Binance Smart Chain (BSC) is a blockchain that operates in parallel to the original Binance Chain. Launched initially in April 2019, Binance Chain was designed to enable fast and decentralized trading. However, to achieve this, certain trade-offs were made, limiting its programmability compared to other blockchains.
Binance Smart Chain was introduced to address these limitations. It is a new blockchain that provides a full environment for building high-performance decentralized applications. Built to ensure cross-chain compatibility with Binance Chain, BSC allows users to benefit from the strengths of both platforms.
BSC supports smart contract functionality and is compatible with the Ethereum Virtual Machine (EVM). This design preserves the high throughput of Binance Chain while introducing smart contracts into its ecosystem.
BEP20 Token Standard
The BEP20 token is a technical standard created on Binance Smart Chain. It extends the functionality of Ethereum’s ERC-20 standard, serving as a foundational framework that defines how tokens can be used, spent, and managed within the BSC ecosystem.
BEP20 tokens were designed to offer developers a flexible format for launching various types of digital assets. Similar to BEP2 tokens on Binance Chain, BEP20 token transfers are powered by BNB, which incentivizes validators to confirm transactions on the blockchain.
How Binance Smart Chain and BEP20 Tokens Work
Consensus Mechanism
BSC uses a consensus model called Proof of Staked Authority (PoSA). Participants stake BNB to become validators. When they propose a valid block, they earn transaction fees from the transactions included in that block.
Unlike some protocols, BNB is not inflationary—there is no block subsidy for newly minted BNB. Instead, the supply of BNB decreases over time due to regular token burns conducted by Binance.
Cross-Chain Compatibility
BSC was designed as an independent yet complementary system to the existing Binance Chain. The dual-chain architecture enables users to seamlessly transfer assets from one blockchain to the other. This allows for fast trading on Binance Chain and powerful decentralized application development on BSC.
Tokens like BEP2 and BEP8 from Binance Chain can be swapped for BEP20 tokens, the new standard adopted by BSC.
Decentralized Finance on Binance Smart Chain
A range of digital assets—such as BTC, ETH, LTC, EOS, and XRP—exist on Binance Chain as “Peggy Coins.” These are tokens pegged to assets on their native chains. For example, locking 10 BTC allows users to receive 10 BTCB on Binance Chain. These can later be traded back for the original asset, ensuring the pegged token’s value mirrors the underlying asset.
The flexibility of Binance Smart Chain enables assets from various blockchains to be used within the growing decentralized finance (DeFi) ecosystem.
👉 Explore more about DeFi strategies
BSC and the BEP20 token standard significantly expand the functionality of the original Binance Chain. They incorporate advanced protocols designed to bridge the gap between different blockchains. Although still in its early stages, BSC’s support for BNB staking and EVM compatibility makes it an ideal platform for developers building robust decentralized applications.
Frequently Asked Questions
What is the difference between Binance Chain and Binance Smart Chain?
Binance Chain focuses on fast, decentralized trading, while Binance Smart Chain supports smart contracts and decentralized applications. They run in parallel and are cross-chain compatible.
How do I create a BEP20 token?
You can create a BEP20 token using platforms that support token generation on BSC. Typically, you need to specify the token name, symbol, and decimal places before confirming the transaction with BNB.
What is the role of BNB in the Binance Smart Chain?
BNB is used for staking by validators, paying transaction fees, and governing the network. It also facilitates token transfers and smart contract executions.
Can I use MetaMask with Binance Smart Chain?
Yes, BSC is compatible with the Ethereum Virtual Machine, so you can configure MetaMask to interact with Binance Smart Chain by adding the BSC network details.
What are Peggy Coins?
Peggy Coins are tokens on Binance Chain that represent assets from other blockchains, such as Bitcoin or Ethereum. They are pegged 1:1 with the original asset.
Is Binance Smart Chain decentralized?
BSC uses a Proof of Staked Authority consensus, which relies on a limited number of validators. This offers scalability, though it involves a trade-off in full decentralization compared to Proof of Work systems.
Conclusion
Binance Smart Chain and the BEP20 token standard enhance the original Binance Chain by introducing smart contracts, cross-chain compatibility, and DeFi support. With high throughput and low transaction costs, BSC is an attractive option for traders and developers alike.