Blockchain technology has undoubtedly changed the financial industry. Now, financial institutions can launch their tokens on private and public blockchain networks. This can be done to create a digital currency through an initial coin offering (ICO) or even develop a customer rewards program.
To create a token, you must first know the available token standards. The most popular standards are ERC-20 and BEP-20. Both have unique features, use cases, and pros and cons.
In this guide, we’ll explain the difference between ERC-20 and BEP-20 on several levels, including transaction speed, security features, and compatibility with digital asset infrastructure. These comparisons will make an informed decision for your next digital asset infrastructure.
A token standard is a set of rules that dictates how a token should behave on a blockchain network. Token standards contain rigid conditions and functions that govern the creation and deployment of smart contracts.
Smart contracts are autonomous programs that run automatically on a blockchain network. Essentially, they’re the fuel that drives tokens. For example, you can use a smart contract to automatically execute perpetual futures, which are derivatives that allow continuous betting without an expiration date.
Token standards contain application-level specifications, such as:
They allow developers to create uniform applications on blockchain networks that perform basic functions.
Token standards are very similar to software development kits (SDKs). Developers can use token standards to create cohesive tokens for any decentralized application (dApp). Because they’re different from one another, token standards can impact a business’s or investor’s strategy in the digital asset market.
For example, your token standard will influence your digital asset infrastructure, whether you’re siding with Ethereum or Binance. Choosing AlphaPoint takes the frustration out of vetting token standards, meaning you can rely on white-label technology to develop custom tokens for your business.
Not all blockchains are the same. Each blockchain has its own set of token standards that dictate the development of tokens on that network.
Ethereum and Binance have two of the most popular token standards available: ERC-20 and BEP-20. Each token standard is designed to meet the platform’s unique functionalities while maximizing security and efficiency.
For example, the Binance Smart Chain (BSC) is typically faster than the Ethereum network. However, it’s much newer than Ethereum and has a smaller developer community.
For this reason, a business may choose the Ethereum network over BSC since it has a committed developer community and plenty of use cases.
The availability of different token standards means developers can choose the one that works best for their project and avoid a monopoly.
Several different crypto token standards are available to support a wide range of projects. The most well-known token standards are:
Countless other Ethereum and BSC token standards are available, but this guide will focus solely on ERC-20 and BEP-20.
The ERC-20 token standard contains vital information for token development projects on the Ethereum network. Here is everything you need to know about this framework.
ERC-20 contains specific functions and events commenced by a smart contract. Mandatory functions include:
As you can see, these functions specify how a token is spent and transferred. This framework also contains optional functions, such as:
Conforming to these standards helps developers ensure their tokens work with compatible wallets and incorporate with the rest of the Ethereum ecosystem.
The ERC-20 token standard is essentially a set of guidelines. By following these guidelines, developers can make sure their tokens are compatible with dApps in the Ethereum ecosystem.
These rules primarily focus on data access and token transfer between user accounts. Tokens following this format can be traded on Ethereum’s decentralized exchange.
To begin creating an ERC-20 token, here are three preliminary requirements you must meet:
Once you’ve met these requirements, you can start developing your ERC-20 token by following the steps below.
The BEP-20 token standard is a compilation of rules required of tokens on the BSC network. Let’s look at how this token standard works and its core functions.
BEP-20 tokens were designed to be a better alternative to Ethereum token standards, so they share several similarities. In fact, the BEP-20 token standard has many of the same functions as the ERC-20 standard.
However, there are some noticeable differences. For example, the BEP-20 token standard features a wider range of parameters, such as:
BEP-20 is the token standard for all apps on the BSC, a dynamic blockchain network that runs an alternative to Ethereum. This token standard outlines the specifications and rules for creating BEP-20 tokens.
Following this token standard ensures seamless usage, storage, and transfer of tokens on the Binance Smart Chain.
Here are the steps for creating a BEP-20 token from scratch:
You can store BEP-20 and ERC-20 tokens using hardware and software wallets. Here are some security considerations for storing your unique tokens:
You can securely test your tokens before deployment by choosing the right custody solution.
