Understanding BEP20 Token Standard

Introduction

Decentralized Finance or DeFi offers its users the ability to keep transaction records without the presence of any centralized regulatory body. It means that there are no banks, no tellers, or government agencies that are supervising the transactions on a blockchain. To ensure that the blockchain remains independently operational without any need for mechanical input, a specific set of rules is programmed into blockchain protocols and cryptocurrencies. Studying these predetermined sets of rules can allow digital currency traders to understand and use their crypto reserves to the best of their potential.

What is a Token Standard?

Before learning about the BEP20 token standard, it is crucial for the readers to first understand the concept of token standards. A token is an encrypted entity that can transfer value between two parties. Tokens are always issued and backed by a native blockchain project like the MATIC token issued by the Ethereum blockchain. These tokens can carry out commands and remain operational without any guidance from a nominated supervisory authority.

For example, fiat currencies are printed and managed by the Central Banks of the related country. Decentralization of tokens is made possible with the use of smart contracts. Smart contracts are a set of programmed rules that allow all tokens issued to follow and behave based on them. The smart contract rules specified for tokens are called token standards, which are used to specify features of a token like an interface, minting, burning, pause, staking rules, etc. One token can follow multiple tokens at any given time, but all the token standards acting on the tokens need to be in sync.

Types of Token Standards

The types of token standards are determined by the features and the source of issuance. One particular token can be compatible with a wide variety of token standards as long as there are no clashing protocols. Tokens standards are typically native to a blockchain. Ethereum network has managed to issue several token standards since its conception. In the same manner, several other blockchains have issued a personalized version of token standards that allow native and foreign tokens on the blockchain to remain operational and act in an expected and predetermined manner for all cryptocurrency investors and holders.

What is a BEP20 Token Standard?

A BEP20 token standard is specific to Binance Smart Chain. It is worth noting that Binance is one of the largest cryptocurrency exchange platforms in the world. The cryptocurrency exchange also launched a native blockchain a few years ago. With time, Binance rebranded its native blockchain and introduced a parallel project called Binance Smart Chain or BSC that was responsible for hosting its native token called the BNB token.

The BEP20 token standard is a set of rules for BNB token governance issued by BSC developers. The BEP20 token standard is used by other developers to enable their cryptocurrency projects to be able to interact and host on the BSC blockchain. BEP20 token standard took its inspiration from the ERC20 token standard, which is one of the most popular token standards in the blockchain sector. However, BEP20 Token is often appreciated for its compatibility with Web 3.0-related projects.

How Does BEP20 Token Standard Work?

Binance blockchain and BSC depend on smart contracts to carry out their decentralized operations. The BEP20 token standard is a set of rules or interfaces that decides how the BNB token and other digital currencies are going to behave while operating. The BEP20 token standard is the aggregate governance protocol that allows a token to qualify for operating on the BSC.

The developers who are planning to issue a token protocol on Binance Smart Chain need to understand and program their cryptocurrencies per the BEP20 token standard. BEP20 is an abbreviation for Binance Smart Chain Evolution Proposal. Without compliance with the BEP20 token, any digital currency cannot interact or operate in tandem with the BSC ecosystem.

Binance Smart Chain

The Binance Smart Chain or BSC was introduced, keeping in view the innovative approach for projects that are well-suited for the Web3.0-related blockchain and cryptocurrency projects. Using the BEP20 token standard as a guideline, developers were able to create several types of autonomous Web 3.0 compatible cryptocurrencies and blockchain applications. When developers want that their token on the BSC ecosystem, they use BEP20 token protocols using programing.

Binance Chain put the biggest emphasis on design-related guidelines for developers. With a hefty and unruly design, tokens can clog the blockchain network and create backlogs in digital transactions. However, with the help of the Binance Chain protocols, developers can ensure that every token on the network is in sync with others and remain operational without experiencing any disruptions. Furthermore, Binance Chain and BSC also allow developers to create effective and compatible DEX or decentralized exchange tokens, smart contracts, applications, and protocols.

What is Dual Chain Architecture?

The readers have noticed mention of Binance Chain and Binance Smart Chain related to Binance Exchange thus far. The developers at Binance use Dual Chain Architecture that is defined and streamlined by the BEP20 digital address and related protocols. It is worth noting that Binance Chain and Binance Smart Chain are independent projects. However, both blockchains can operate parallel and complement the other.

