What is the difference between ERC20, TRC20 and BEP20 for Tether?

Tether is the most popular stable cryptocurrency today. It is available in different formats: ERC20, TRC20 and BEP20. Each of them has its own advantages and disadvantages that affect the speed of transactions, the size of commissions and functionality. In this article, we will consider how to choose the right USDT format for your transactions and what nuances you should pay special attention to.

Content:

• How Tether is different from other stablecoins
• What is a token
• What is ERC20
• Advantages and Disadvantages of Tether ERC20 Network
• What is TRC20
• Advantages and Disadvantages of Tether TRC20 Network
• What is BEP20
• What is the difference between BEP2 and BEP20 token
• Advantages and Disadvantages of Tether BEP20 Network
• What is the difference between ERC20, TRC20 and BEP20
• Which standard should a beginner choose?
• Choosing a wallet for ERC20, TRC20 and BEP20
• Conclusion.

How Tether is different from other stablecoins

Despite its high popularity and gigantic capitalization ($111 billion – third in the world), Tether is far from the only stablecoin on the market. It has several very serious competitors, such as USD Coin (USDC), Dai (DAI) and Binance USD (BUSD). However, some unique features make it stand out from its competitors:

1. Collateral. According to official information, USDT is backed by fiat currencies (mainly US dollars) at a ratio of 1:1. However, there is no objective information on this matter, since audits of the issuing company Tether Limited still cause heated debate among cryptocurrency market participants. At the same time, other stablecoins can be backed not only by fiat money stored in accounts of regulated US financial institutions, as in the case of USD Coin, but also by excess collateral of cryptocurrencies, as in the case of DAI or special algorithmic models, as implemented in Binance USD.

2. Centralization . Tether is issued and managed by a private company from the Bahamas, Tether Limited. Therefore, this stablecoin is categorized as centralized. While its competitors can be partially decentralized, such as USDC or BUSD. This means that they are issued and managed by a specific organization (for example, USDC is managed by Circle, and BUSD is managed by the Binance crypto exchange). At the same time, some aspects of their activities are carried out by decentralized entities: for example, Circle cooperates with decentralized protocols Compound and Aave, and BUSD with protocols PancakeSwap and Venus. Thus, both Tether competitors aim to make their cryptocurrencies more accessible to DeFi (decentralized finance) users.

3. Stability. Tether has always demonstrated a peg to the US dollar, but has been criticized for small deviations from it. However, the stability of Tether's competitors largely depends on the type of their collateral and management algorithms.

4. Usage: Tether (USDT) is very popular and widely used on crypto exchanges , while its counterparts are not so common and can be used more in the DeFi or gaming industry.

What is a token

Before we dive into Tether standards, we need to understand what a token is. Tokens are digital assets that may or may not have intrinsic value. Tokens with intrinsic value, such as DAI, MKR, BAT, are backed by various mechanisms: cryptocurrency reserves, voting on network parameters, or advertising demand. And tokens without intrinsic value, such as Dogecoin, Shiba Inu, or GameStop, determine their value solely based on supply and demand in the market. This state of affairs ensures compatibility between different tokens, which allows them to easily interact not only with each other, but also with decentralized applications (dApps).

What is ERC20

Such a powerful and multifaceted function as a token must be processed according to strictly defined and reliable rules, known as standards. It is ERC20 that acts as such a standard, operating on the Ethereum blockchain. ERC-20 (Ethereum Request for Comments 20) was first proposed by Fabian Vogelsteller in November 2015. It should be noted that there is no evidence that he had a significant influence on the development of this technology; most likely, he simply popularized it.

ERC20 is a technical standard for creating smart contracts on the Ethereum blockchain. It is essentially a set of specific rules that smart contracts must follow in order to be considered ERC-20 tokens. With this standard, users can transfer tokens from one account to another, find out the current balance, receive offers from other users, and confirm the amount of tokens spent by a third-party account.

Advantages and Disadvantages of Tether ERC20 Network

Like any cryptocurrency, the Tether ERC20 network has its own advantages and disadvantages that should be taken into account when using it.

The advantages of Tether ERC20 include:

• Stability – Pegged to the US dollar, providing exchange rate stability compared to other cryptocurrencies.
• Liquidity – can always be exchanged for any product or service, as it acts as an analogue of the US dollar.
• Availability – supported by most major cryptocurrency exchanges and wallets.
• Compatibility – compatible with a wide range of decentralized applications and smart contracts.
• Ease of use – easy to send and receive, just like any other cryptocurrency.

Among the disadvantages of Tether ERC20, we note the following:

• Centralization – issued and maintained by a centralized company, Tether Limited.
• Lack of transparency – Tether Limited does not fully disclose its reserves, which raises legitimate questions among crypto market participants about its transparency and accountability.
• Risks of hacking – like any other cryptocurrency, Tether ERC20 is vulnerable to hacker attacks and theft.
• Monetary policy - according to experts, Tether Limited is printing too many USDT tokens, which could lead to inflation.
• Unethical use – used for market manipulation and other illegal activities. For example, in 2018, the US Department of Justice charged cryptocurrency exchange Bitfinex and Tether Limited with conspiring to manipulate the price of Bitcoin by artificially increasing the supply of Tether ERC20.

