Binance (BNB) can be a complicated world for beginners. Whether you want to trade, use, or create digital assets on the chain, you must first learn the difference between BEP2 vs. BEP20 tokens. While their names are similar, these tokens are different from one another. They are both parts of BNB, but BEP2 belongs to the BNB Beacon Chain (formerly Binance Chain), while BEP20 belongs to BNB Smart Chain (previously Binance Smart Chain). What are the exact differences? Let’s find it out.
BEP2 vs. BEP20 Tokens: Side-By-Side Comparison
The table below compares the BEP2 and BEP20 tokens:
|Blockchain network||BNB Beacon Chain||BNB Smart Chain|
|Purpose||Seamless cryptocurrency integration||Extension of ERC-20 token standard|
|Consensus algorithm||Proof of Work||Proof of Stake Authority|
|Support for smart contracts||No||Yes|
|Gas fees||Fees on centralized and decentralized exchanges||No fees on centralized and decentralized exchanges|
|Scalability||Limited support||Flexible scalability opportunities|
|Block verification speed||Every 2 seconds||Every 2 seconds|
BEP2 vs. BEP20 Tokens: What’s the Difference
BEP2 and BEP20 are two types of BNB tokens developed for fundamentally different purposes. Here’s an in-depth comparison between the two.
BEP2 tokens are native to BNB Beacon Chain. BNB Beacon Chain is the governance and staking layer of the BNB ecosystem where consensus is reached. This network controls and coordinates the Ethereum stakers. Ethereum stakers are developers who help validate and secure the network in exchange for rewards.
Hence, in a more complex definition, BEP2 is the technical standard for the issuance and implementation of tokens on the BNB Beacon Chain. The standard ensures that all tradable goods and virtual assets the token represents can integrate smoothly with each other, as well as the surrounding ecosystem.
BEP20 is also part of the BNB blockchain, but it is native to BNB Smart Chain. This network enables the decentralized exchange of BNB tokens and was designed primarily to support the developers of dApps. The network’s design is compatible with the Ethereum Virtual Machine (EVM), which is a computation engine that acts as a decentralized computer and is responsible for executing smart contracts.
Even though they are connected, BNB Beacon Chain and BNB Smart Chain run separately from the BNB main net. The main net is an independent blockchain running its own technologies and protocols on a separate network; this architecture minimizes the risk of the crash of the entire ecosystem. As a result, disruptions on one network shouldn’t affect the other two networks.
Not only are BEP2 and BEP20 tokens part of different networks, but they have different purposes as well. The former is Binance Exchange’s native currency (BNB) on centralized and decentralized exchanges and the standard used to define the Beacon Chain’s most basic and essential features of tokens.
Its purpose is to define the rules that developers have to follow when issuing and implementing new tokens in the network. It can be used also for making payments, including virtual currency purchases and online services – such as Canva, Storm, and BitTorrent – to book travel accommodations and even for financial purposes, such as loans or investments. You can also use BEP2 coins for paying gas fees while trading on the Binance Chain platforms.
Due to this reason, users have to hold an amount of BEP2 (BNB) coins in their wallets to cover these fees regardless of the types of coins traded on the network. BEP2 tokens also act as assets that users can trade on Binance DEX, BNB Beacon Chain’s decentralized exchange.
BEP20 follows the Ethereum ERC-20 standard and is the default token for the BNB Smart Chain. Its purpose is to extend Ethereum’s most common token standard, and it was created to run parallel to but independently from the Binance blockchain. It also incorporates the smart contract functionality that BEP2 lacks.
Essentially, BEP20 provides a framework that allows developers to introduce new tokens that allow for dApp and decentralized finance (DeFi) operability. Similar to BEP2, BEP20 defines the BNB Smart Chain standards for how a token can be created and used.
BEP20 also provides basic token transfer functionalities, allowing developers to approve tokens that third parties can spend within the chain. You can also use them to make transfers between BNB Beacon Chain and BNB Smart Chain. Beyond cryptocurrency usage, this token can represent a vast range of assets, including fiat money, company stocks, commodities, and more.