Dual Chain Architecture can be defined as the interconnection or link between the Binance Chain and BSC. Dual Chain, also called Binance Bridge, allows the tokens such as BNB to travel from one blockchain project to another without using any third-party mediator. Binance Bridge is also responsible for increasing the interoperability of the networks. It is also worth noting that Binance Chain and Binance Smart Chain are two independent blockchain networks with different sets of Token Standards. BEP20 Token Standard is exclusive to BSC. BEP20 Token Standard provides a baseline for the developers to create suitable crypto products that are in sync with the BSC requirements.

Important Parameters of BEP20 Token Standard

BEP20 token standard has taken inspiration from the ERC20 token protocols that are issued for governance guidelines on the Ethereum network. Any security token, stablecoin, or utility token that is present on BSC needs to comply with the BEP20 standard. BEP20 also provides the guidelines for the developers to create Peggy Coins, which are a special class of cryptocurrencies with the ability to get a pegging to the value of other asset classes or commodities. Here are some of the important parameters set by the BEP20 token standard that every native token has to follow:

Minting

Minting is the ability of a blockchain protocol to create new tokens to perform a specified set of functions. The developers on the BSC can mint new tokens with the help of guidelines using the BEP20 token standard. BEP20 token standard serves as an inflationary parameter for the minting protocols. Developers can take specifications defined in the BEP20 Standard library and use them to make sure that they can mint new tokens on BNB without violating the inflationary rules required and make a contribution to expanding the BEP20 supply.

Burning

If a token project wants to allow its users to send their reserves to burning addresses, it can also take reference from the BEP20 token standard. The tokens that are compatible with the BEP20 token standard can allow their users to deploy the minting options on the network and take advantage of its deflationary parameters. Burning can help a token project reduce the supply and maintain demand.

Blacklisting

BEP20 token standard also allows the developers to set the Blacklisting criteria. If any of the tokens operating on the BSC network violate certain rules that can result in losses for the investors, it is defined in advance by the BEP20 standard. These limitations can work as a deliberate technical blind spot that hackers can exploit and filter out by Blacklisting unethical or uncompetitive practices.

Pausing

Pausing protocols are like a fuse for blockchain protection in the event of a technical crash or a hack attack. Using the Pause protocols, the developers can isolate and freeze all the cryptocurrencies that are under attack or experiencing a glitch. In this manner, the hackers are blocked from stealing any more tokens, and developers can jump in to implement countermeasures.

Differences Between BEP20 and BEP2

In the aforementioned paragraphs, readers have understood that Binance exchange has launched two independent blockchain projects, namely Binance Chain and BSC. While BEP20 token standard is native to BSC, the Binance Chain uses the BEP2 token standard as its core programming principles. Digital currency traders need to understand the point of distinction between the two token standards to avoid any overlap and be able to use them effectively.

Scalability

Scalability is the ability of a blockchain network to handle the number of transactions per second. BEP2 token standard offers a lesser amount of scalability capacity in comparison to the BEP20 token standard. To this end, BEP20 allows the developers to add burn and mint options to maintain the demand and supply dynamics effectively.

Transaction Fees

BEP2 can guide the developers to incorporate transaction fee guidelines for centralized and decentralized exchanges. However, the tokens that are using BEP20 at their core do not require any transaction fee input on either CEX or DEX platforms based on Binance.

Blockchain Ecosystem

The ecosystem suited for BEP2 tokens is Binance Chain, while the BEP20 tokens are appropriated for BSC.

Smart Contracts

BEP2 standard does not contain any protocols that can support batch transfers on Binance Chain. On the other hand, the BEP20 standard has dedicated a lot of attention to making the BSC tokens get smart contracts support and backing.

Consensus Models

BEP2 tokens are always PoW or Proof-of-Work consensus mechanism currencies. On the other hand, BEP20 tokens are useful for the tokens that are using the PoS or Proof-of-Stake consensus model.

Token Address

BEP2 token addresses typically start with BnB, and they also require a MEMO. Meanwhile, BEP20 tokens use x0 suffixes like Ethereum network addresses.

Ethereum Affinity

BEP2 tokens do not have compatible programming to allow them to transfer to the Ethereum ecosystem. On the other hand, BEP20 tokens have borrowed heavily from the ERC20 token standards on the Ethereum network, and therefore they can run on the Ethereum blockchain without any additional protocols.

