As an experienced blockchain analyst, I often get asked by developers and traders: "What‘s the difference between BEP2 and BEP20 tokens on Binance Chain?"
This guide shares my in-depth perspective to help you grasp the key contrasts between these two critical standards.
By the end, you‘ll understand the unique purpose, capabilities, and ideal use cases for BEP2 vs BEP20. I‘ll also make clear recommendations so you can decide which token model fits your needs as you explore Binance Chain development or trading.
Sound good? Let‘s dive in by laying the foundation…
Binance Chain and Binance Smart Chain 101
We can‘t compare BEP2 and BEP20 without briefly understanding Binance Chain and Binance Smart Chain…
Binance Chain serves as a high-speed trading platform optimized for crypto exchange between assets. It launched in 2019 to provide a fast, scalable alternative to existing blockchains.
Binance Smart Chain (BSC) parallels Binance Chain in the Binance ecosystem. It offers Ethereum Virtual Machine compatibility for building decentralized apps and DeFi.
Think of Binance Chain as prioritizing speed. And Binance Smart Chain as emphasizing smart contracts.
With the stage now set, let‘s explore each native token standard‘s origins and original purpose…
Demystifying BEP2 Tokens
BEP2 tokens originated as the native coin standard for Binance Chain.
Their purpose comes down to facilitating fast, high-volume trades between cryptocurrency assets. BEP2 powers Binance DEX and other DEX platforms built on Binance Chain.
For example, the speed of BEP2 aids:
- Executing 1-second trades to capitalize on arbitrage opportunities
- Supporting complex algorithms and high frequency trading strategies
- Settling millions in daily crypto exchange volume across DEX platforms
BEP2 also defines how to create and transfer tokens on Binance Chain. The standard ensures new assets integrate smoothly with BNB Coin for paying fees.
But BEP2 does not intrinsically support smart contracts. It focuses purely on speed. This limits flexibility for developers…
Now let‘s examine the origin story of BEP20 tokens.
Introducing BEP20 Tokens
The BEP20 token standard emerged to bring smart contract functionality to Binance Smart Chain.
It follows Ethereum‘s ERC-20 interface – the most common standard for tokens on Ethereum. With BEP20, the Binance Smart Chain blockchain could:
- Support decentralized apps, DeFi protocols, token swaps, and other popular Ethereum use cases
- Provide higher throughput and lower fees compared to Ethereum
- Retain cross-compatibility with existing Ethereum tooling and infrastructure
The table below shows how BEP20 builds on ERC-20 with adaptations tailored for Binance Smart Chain:
||Ethereum ERC-20 Standard | Binance Smart Chain BEP-20 Standard |
|-|:-:|:-:|
|Interface | Same method names and parameters to maintain compatibility | Same method names and parameters|
|Gas Token| Ether (ETH) used to pay transaction fees | Binance Coin (BNB) used to pay gas fees|
Transaction Validators | Miners who validate transactions and mint new blocks | Validators who stake BNB and validate transactions based on delegated stake |
This ERC-20 inspiration makes BEP20 well-suited for creating tokens and blockchain apps – especially DeFi.
Next let‘s dig deeper on the technical contrasts.
Comparing Technical Architectures
While both pivotal to Binance Chain, BEP2 and BEP20 differ significantly in their technical designs. Let‘s overview some core contrasts:
Consensus and Block Production
Binance Chain uses a Delegated Proof of Stake consensus with a fixed set of validator nodes. This aids swift 1-second block production. But some critique the more centralized approach.
By comparison, BSC leverages a Proof of Staked Authority algorithm based on BNB staking. This allows 3 second block times for faster/cheaper transactions than Ethereum while ensuring decentralization.
Smart Contract Capabilities
BEP2 does not support smart contracts given its sole focus on speedy transfers. This severely limits the flexibility of BEP2 tokens.
BEP20 fully supports Ethereum-compatible smart contracts. This interoperability explains the standard‘s rapid growth in 2021. Developers could easily port Solidity-based projects from ETH to BSC.
Statistics and Growth Trajectory
By Q1 2022, $350+ billion total value was locked in DeFi protocols on Binance Smart Chain. Top DApps like PancakeSwap saw 2+ million daily users.
Binance Chain‘s native DEX also facilitates hundreds of millions in daily BEP2 trading volume.
But BEP20 and Binance Smart Chain outpaced growth in developers, users, and value transfer – thanks chiefly to Ethereum compatibility.
This comparison just skims the surface. But you can see each standard aligns to core priorities…
BEP2 => Fast token swaps
BEP20 => Smart contract apps
Let‘s build on this with specific use cases.
BEP2 vs BEP20 Token Use Cases
With the technical and adoption profiles fleshed out, we turn to ideal use cases. As a developer or trader, when should you opt for BEP2 or BEP20?
BEP2 Use Cases
BEP2 excels for projects like:
- Trading bots that require rapidly swapping between volatile asset pairs
- New tokens you wish to list swiftly on Binance DEX
- Platforms focused strictly on transfers or payments rather than advanced logic
But even Binance Chain recognizes BEP2‘s limitations. Hence the parallel development of Binance Smart Chain to support smart contract functionality.
BEP20 Use Cases
BEP20 shines for:
- Building DeFi protocols, dApps, token swaps, and other complex platforms
- Porting Ethereum-based tokens or apps to gain user volume
- Minting NFT collectibles, crypto gaming assets, governance tokens, stablecoins and more
- Any project requiring smart contracts for advanced token behavior
BEP20 fuels most growth in Web3 development on Binance Smart Chain – from DeFi to NFTs.
Conclusion: Should You Choose BEP2 or BEP20?
We‘ve covered a lot of ground comparing BEP2 vs BEP20 tokens. Let‘s wrap up with my direct recommendations…
For trading-focused projects that demand speed – choose BEP2.
For ambitious development ventures prioritizing smart contracts – go BEP20.
If debating between standards, BEP20 seems the superior option for most use cases today due to its flexibility and adoption trajectory.
But both BEP2 and BEP20 will continue providing value across the broader Binance ecosystem moving forward.
I hope this insider‘s guide has provided much-needed clarity. Please ping me with any other questions!
