Among the earliest decentralized exchanges deployed on the BSC blockchain, BurgerSwap enables users to conduct cryptocurrency swaps facilitated by its automated market maker (AMM).
- Swipe (SXP): A DeFi protocol that bridges the gap between fiat and cryptocurrency. Its key products include Visa debit cards and multi-asset DeFi wallet that allows instant conversion between cryptocurrencies, fiat currencies, and stablecoins.
What is ERC20?
ERC20 is a standard used by the Ethereum blockchain for fungible tokens. Fungible tokens have a standardized, non-unique value for each token unit. Cryptocurrencies are the most obvious examples of fungible tokens, since each unit of a particular cryptocurrency is indistinguishable from another unit. For example, each Ether is indistinguishable from and worth the same amount as any other Ether.
In that sense, fungible tokens are different from non-fungible tokens (NFTs), which have a unique non-standardized value assigned to each token. Ethereum has another standard for NFTs, called ERC721.
ERC20 is used extensively for the development of smart contracts for DApps on Ethereum. Gas fees are paid in Ether.
Due to the popularity of ERC20, ERC20 token transactions are supported by a large number of wallets, including MyEtherWallet, MetaMask, and Trust Wallet.
Top 5 ERC20 tokens
- Tether: One of the earliest stablecoins and one of the first cryptocurrencies to peg its market value to a fiat currency–in this case, the US Dollar.
- USD Coin: Another stablecoin pegged 1:1 with the U.S. dollar; this means that holders of the USDC can redeem 1 USD coin for $1 at any time.
- BUSD: A stablecoin pegged 1:1 with the USD, used for loans, payments and any transactions that are available to ERC20 tokens.
- Dai: An algorithmic stablecoin issued by MakerDAO, pegged 1:1 with the USD.
- Uniswap: One of the largest decentralized exchanges (DEXs) that enables users to trade cryptocurrencies without a centralized third party.
Top 5 ERC20 tokens as of August 2020 (Source: CoinMarketCap)
BEP2 vs. BEP20 vs. ERC20: Which is better?
BEP2 vs BEP20
While both BEP2 and BEP20 are native token standards within the same ecosystems of BNB and BSC blockchains, there are several differences between both tokens:
- Smart contract capabilities: Smart contract capabilities are not supported for tokens on the BEP2 standard (BEP2 was developed with the aim of scalability), while the BEP20 standard was specifically developed for tokens that will be using smart contracts.
- Consensus mechanism: BEP2 uses a Proof-of-Work consensus mechanism while BEP20 uses Proof-of-Stake.
- Compatibility with Ethereum: BEP2 tokens cannot operate in an Ethereum-based environment, whereas BEP20 tokens are fully Ethereum-compatible.
DEX/CEX transaction fees: BEP2 tokens require transaction fees on both CEXes and DEXes, while BEP20 tokens require no transaction fees on both these exchanges, making the latter more developer-friendly.
Is BNB BEP2 or BEP20?
BNB tokens come in both BEP20 and BEP2 standards, as both standards operate within one overall ecosystem–BEP2 on BC, and BEP20 on BNB. However, BNB tokens that are in BEP2 format can only be used as transaction fees on its native blockchains BC and BNB. For wider usage, these BEP2 tokens can be converted into BEP20 tokens.
Given the growing popularity of smart contracts and DApps, BEP20 and ERC20 tokens are far more actively used than BEP2. BEP2 might be of interest to someone who wants to trade cryptocurrency using various coin pairs. However, BEP2, given its lack of support for smart contracts, will not let you access the rich world of DApps. In that respect, the real showdown is between BEP20 and ERC20.
