What are BEP-20 tokens?

What are BEP-20 tokens?

BEP-20 is a token standard that runs on BNB Chain. The abbreviation “BEP” is short for “Binance Smart Chain Evolution Proposal” and extends the ERC-20 token standard made for the Ethereum network.

For the BEP-20 tokens to make sense, let’s first take a quick look at BNB Chain and its ecosystem.

BNB Chain

BNB Chain is a blockchain platform that allows developers to build and deploy their DApps quickly and easily and was envisioned by Binance to be an alternative to Ethereum. BNB Chain uses advanced smart contract technology to improve the efficiency, transparency, and speed of transactions on the network, making it an ideal choice for many developers. As of November 2022, it’s the world’s largest smart-contract blockchain in terms of transaction volume and daily active users.

The evolution of smart contracts first arose when the popularity of the Ethereum network grew, and the ERC-20 token standard was made as a way for these smart contracts to interact with each other. The BEP-20 token standard has the same purpose, just on the BNB Chain.

Worth adding to the story; Binance first launched Binance Chain in 2019, a blockchain optimized for ultra-fast trading based on the BEP-2 token standard. However, the focus on speed caused issues on other fronts, and they needed a way to make it more flexible for developers making smart contracts. The solution? They launched a new blockchain, the Binance Smart Chain, and the BEP-20 token standard.

With dual chain architecture, both chains are complementary. This means that you can swap between BEP-2 tokens and BEP-20 tokens.

In February 2022, Binance merged Binance Chain and Binance Smart Chain to form BNB Chain. You can read more about it here.

So, what are BEP-20 tokens?

You can look at the BEP-20 token standard as a set of rules or technical guidelines developers must follow when creating a token on the BNB Chain. These rules ensure that the new token performs essential functions, making it compatible with other products and services on the network. Any tokens created following the BEP-20 token standard are deployed as BEP-20 tokens.

BEP-20 was designed to provide a flexible format for developers to launch different tokens. These tokens can represent anything, like shares in a company or money in the bank, with the latter being what we know as stablecoins. This format simplifies the process of creating a token, and everyone can have a token created on BNB Chain in minutes.

The BEP-20 tokens stand out in the crypto space as they’re designed for transactions to go super fast and with nominal transaction fees. They’re also EVM-compatible, meaning they can interact with the Ethereum Virtual Machine - solving any potential usability issues. These specs make them preferable for many people in the space, being proven by having the most daily active users.

You can dive deeper into the BEP-20 token’s specifications here.

Examples of BEP-20 tokens

Let’s look at the three most known examples of BEP-20 tokens.

Binance-Peg BUSD (BUSD)
BUSD is a stablecoin pegged to the US dollar on a 1:1 basis. It was developed by Binance in partnership with Paxos – an American-based financial services company. Stablecoins like BUSD are designed to achieve price stability and provide an alternative option to traditional fiat currencies. Note that the original BUSD was created as a BEP 2 token running on Binance Chain, so Binance-Peg BUSD is the BEP-20 version made for the Binance Smart Chain.

PancakeSwap (CAKE)
Like Uniswap for Ethereum, PancakeSwap is a decentralized exchange for swapping BEP-20 tokens. The primary function of their native token, CAKE, is to incentivize people to add liquidity to the exchange, as PancakeSwap generates CAKE to reward people who contribute to the liquidity pools through various methods.

BakerySwap (BAKE)
BakerySwap is another decentralized exchange for swapping BEP-20 tokens and the first made on BNB Chain. Their native token, BAKE, works in a similar way as CAKE does for PancakeSwap, rewarding liquidity providers but also giving voting rights on the protocol.

Final thoughts

BEP-20 is one of the most preferred tokens in the space, and for a good reason. It gives developers the tools to implement cutting-edge smart contracts and dApps and has established itself as the go-to blockchain for developers. It also supports quick, cheap, and efficient DeFi transactions, making it attractive for the everyday user.

However, we do see new up-and-coming L1s being developed, promising even better tech, so there’s no doubt that BNB Chain and the BEP-20 tokens will see more competition in the future.

Even Bergan Bugge

Even Bergan Bugge

Account Executive at Presail