Learn about token standards (types of tokens) and why they are important in Best Wallet.
Understanding the difference between token standards will help you successfully buy, swap, and send your crypto.
What are token standards?
A token is a cryptocurrency that is created, managed, and distributed by a blockchain. These tend to have trading value and utility within the blockchain network.
Blockchains have created a set of rules that make it easier for developers to design tokens on these networks, and to ensure that new tokens are secure and well-designed.
This ruleset is called a token standard. It contains the guidelines that tokens should follow to be optimised for the blockchain. These rules usually describe the token’s data, the types of actions it is capable of, and how holders can use the token.
What is an ERC-20 token?
The most popular token type is the ERC-20, a standard that is used mainly on the Ethereum and Polygon networks.
The ERC-20 standard allows developers to create tokens on the Ethereum blockchain that can be utilised with the network’s other platforms and apps.
This means that developers creating platforms today can be reassured that they will be compatible with future unreleased tokens. For example, a brand new ERC-20 token will still be usable with the Uniswap decentralised exchange that was created in 2018.
Some of the biggest cryptocurrencies use the ERC-20 standard. These include Shiba Inu ($SHIB), Chainlink ($LINK), and Uniswap ($UNI).
But not every cryptocurrency is limited to just ERC-20. Some cryptocurrencies are available on multiple crypto networks and subsequently have different standard types for that same token.
For example, Tether ($USDT) can be used on both the Ethereum and BNB Smart Chain (also commonly referred to as Binance Smart Chain). Its token is available in two different standards to allow this: ERC-20 and BEP-20.
What is a BEP-20 token?
The BEP-20 standard is similar to the ERC-20 standard but is native to the BNB Smart Chain (BSC).
The BEP-20 standard was inspired by the ERC-20 standard and follows similar principles. The token standard‘s main goal was to create a flexible set of rules that allowed many developers to launch various tokens.
Binance created BEP-20 to include different modifications to ERC-20, with the aim of improving the speed and cost of transactions.
Similar to the ERC-20, these token types can interact with crypto apps across the BNB Smart Chain. For example, you can trade BEP-20 tokens on PancakeSwap, a decentralised exchange native to the BNB Smart Chain network.
Many of the large cryptocurrencies have BEP-20 versions, including Chainlink ($LINK) and Tether ($USDT). There are also significant cryptocurrencies that are native to the BNB Smart Chain, such as PancakeSwap ($CAKE).
Important considerations
When transacting in Best Wallet, it’s important to remember what network your crypto funds are on.
Check which chain your crypto resides on. Whenever you send cryptocurrencies to a new wallet, you will need to specify which chain you are sending on. You must make sure this correlates to the cryptocurrency you hold otherwise you could permanently lose this cryptocurrency. For example, if you are sending an ERC-20 token, make sure you send it on the Ethereum network. Learn how to check what network your cryptocurrency is on in Best Wallet.
Token standards determine compatible platforms. Your type of token will determine whether you can interact with certain protocols. For example, if you are looking to stake on PancakeSwap, make sure you are using BEP-20 tokens.
Choose your crypto investments wisely. Token standards have made it a lot easier to create a cryptocurrency. Many scam projects have emerged as a result of this, especially on certain networks and with certain token standards. Make sure you always research a cryptocurrency token properly before investing.