The new ERC 404 token standard offers both promises and uncertainties to traders and digital art enthusiasts. But is this a reliable solution for traders and digital art enthusiasts?
The ERC-404 standard, which is an experimental standard, aims to solve this problem. It combines the ERC-20 non-fungible and fungible characteristics with ERC-721 fungible ones.
ERC-20 acts as a standard protocol for token issuance, which governs token exchange on the Ethereum Network. Tokens can be traded based on rules that are predefined. ERC-721, on the other hand, is a non-fungible standard, which allows developers to tokenize data ownership using Solidity.
ERC-20 standards and ERC-721 standard are usually designed for fungible digital assets such as currency and collectibles. This categorical division, however, complicates sharing and rapid exchange of specialized digital asset.
What we know about the ERC 404 standard
The ERC-404 protocol is a new standard that aims to combine the best features of ERC-721 NFTs with ERC-20 non-fungible Tokens. Its main goal is to solve the liquidity issues that NFT collections have and increase their utility in the defi eco-system.
ERC-404: What is it? work? ERC-404 is a contract template that facilitates transactions involving ERC-721 as well as ERC-20 tokens. This contract does nothing to alter existing standards, but instead facilitates the exchange of different assets. The Ethereum Foundation and the broader Ethereum community have not yet recognized ERC-404.
ERC-404 project
Pandora
Pandora was the first ERC-404 token to be released in early February 2024. The system is based on two assets, an ERC-20 token (PANDORA), and a non fungible ERC-721 coin known as Replicants.
The Pandora project released a total 10,000 ERC404 tokens. Each one was linked to a specific NFT in the Replicants Collection. The NFTs are represented as colored boxes, called Replicants. They come in five colors, which each represent a different level of rarity. Ordinary boxes are green while rarer ones are red. PANDORA tokens with ERC-404 codes come in a random box.
When a PANDORA Token is purchased, the mint contract will automatically create a NFT Replicant. This replicator will then be transferred to the user’s wallet. When a token or NFT is transferred from one wallet to another, it is then burned.
The reverse process is not possible. When selling or transferring an NFT the PANDORA token remains unaffected. Instead, the fungible Token is transferred into the new owner’s wallet along with a Replicants.
Each PANDORA token is generated by the mint contract with random parameters and varying rarities. The buyers of the NFT cannot predict the rarity in advance. This ensures that all users have equal opportunity and adds a level of uncertainty and speculation to trading.
DeFrogs
DEFROGS is a meme coin The PEPE crypto project inspired this collection. The DeFrogs Collection consists of 10,000 NFTs that each feature a unique frog, with its own features and accessories. Built on the Ethereum DeFrog blockchain ensures proof Token ownership and distinctive individuality
The project was launched in July 2022 and quickly gained considerable attention among the NFT community.
Why is ERC-404 becoming more popular?
ERC-404 became a hot topic in the X Crypto community. The surge in interest for these new tokens can be seen in metrics such as trading volume, PANDORA’s market value, and Replicants’ price.
PANDORA’s token value has increased by 290% since its launch in February, according to the latest figures. It now stands at $16, up from $5. CoinMarketCap. The token experienced explosive growth between February 5 and February 9. soaring The current market capitalization is $166 million.
Many factors have contributed to this rapid growth. ERC-404, a new standard for tokens with a unique trading format, is the first factor that contributes to this rapid success. Investors can also benefit from the price difference between the NFT token and the PANDORA.
The ERC-404 hype has caused a spike in gas fees, which reached an 8-month high. Users had to pay $60 for regular transactions, and the costs peaked at $377. Gwei – the highest since May 2023.
ERC-404 standard Spurs Competitor
Cryptocurrency Development Group unveiled a new implementation of ERC-404 experimental token standard in the wake of its rapid rise.
In response to concerns over fees, developers came up with a new solution. The Divisible NFT (DN-404) standard was introduced by programmers on February 12th. The Divisible NFT standard (DN-404) is a hybrid ERC-20/721 that allows tokens not fungible to be divided into pieces and traded among users.
The DN-404 standard uses two contracts instead of the ERC-404. “base” ERC-20 “mirror” ERC-721. Developers claim this separation minimizes potential problems.
The decentralized exchangeDEX) Trader Joe was the first platform To adopt the DN-404 standards, launching the SHOE token. These tokens were distributed exclusively to 22,140 wallets that belonged to active users of Joepegs and NFT projects associated with the Joe Studios accelerator.
What are the ERC-404 Tokens’ future prospects?
The standard has been criticized for its effectiveness and practicality. Developer Quit has highlighted vulnerabilities in lending pools that are not configured to ERC-404. This could allow users exploit the system by withdrawing high-value NFTs rather than their exchangeable fractions.
These criticisms highlight the experimental nature and potential challenges of ERC-404 in real-world application.
Despite these challenges, the ERC-404 has attracted interest for its unique approach towards NFT fractionation. NFTs have become more liquid due to the ability to trade tokens on decentralized exchanges.
This was a novel concept for NFTs. They were treated like regular ERC-20 Tokens. The price decline of Pandora and ERC-404 Tokens has raised doubts. This raises doubts about the success of the standard and its acceptance in the crypto community.
“This article is not financial advice.”
“Always do your own research before making any type of investment.”
Source: crypto.news