Differences Between BEP20 and ERC20

ERC20 stands for Ethereum Request for Comment, which is a part of the EIP or Ethereum Improvement Protocols. The ERC20 Standard is often touted as the main building block for the Ethereum network. The core developers at the Ethereum network, Vitalik Buterin, and Fabian Vogelstellar, created the ERC20 token standard in an attempt to add scalability to the Bitcoin source code. Binance developers have based the BEP20 standard on ERC20; however, there are still some visible differences between the two entities mentioned:

Transaction Fees

Transaction fees on BEP20 tokens are mostly cheaper and almost non-existent. On the contrary, ERC20 tokens are subject to massive gas fee inflation on account of increasing trading volume on the network. 

Another reason for the increase in Gas fees for ERC20 tokens is that they are paid in the form of Ethereum tokens that are more expensive. In contrast, BEP20 tokens can settle gas fees using BNB.  Furthermore, the smaller gas fee also keeps the BNB supply limited in comparison to the ETH that keeps increasing in quantity in the form of gas fee payments for ERC20 tokens.

Scalability

ERC20 tokens can line up one transaction per 15 seconds, which grants it a limited transaction processing speed. Meanwhile, BEP20 tokens can process a complete circuit of transactions every 3 seconds that making it faster and more scalable in comparison by five times.

Security

Security against threats is a very important factor when it comes to digital trading currencies online. ERC20 tokens offer better protection against hacks and technical blind spots in comparison to BEP20 tokens. The main reason that ERC20 tokens require more time to verify every transaction is that they have a greater number of technical checkpoints.

Steps to Create a BEP20 Token

There are certain important points that a developer must decide before they plan to create a new BEP20 token reserve. To learn about the steps for creating the perfect BEP20 token, it is important to first learn about the basic features that every token must possess. The developer must first determine the following variables to create a BEP20 token:

Minting

The developers must determine all the protocols and executable commands related to minting new tokens. The developer should be able to answer questions like who has the authority to mint the tokens, what consensus model the miners can use, what are the requirements for token minting privileges, and how minting can be disabled if needed.

Capping

Capping defines accounting for the total number of tokens in a crypto project. Once a blockchain has been capped to a specified number of tokens, it cannot make any addition.

Burning

Burning protocols are an important feature for a token project that allows the developers or the users to reduce the total supply. The developers should decide in advance the conditions for burning tokens to maintain a healthy demand.

Ownership

The rights of a token owner are also set by the rules that are pitched in by the developers of the token project.

Accessibility Options

Developers have the option to allow the users of tokens to set nominate admins or minters. It is a great feature for investors who are planning to add professional brokers to assist them with crypto trading.

Notifications

Developers can introduce operable tokens that can issue a notification after confirmation of the transaction verification process. In this manner, the senders and receivers of the tokens can get a call back to confirm the transfer or approval of token transactions.

Recovery

In the event of a hack attempt or a technical error, recovery protocols can allow the token holders to salvage their reserves or even regain access to their funds.

Now that the important features for token creation are clarified, the reader can follow the following steps to create a new BEP20 token. The creator of the BEP20 token should have a digital wallet account such as MetaMask or TrustWallet and have a command on Remix IDE that allows them to generate contracts using the Solidity programming language. Here are the steps:

Setup the BSC Testnet on the digital wallet application. Different digital wallet applications have different options for adding BSC Testnet. The users must input the network name, RPC URL, Chain ID, currency symbol, and block explorer URL.

It is time to add a few BNB tokens to the digital wallet account. Developers can also copy the digital wallet address and paste it into the required field to commence the BNB transfer.

The next step involves coding the new BEP tokens using Remix IDE. Developers can borrow the ERC-20 token standard from OpenZepplin for a smart contract as BEP20 also use EVM. 

Once all 9 lines of code are done, developers can deploy the initial BEP20.sol on BSC Testnet using the solidity compiler options. The developers should connect their digital wallets with Remix IDE after adding the Web 3.0 environment and set “initial Supply” with the deploy button.

The final step is to add tokens to the digital wallet account with the help of Add token option filling out the necessary information. There is also the option of copying the Remix Contract address and accepting the token as fields are automatically completed.

Conclusion

BEP20 token standard serves as a guideline or a mold for the developers who can use the predetermined requirements to create compatible tokens. Some of the top BEP20 tokens are Safe Moon, Zilliqa, Wrapped Bitcoin, and Wrapped BNB. BEP20 is also used for standardizing DEX like Pancake Swap, Yield aggregators like Autofarm, and MMA protocols like Venus.


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