Support for Smart Contracts
Smart contracts are transaction protocols that allow electronic systems to execute the terms of a contract automatically when certain conditions are met. These protocols are stored within the blockchain and cut off the need for intermediaries or human intervention. Hence, they minimize the risk of fraud and malicious or accidental errors, as well as arbitration and enforcement costs.
A cryptocurrency token with smart contract support appeals to more users and developers, and this is one of the greatest differences between BEP2 and BEP20. Of the two tokens, only BEP20 is compatible with the Ethereum Virtual Machine and its corresponding smart contracts. Accordingly, this makes it a better choice for developers who want to introduce tokens that are compatible with the Binance Smart Chain framework.
You can use BEP20 for creating decentralized applications and decentralized finance contracts. Among the many benefits that come with smart contracts, BEP20 features very fast transfers, automatic remittance, and very low costs compared to BEP2.
The transaction cost is one of the most important aspects developers consider before diving into a new project. Here, too, BEP20 has a significant advantage — no transaction fees on Binance’s centralized and decentralized exchanges.
BEP20 remains cheaper when traded outside BNB platforms, for instance, when using third-party wallets. The lower fees are explained by its consensus mechanism, the Proof of Stake Authority being faster and cheaper than Proof of Work.
Not only is Proof of Work more expensive, but it is also less environmentally friendly than Proof of Stake Authority. This is another thing that makes BEP20 more appealing.
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BEP2 and BEP20 are native BNB tokens. This ecosystem is different from Ethereum, but the truth is that compatibility with EVM is now more important than ever. According to experts, Ethereum features the largest and most diverse public blockchain ecosystem. EVM compatibility also allows new blockchains to build interconnected ecosystems.
Developers of new tokens can leverage the existing EVM developer community and create successful applications. This is why BEP20 is more appealing to developers, as it allows them to create new tokens on the BNB blockchain more quickly and with less effort.
Unlike BEP20, BEP2 doesn’t follow the Ethereum ERC-20 standard and is limited within the Binance ecosystems. Since it is impossible to use BEP2 coins on other blockchain networks, BEP20 gains the upper hand.
Another feature in favor of BEP20 is scalability. This token allows developers to identify supply and demand from minting and burning parameters. The flexibility of controlling demand and supply serves as a scalability boost for most projects.
BEP20 is also compatible with Ethereum, so you can trade it on public platforms. This is another point in favor of scalability. The opposite is true for BEP2.
BEP2 vs. BEP20 Tokens: 6 Must-Known Facts
- BEP2 is the token standard used by the BNB Beacon Chain platform. BEP20 is the token standard used by the BNB Smart Chain platform.
- BEP2’s main advantage is the convenience of trading between various cryptocurrencies in the decentralized exchange format (DEX).
- BNB backs BEP20 tokens, which are compatible with both BEP2 and ERC-20 platforms. You can trade between BEP20 and BEP2 whenever needed.
- Most virtual wallets support BEP20 tokens, but very few allow users to trade BEP2 tokens.
- BEP20 is cheaper to trade than BEP2, thanks to its lower gas and transaction fees.
- BEP2 does not support smart contracts. Most developers prefer the BEP20 blockchain because dApps rely on smart contracts for their functionality.
BEP2 vs. BEP20 Tokens: Which One Is Better? Which One Should You Use?
All things considered, choosing a favorite between these two tokens isn’t hard. BEP2 might be BNB’s original token standard, but it only serves those who want to remain confined within the ecosystem. Users can only trade these tokens on BNB blockchains, and they don’t support smart contracts.
BEP20 tokens, on the other hand, support smart contracts and are compatible with Ethereum. You can use them outside of the BNB blockchain or swap them for BEP2 coins whenever needed. Several virtual wallets support them, and developers have to pay fewer fees. Overall, BEP20 tokens are the best choice for developers and crypto traders alike.
Last update on 2023-03-18 / Affiliate links / Images from Amazon Product Advertising API