Understanding Network Differences
Every cryptocurrency is initially launched on a distinct network, known as a blockchain, with the potential for subsequent issuance on additional networks to expand its reach and applicability across various platforms.
If a cryptocurrency is not issued on another network, it can be transferred to it. Wrapped tokens are used for this purpose. These are token copies created based on the original on another blockchain. The original coin is locked in a smart contract while its copy is in use. When the token returns to the native blockchain, the wrapped version is destroyed, and the original is released. This ensures that the total supply of assets remains unchanged.
For example, Bitcoin has a wrapped version on the Ethereum blockchain (Wrapped Bitcoin (WBTC) and on the BNB Beacon Chain (Bitcoin BEP2 (BTCB).
Networks differ from each other in terms of:
- Consensus algorithm;
- Use cases;
- Functional features;
- Throughput and scalability;
- Compatibility with other networks;
- Privacy and confidentiality;
- Fees.
In addition to distinguishing features, blockchains have their own token standards. The functionality and properties of a cryptocurrency depend on its standard.
Networks often support multiple standards simultaneously:
- Ethereum: ERC-20, ERC-721, ERC-777, ERC-1155, ERC-4626, and others;
- Tron: TRC-10 and TRC-20;
- BNB Chain: BEP-2 and BEP-20.
Factors to Consider When Choosing a Network
The primary criteria for selecting a network are compatibility, fees, and transaction time.
Compatibility is paramount, as sending cryptocurrency through the wrong network poses the risk of asset loss. This consideration is crucial for both centralized and decentralized platforms and wallets, as certain limitations always exist. After verifying support for the desired networks, attention should be paid to cost-effectiveness.
Not all networks offer cheap and fast transactions. Therefore, for frequent transfers, it is advisable to focus on blockchains optimized for cheaper transactions.
Bitcoin offers reliable but slow transactions with high fees. It is not utilized on decentralized exchanges.
Ethereum is tailored for smart contract functionality, making it prevalent on many decentralized platforms. Additionally, the blockchain is present on most centralized platforms. Network fees are lower, and transactions are faster compared to Bitcoin. However, newer blockchains offer significantly more advantageous conditions.
BNB Chain is supported by many decentralized and centralized exchanges. Transactions are fast and cost very little.
Tron is less prevalent on decentralized platforms but widely used on centralized ones. Network fees are low, and transactions are fast.
Choosing a Network for Cryptocurrency Transfers via Bitbanker
If you intend to receive or withdraw cryptocurrency, ensure that you have selected the correct network to avoid any potential issues.
For example, if you have selected BEP-20 to replenish your balance, ensure that the platform or wallet from which the transfer will be sent also supports this network, and the same network is chosen in the window where your transfer is being processed.
In addition to the network, it is essential to verify the currency. Since many cryptocurrencies have similar names, double-check that you have chosen the correct one.
This can prevent confusion between currencies such as:
- USDC and USDT;
- ETC and ETH;
- BTC and BCH;
- APE and APT;
- GMT and GMX;
- and others.
Sending the wrong currency will result in loss of funds. While not all wallets impose restrictions, on centralized platforms, it is usually necessary to send a specific currency. Non-custodial wallets often do not impose such limitations; the crucial aspect is selecting the correct network.
Keep in mind that not all cryptocurrencies are available on multiple networks.
Avoid relying solely on the initial characters in the wallet address, as some networks have a unified format:
- 0x for ERC-20 and BEP-20;
- 0 for AVAXC;
- T for TRC-20.
Consequences of Using the Wrong Network for Transfers
If you mistake the network, you will lose your funds since confirmed transactions cannot be revoked.
If the transaction has not yet been executed, there is a chance to cancel it upon detecting the error. Prompt action is necessary, especially when using a blockchain with fast confirmation.
When sending funds via the wrong blockchain, several methods can be employed to recover the funds. If the transfer was made to a wallet supporting multiple networks, the cryptocurrency can be transferred to the desired blockchain.
If funds were sent to a wallet supporting only one network, incorrectly chosen, importing the private key into a new wallet supporting both networks is necessary.
Upon detecting an error, contact the exchange or wallet support to inquire about the possibility of fund retrieval.
If you mistakenly send USDT, you can contact the issuer’s support and request a refund. This option exists due to the stablecoin’s centralized nature. However, the fee for recovery is a minimum of $1000.