To help you make a final decision about using Tether ERC20, we have summarized its main advantages and disadvantages in a table.

What is TRC20

TRC20 is a standard for creating cryptocurrencies only on the Tron blockchain. At the same time, these tokens can be used in applications developed for the Ethereum blockchain. The USDT TRC20 token is very popular and can be traded on many decentralized exchanges such as SunSwap, JustSwap, and DeFi Swap. In addition, they are actively used as a game currency and in-game items. Some companies use TRC20 tokens to reward their customers for loyalty. These include BitTorrent, which rewards its users for sharing files through its own network, WINk Network - for viewing ads and playing games on the blockchain, and the TRON Foundation - for transactions and participating in network governance.

Advantages and Disadvantages of Tether TRC20 Network

The benefits of TRC20 tokens include:

• Low fees – transactions with TRC20 tokens (on the Tron network) are significantly cheaper than transactions on the Ethereum blockchain (ERC20), thanks to the high throughput of the Tron blockchain.
• High transaction speed – transactions with TRC20 tokens are processed very quickly, usually within a few seconds.
• Scalability – The Tron blockchain is capable of handling a large number of transactions per second, making Tether TRC20 ideal for use in applications that require fast and cheap transactions.
• Compatibility – can be used in decentralized applications (dApps) developed for Ethereum.
• Widespread availability – Tether TRC20 is available on many cryptocurrency exchanges and wallets.

Disadvantages are similar to Tether ERC20.

What is BEP20

BEP20 is a token standard developed by Binance for its own blockchain, Binance Smart Chain (BSC). It is an evolution of the ERC-20 format used in the Ethereum network, but with some key differences. The main one is compatibility with smart contracts, as well as significantly lower fees due to the high throughput of the BSC blockchain. In addition, transactions with BEP20 tokens are processed very quickly, usually within a few seconds.

What is the difference between BEP2 and BEP20 token

Beginners often confuse BEP2 and BEP20 tokens. So let's talk about the difference between USDT BEP20 and the BEP2 standard. The only thing that connects them is their relationship with the Binance exchange, for which they were developed. Without going into technical details, BEP2 is a simple and effective standard specifically created for fast and cheap cryptocurrency transactions, while BEP20 is more universal and is used for a large number of applications. In addition, BEP2 tokens are completely incompatible with other blockchains, while BEP20 is compatible with Ethereum and many other distributed ledgers that support the ERC-20 standard.

The main differences between these standards are presented in the table:

Advantages and Disadvantages of Tether BEP20 Network

The advantages and disadvantages of the BEP20 token are almost identical to the pros and cons of USDT ERC20, since this token is a continuation and development of the ERC20 standard.

What is the difference between ERC20, TRC20 and BEP20

In simple terms, ERC20, TRC20 and BEP20 are token standards that are used to create and issue cryptocurrencies on different blockchains: Ethereum, Tron and Binance Smart Chain (BSC), respectively.

The characteristics of ERC20, TRC20 and BEP20 are shown in the table below:

Which standard should a beginner choose?

To make it easier for an ordinary user to work with ERC20, TRC20, and BEP20 tokens, they should make sure that their wallet is compatible with these standards. For beginners, we recommend paying attention to USDT ERC20. Due to its versatility and a large selection of tokens for exchange, it is most attractive for beginners. At the same time, TRC20 and BEP20, due to their low fees and fast transactions, will certainly be of interest to more experienced users who frequently make transactions.

Choosing a wallet for ERC20, TRC20 and BEP20

Whichever token you use – ERC20, TRC20 or USDT BEP20, you need to store them somewhere. Therefore, before you start working with USDT tokens of these standards, take care of a suitable wallet for storing them. The easiest option is to download a wallet from the Play Market or AppStore, which we wrote about in detail in “ Trust Wallet Review ”.

Trust Wallet is a popular mobile wallet that supports multiple tokens including ERC20, TRC20, and BEP20, and has a built-in web browser for decentralized applications (dApps) - DEX exchanges: Uniswap, PancakeSwap, DeFi applications: Aave, Yearn Finance, blockchain games like Axie Infinity and OpenSea for the NFT market.

As an alternative to Trust Wallet, you can consider the equally popular mobile wallet Metamask and multi-currency wallets for desktop and mobile devices Exodus and Atomic Wallet. All of them support Tether in ERC20 and TRC20 formats, as well as BEP20.

Conclusion

Tether (USDT), pegged to the US dollar, remains the most popular cryptocurrency available on various blockchains. For beginners, it is easy to get confused by the variety of existing standards, such as ERC20, TRC20, and BEP20. Each of them has its own pros and cons, such as transaction fees, processing speed, and availability. In this article, we have looked at the main differences between the Tether standards, their advantages and disadvantages, as well as popular storage wallets to help you choose one. However, the final decision is up to you, and will depend on your individual needs.

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