5 BEP20 vs. ERC20 Differences
BEP20 vs. ERC20: Standard Specification Requirements
A token standard’s key purpose is to specify parameters, called functions in the blockchain world, that are used by smart contracts, wallets, and marketplaces when interacting with the token. Both ERC20 and BEP20 include six functions that can be specified for a token. These functions respectively serve the following purposes:
- Indicating the token’s total supply
- Showing the token balance of an address on the network
- Defining how tokens are sent to an address
- Defining how tokens are sent from an address
- Specifying whether and how multiple withdrawals from an address are permitted
- Specifying limits on the amounts that one address can withdraw from another address
BEP20, as a newer standard extending ERC20, has four additional functions that respectively specify the following information:
- The token’s name
- The token’s symbol
- The number of decimals for a token unit
- The token owner’s address
In this sense, BEP20 can be described as more thoroughly specified.
BEP20 vs. ERC20: Transaction Fees (aka Gas Fees)
Compared to ERC20, BEP20-based transactions involve much lower fees, largely thanks to BSC’s proof of staked authority (PoSA) block validation method. Under the PoSA model, validating nodes stake a certain number of BNB coins to verify a transaction. The top 21 nodes with the highest staked BNB amounts receive the validation rights.
An average transaction using BEP20 tokens will likely cost no more than a few cents in fees. In comparison, the average ERC20 token transfer gas fee is around $12. In short, when it comes to gas fees, BEP20 is the clear winner over ERC20.
BEP20 vs. ERC20: Block Verification Speed
The PoSA method also gives BEP20 transactions faster execution speeds compared to ERC20 transactions. While individual transaction verification times vary, average block verification times on the underlying blockchains are about 3 seconds for BSC and close to 15 seconds for Ethereum. This means that a typical BEP20 transaction is likely to be executed 5 times faster than a similar ERC20.
However, Ethereum’s planned move from Proof of Work (PoW) to Proof of Stake (PoS) by the end of 2021 is expected to significantly cut the execution times for ERC20 transactions.
BEP20 vs. ERC20: Variety of Tokens
Ethereum is the world’s largest smart contract platform, boasting close to 3,000 DApps, the vast majority of them based on the ERC20 standard. In comparison, BSC currently hosts just over 800 DApps, with the vast majority based on BEP20. However, BSC’s spectacular growth rate over a period of less than a year since its launch has led to an explosion in the number of BEP20 projects.
If you prefer investing in tokens of more established DApps, ERC20 tokens may give you a wider choice. However, for newer DApp projects, BEP20 tokens are a good alternative.
BEP20 vs. ERC20: Platform Security
While BEP20 tokens involve cheaper gas fees and faster execution times, BSC’s PoSA validation model has been criticized for its potential security weaknesses. The main complaint relates to the lower levels of network decentralization when transactions are approved.
BSC relies on just 21 selected validators for block verification. In comparison, Ethereum has more than 70,000 validators distributed over its network. The low number of validators on BSC may raise issues of trust among potential users.
In essence, it can be argued that BEP20 tokens offer superior gas fees and execution times at the expense of security and decentralization. For someone highly focused on security, ERC20 tokens, comparatively speaking, may provide greater peace of mind.
For a typical person interested in DApps and tokens, the key point is that BEP2, BEP20, and ERC20 refer to the token standards used by their respective blockchains. When your wallet offers to transfer tokens using these standards, it simply means that the transaction will be executed using the respective platform — BNB for BEP2, BSC for BEP20, or Ethereum for ERC20.
BEP2, while a decent choice for DEX-based cryptocurrency trading, lacks support for smart contracts. BEP20 and ERC20 give you access to a rich variety of DApps and tokens based on smart contract technology.
From the technical point of view, the BEP20 standard has more detailed token specification options compared to ERC20, largely because BEP20 is built upon and extends ERC20.
BEP20’s advantages over ERC20 are the lower fees and faster execution times. However, these advantages may diminish, or perhaps disappear, when Ethereum moves to the PoS validation model later this year. ERC20’s advantages over BEP20 are the wider choice of DApps/tokens available for this standard, as well as a more secure decentralized verification method.