If you plan on buying and trading cryptocurrency on a regular basis, chances are you will or have already used Binance, the world’s largest cryptocurrency exchange. Which is why it is a good idea to gain an understanding of the two token formats currently used by Binance — and the different decentralized networks that it currently operates.
There are two of each, both of which are used for different purposes with their own native tokens. Although they were brought together earlier this year with the launch of the new BNB Chain system, they still have their differences. In this AAG Academy guide, we’ll look at the BNB Beacon Chain, the BNB Smart Chain, and the BEP2 and BEP20 tokens they use.
BEP2 is the token format for Binance Beacon Chain (BNB), which is used for all transactions on the Binance cryptocurrency exchange platform. BNB is accepted on both the centralized (CEX) and decentralized exchanges (DEX) offered by Binance, and it is most commonly used to pay network transaction fees — also known as “gas” fees.
One important thing to note about BEP2 BNB tokens is that they are exclusive to the BEP2 blockchain platform, and therefore can not be used on other third-party networks. In other words, if you attempt to send BEP2 tokens to a wallet on another blockchain, the transaction will either fail or you will lose those tokens.
BNB Beacon Chain (BNB) is the relatively new name for the Binance Chain (BC), the original Binance blockchain, which first launched in 2017 as a decentralized marketplace for exchanging digital assets. It hosts Binance’s decentralized exchange, which is used to acquire tokens that may not be listed on the centralized, more mainstream alternative.
Like other decentralized exchanges, BC was designed to make the exchanging process as quick and as affordable as possible. Users can use it to swap cryptocurrency assets directly with one another, with no need for a middleman or third-party facilitator, so the transaction fees are low. And those fees are paid with BNB, the blockchain’s native token.
BC employs the delegated proof-of-stake (DPoS) consensus mechanism, in which users vote to decide which network nodes will verify new blocks. It uses 11 validators per block, and the time to process a block is typically less than one second — hence why BC is so fast.
BEP20 is the token format for the BNB Smart Chain (BSC) network, which, unlike the original BC network, is capable of hosting decentralized applications (DApps). BEP20 tokens, unlike BEP2 tokens, aren’t limited to being used on BNB exclusively. They are compatible with both BEP2 and Ethereum’s ERC-20, and they use the same address format as ERC-20.
BSC, which first launched in 2020, and was known as Binance Smart Chain until earlier this year, is an Ethereum Virtual Machine (EVM), which means it is compatible with all DApps that are built to run on Ethereum. This gave BSC a huge advantage because it meant that existing DApps that were already incredibly popular, such as the MetaMask wallet, for instance, were immediately ready to run on BSC when it made its public debut.
This allowed Binance to more easily get into the decentralized finance (DeFi), NFT and wider web3 industries, which were taking off at an incredible rate at the time. What’s more, when developers are building new DApps for BSC, they can use code already well established for Ethereum, making things much simpler and boosting support for BSC itself.
BSC used the proof-of-staked authority (PoSA) consensus mechanism — a combination of DPoS and proof-of-authority (PoA). With PoSA, validators take it in turns to create new blocks, and it takes around five seconds to fill one block. BCS fees were paid using the native BEP-20 token.
Now, here’s where things get a little complicated. You see, BC, as it was formerly known, and BSC are no longer entirely separate entities. Earlier this year, Binance merged them into what’s called BNB Chain, a multi-network system that incorporates both BNB and BSC. So, users can now enjoy the best parts of both blockchains within a single system.
BNB Chain, which Binance refers to as just “BNB” for short — the same name given to its native token — is just as open as its predecessors, just as permissionless, and forever decentralized. BNB remains open-source, and it promises to be the best Binance network yet, with support for large-scale applications like GameFi, SocialFi, the Metaverse, and more.
Some of the improvements made with BNB include scaling from one chain to a multi-chain system, improving scaling solutions, boosting the throughput of BSC, and adding on-chain governance mechanisms. Binance calls these “major technical updates” that will also allow the company’s new “MetaFi” mission, bringing together everything web3 in one place.
The BNB Chain merge doesn’t make a whole lot of difference to BEP2 and BEP20 tokens. Both still exist, and BEP2 remains the token standard for BNB coin, the native token on the Binance DEX. It is also still a unique standard, exclusive to Binance, only usable on Binance, and not compatible with other blockchains. Therefore, its primary use is still paying fees.
BEP20 tokens, on the other hand, continue to use the same ERC-20 token standard as Ethereum. That means that in addition to being able to use them within Binance’s own blockchains, they are also compatible with Ethereum smart contracts, and therefore any DApp originally built for the Ethereum blockchain, of which there are more than 500,000 today.
Both BEP2 and BEP20 have extremely low gas fees, especially when compared to those on the Ethereum network. The average fee for BEP2 and BEP20 transactions is just a few cents, while the fee for ERC-20 has been known to exceed $50.
Binance Bridge 2.0 is the latest system for bridging certain tokens from Ethereum to BNB Smart Chain. It allows you to use wrapped tokens within the BNB Chain ecosystem for things like DeFi, blockchain games, the Metaverse, and more.
It would be unfair to compare the BEP2 and BEP20 token standards and say which is best since they are each used for different things. It would be like comparing a certain car with a certain airplane. BEP2 tokens are exclusive to the BNB Beacon Chain and predominantly used to pay transaction fees. BEP20 tokens have lots of other uses and are more flexible.
Yes and no. Almost all wallets compatible with BEP2 can also hold BEP20 tokens. However, as we mentioned above, while BEP2 is exclusive to the BNB Beacon Chain and cannot be used elsewhere, BEP20 tokens can be used on both the BNB Smart Chain and Ethereum.
That depends on what you’re doing, but it is best to use BEP20 tokens where possible due to the significantly lower gas fees on BEP20 transactions.
This article is intended to provide generalized information designed to educate a broad segment of the public; it does not give personalized investment, legal, or other business and professional advice. Before taking any action, you should always consult with your own financial, legal, tax, investment, or other professional for advice on matters that affect you and/or your business.
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