ERC-20 & BEP-20 Tokens Explained

Before the last decade, it was more tedious for developers to create tokens for their projects. However, the development of ERC-20 and BEP-20 standards has now made token development easier for developers.

By
Ahamdi Abarikwu
on
April 7, 2021
Category:
Cryptonomics

Introduction

Current estimates suggest that the number of cryptocurrencies as of January 2021 is well over 4,000. This number, by general assumption, means that about 4,000 cryptocurrency-based platforms have each created unique tokens for their platforms. Let us imagine for a moment that each of these platforms developed their tokens to be mutually exclusive of others. With nothing in common, the crypto market would be like a madhouse. Compatibility and interoperability will be very serious issues that will hinder the development of the crypto industry. 

To limit interoperability issues, it became necessary to have standards that define a common set of rules. If different tokens are created by developers in line with those rules, the tokens can work together better.

In this article, we will be looking at two of the most common standards used by developers for token creation: the ERC-20 and BEP-20 standards.

What Are ERC-20 and BEP-20 Tokens? 

The ERC-20 and BEP-20 standards are owned by the Ethereum Foundation and the Binance Organization respectively. These two standards are arguably the most popular standards preferred by developers. Tokens developed in line with these standards are called ERC-20 tokens and BEP-20 tokens. With the exception of Bitcoin, Ethereum and Binance are the next most capitalized Blockchain ecosystems. A recent report gave the total market capitalization of all ERC-20 tokens as about $46 billion. That of BEP-20 tokens was estimated to be $1.2 billion. Let us take a glance at the standards.

The ERC-20 Standard

There are a number of standards that a developer can choose from when creating a token. Out of them all, the ERC-20 standard is the most widespread. 

ERC-20 is an acronym. It stands for, ‘Ethereum Request for Comments’. The number 20 represents the Request ID. It was proposed in 2015 by a leading Ethereum developer named Fabian Vogelsteller.

The ERC-20 standard is a set of rules that a developer programs into a token’s smart contract. Tokens programmed in line with these rules are compatible with themselves and other blockchain services which support the ERC-20 standard. 

Features of ERC-20 Standard

The standard prescribes nine functions or rules. Six functions out of the nine are compulsory while three are optional. The six mandatory rules must be implemented before a token can be an ERC-20 token. The optional rules are at the discretion of a developer to implement or not. The rules and the lines of code that define them are as follows

  • Optional Rules
  • Token Name: This is used in giving the token a name. The function is written as: 

String public constant name = “Token Name”;

  • Symbol: Giving a token a symbol helps to differentiate it from other tokens. The code for it is, 

String public constant symbol = “SYM”;

  • Decimal:This function specifies the number of decimal places the token can be divided into. The maximum value is 18. The function is written as, 

Uint8 public constant decimals = 18;

  • Mandatory Rules
  • totalSupply: specifies the total number of tokens in the token’s smart contract. 
  • balanceOf: shows the number of tokens that an address has. 
  • Approve(): this function kind of audits the withdrawal of tokens from a contract address. It puts a cap on the number of tokens that can be withdrawn from that address. 
  • Transfer(): when this function is called, tokens are transferred from one address to another. 
  • transferFrom(): this function is similar to transfer() but is more flexible. It can specify an external address from where the tokens are to be transferred. 
  • Allowance(): this function checks if a user has the minimum of tokens required to honour a transaction. 

A sample of the codes that implement these mandatory functions can be seen in the picture below. 

BEP-20 Standard

This is the standard for tokens on the Binance Smart Chain. It is the convention that specifies the technical parameters for a token to be deployed and used on the Binance Smart Chain. 

The BEP-20 standard was derived from, and is compatible with the ERC-20 standard. The code of the functions that define the BEP-20 standard are mostly modifications of those of ERC-20. The modifications were done to improve the existing ERC-20 protocol and optimise speed, transaction cost. Here is a documentation describing the BEP-20 functions.

Gas Fees

BEP-20 and ERC-20 token transactions are paid for in the currency of their native blockchains; that is, BNB and ETH respectively.

Benefits of ERC-20 And BEP-20 Tokens

  • Convenience

They improve the compatibility and interoperability of the blockchain industry. In the past developers sometimes had to build new blockchains just to create a token. These tokens had conflicting parameters. ERC-20 and BEP-20 have made it easier for developers to create tokens that can work together. 

  • Higher Liquidity

Since tokens developed using the same standard are interoperable and interconvertible, it is easier to pool their liquidity together.

  • Better User Experience 

There are more than 4,000 cryptocurrencies in existence today. Imagine a crypto world with standards like ERC-20 and BEP-20.You would have had to need 100 wallets to store 100 cryptocurrencies. How extremely cumbersome that would have been. Nowadays because of standards you only need one or two wallets to manage your crypto assets.

 

Conclusion

The development of the ERC-20 and BEP-20 standards has brought sanity to blockchain development. Developers can now create compatible tokens easily. These ERC-20 and BEP-20 tokens have led to improved users’ experience and convenience. In general, the blockchain industry has become the better for it.


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Ahamdi Abarikwu

Ahamdi Abarikwu is an Electrical Engineer and a lover of anything crypto. He is also an avid writer, proofreader and editor. He loves to play Scrabble in his spare time.