You can exchange both ERC-20 and BEP-20 tokens with the help of a cryptocurrency exchange that supports both tokens. Here are some well-known exchanges that allow users to purchase and exchange both tokens:
Before choosing an exchange, it’s important to ensure the platform supports the specific tokens you want to purchase and trade. You should also be mindful of any transaction fees.
So far, we’ve covered the basics of BEP-20 and ERC-20 token standards. Now let’s see how they compare to one another.
Both tokens have very similar purposes. Ethereum’s ERC-20 token standard formalizes all protocols and rules for tokens on its Ethereum blockchain. Similarly, the BEP-20 token standard defines a set of rules for tokens on the Binance Smart Chain.
Ethereum is a decentralized blockchain powered by smart contract functionality. It houses the widely popular cryptocurrency Ether, which has the second-highest market capitalization behind Bitcoin.
The ERC-20 token standard guides developers in creating dApps and tokens on the Ethereum blockchain. Binance Smart Chain is a subsidiary of Binance, a popular cryptocurrency exchange. Binance designed its blockchain to compete directly with Ethereum.
As the most popular blockchain network, Ethereum offers developers wider community support and flexibility. However, developers can face network congestion, slowing down their applications.
As a result, Binance’s solution is often faster and more efficient. The caveat is that Binance Smart Chain doesn’t have the same level of community engagement as Ethereum.
ERC-20 tokens rely on gas fees to streamline token transfers. When users execute a transfer, they pay fees to the network for processing. During periods of high congestion, gas fees can get expensive, resulting in slow and costly transfers.
On the other hand, BEP-20’s transfer fees are usually lower than ERC-20’s gas fees. So BEP-20 tokens are more ideal for minimizing transfer costs.
Both token standards support developers in creating custom tokens. However, ERC-20 tokens offer developers more resources and tools, thanks to Ethereum’s vibrant and established development community.
So developers wanting a low barrier to entry into token creation would likely prefer Ethereum’s network.
Binance Smart Chain offers high speeds and low fees, making it a more scalable blockchain than Ethereum.
In fact, BSC is best suited for fast-growing tokens and dApps that require cost-effectiveness and faster transactions.
On the contrary, Ethereum transfer costs can be a problem for growing financial startups.
The Binance Smart Chain is the faster blockchain. It can process up to 100 transactions per second, compared to Ethereum’s 20-30.
However, ETH 2.0 will reportedly be able to process 20,000 to 100,000 transactions per second, a remarkable 999,900% increase.
If you value speed above any other feature, BSC is the perfect token choice. That’s at least until Ethereum manages to improve.
Both ERC-20 and BEP-20 tokens are highly secure blockchain networks. Nonetheless, a token’s overall security will depend on its smart contract.
ERC-20 and BEP-20 tokens are built using blockchain technology, making them nearly susceptible to financial manipulation.
Decentralized exchanges like Uniswap, SushiSwap, and Balancer widely support ERC-20 tokens. BEP-20 tokens are compatible with decentralized exchanges that support the Binance blockchain.
Ultimately, ERC-20 tokens will have wider interoperability options because of the popularity of the Ethereum blockchain.
Here are some of the common questions about ERC-20 and BEP-20 tokens:
This can’t happen directly. You must convert a BEP-20 token into an ERC-20 token before you can send it to an ERC-20 address.
Both token standards are incredibly secure, meaning the overall security of the token will depend on the implementation of its smart contract.
You can store both tokens securely using either a hardware or software wallet.
Both tokens have the potential to be profitable. However, BEP-20 tokens offer lower fees, providing users with an affordable way of conducting transactions.
The ERC-20 and BEP-20 token standards dictate how developers can create tokens for the Ethereum and Binance Smart Chain networks. By following these tokenization standards closely, developers can create secure tokens from scratch.
With AlphaPoint’s white-label software solutions, you can rapidly deploy robust smart contracts for token issuance. Our experienced team handles smart contract development and token issuance so your business can focus on what it does best: handling your core operations.
With AlphaPoint, businesses also have access to a wide array of token pairings for exchange operators who want to serve a global user base.
To discover the full potential of AlphaPoint’s technology, request a demo today.
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