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Simply Explained

Simply Explained: Bitcoin BEP2 (BTCB)

Updated: Aug 31, 2024
Published: Apr 18, 2022
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Do you have an exchange account with Binance? Considering it’s the biggest crypto exchange in the world, there’s a good chance you do.

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Not only is Binance the world’s biggest exchange, but it has also developed one of the largest networks in the space. It has branched into trading, blockchains, education, ICOs and very notably DEXs (decentralised exchanges).

The Binance Chain and decentralised exchange are what we will be focusing on here.

What is BEP2?

BEP2 stands for Binance Chain Evolution Proposal 2. It’s essentially a criterion that tokens must meet to function in the Binance ecosystem.

An issue that often occurs when using a specific chain, is the lack of interoperability. The problem with crypto is its division. Certain tokens can’t be used or transferred on certain chains. This means that on certain chains an asset has little or no liquidity.

A key example is BTC. It’s slow, hard to develop on, and developers struggle to find workarounds to deal with high fees and slow speeds. So trading BTC on the Binance network has been very limited.

How do you deal with this?

Well, how about we buy lots of Bitcoins, put them in a safe, issue a token that does work well on Binance and use it as a substitute? Bright idea, right?

It’s what our forefathers did with treasury bills during the very early days of money.

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Well, that’s exactly what they did. BTCB is a token 100% backed by BTC that Binance has in its reserve. The price is pegged to Bitcoin at a rate of 1:1. Think of it as a clone of BTC issued on the Binance Chain. What’s even cooler is its transparency, you can actually see the reserve BTC Binance is holding for the project.

As it developed on the Binance Chain, BTCB easily fixes the issues developers had experienced with BTC whilst maintaining the qualities desired from Bitcoin. They’ve fixed the interoperability issue we discussed earlier.

People are familiar with Ethereum and the ERC20 network, BTCB is just like WBTC or RenBTC on the Ethereum network.

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The impact of BTCB

Since the release of BTCB, traders on Binance DEX have had the opportunity to trade BTC, even if the BTC is hosted on a completely different blockchain. BTCB, therefore, provides Binance DEX traders with access to even more trading pairs, resulting in increased trading volumes. As the range of available assets has grown, so has the liquidity on the platform. All in all, Binance benefits, Bitcoin benefits and anyone trading in the space benefits.

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