What is ERC 404? Is it worth the investment?

So what is this new hype about? ERC-404, the new token standard on the market, will be released in February 2024! With interoperability, better operations, and improved use cases, this new standard is all set to dominate the crypto space. Several developers have recently sparked the Ethereum space with this new token standard.

But what exactly is ERC-404? The Ethereum network has two important token standards: ERC-20 and ERC-721. ERC-404, named after a popular website error code, is an unofficial Ethereum standard built by the Pandora team. Combining the utility of fungible and non-fungible tokens creates a semi-fungible token.

Pandora, the first token built on the ERC 404 token standard, has a market capitalization of $176,321,562. With a 24-hour volume of $24,535,317 and an average price of $17,485.16, it is attracting a lot of attention from investors and traders alike.

However, it is worth noting that the token price has experienced significant volatility since its debut. On February 9, Pandora’s market capitalization exceeded the $300 million threshold and trading volume hit a record high of $71,542,503.

This Coinpedia report summarizes all information related to ERC 404. Let’s delve into the basic principles of ERC 404 as they unfold step by step!

introduction

As mentioned earlier, the Ethereum network has two important token standards: ERC-20 and ERC-721. The ERC-20 token standard is for fungible tokens that function like digital cash. The ERC-721 token standard is for non-fungible tokens, or NFTs. These two standards worked independently to address two different purposes. However, a group of developers studied this system and decided to change it!

Recently they introduced a new standard! Since it has not yet passed the authenticity test by ERC-404, it still falls into the unofficial and experimental category. ERC-404 is named after a popular website error term. Token standards work by linking every issued token to an NFT. If you purchase less than 1 token, the NFT linked to that token will be burned. When a fraction of a token is whole, adding more fractions will automatically issue another NFT. However, this process reduces gas efficiency.

In this new system, traders can buy and sell NFTs as usual or sell portions of their NFTs as tokens. Despite being an “ERC” token standard, it must go through the typical screening process defined for all ERC standard tokens. This process includes submitting an Enhancement Proposal (EIP) and Request for Comments (ERC). This is to ensure that Ethereum upgrades are thoroughly tested and reviewed by the community. Since it has to go through the necessary quality checks, it can be exploited by bad players nearby. Check whether it has passed the quality inspection!

All about ERC 404

• The ERC 404 token standard combines the ERC-20 and ERC-721 token standards. Therefore it is the best in the world!
• ERC-20 handles crypto assets (fungible tokens) and ERC-721 handles NFTs. ERC-404 is a semi-fungible token standard.
• “Crtl” and “Acme” created this new Ethereum-based token standard.
• It was created with the goal of providing enhanced functionality and flexibility to digital assets.
• The market capitalization of ERC-404 tokens began to decline in the second week of February after recording a huge rise last week.
• On February 12, the price of the popular token built on the unofficial Ethereum token standard fell sharply. For example, PANDORA, once the first and most popular token built on the standard, fell 24% on Sunday, February 11, from a high of around $24,000 to less than $15,000.
• Data as of February 13 shows that Pandora’s total trading volume has reached an impressive 73,024 ETH, equivalent to approximately $190 million.
• On February 14, Pandora, an experimental hybrid token, saw a surge in trading volume following its deployment on February 2. In just one week, the fully diluted value of the token soared to over $320 million, making it one of the most talked-about projects. In the cryptocurrency space.
• Notably, this volume includes transactions on both decentralized exchanges (DEXs) for ERC20 tokens and NFT marketplaces for ERC721 tokens.
• Other popular ERC-404 tokens include DeFrogs, Rug, Monarch, and Crystal.

Key features of ERC-404

• Interoperability: ERC-404 Hybrid is designed to operate seamlessly across a variety of platforms and ecosystems, breaking down barriers between different digital landscapes. Since it is a combination of ERC-20 and ERC-721, it can be said to be a semi-fungible token standard that operates seamlessly based on both principles.
• Enhanced Security: ERC-404 uses advanced security protocols to reduce the risk of fraud and keep your digital assets safer than ever.
• Flexible ownership methods: This standard introduces more distinct ownership possibilities, including fractional ownership, to meet a wider range of use cases rather than just a few.
• Enhancing Sustainability: ERC-404 includes mechanisms aimed at reducing the environmental impact of NFT transactions and addressing growing concerns about blockchain sustainability.
• Fractional NFT: Imagine owning a rare digital Mona Lisa painting. Instead of one person owning the entire NFT, ERC-404 allows multiple people to share this wondrous digital asset. This portion control isn’t just new. This paves the way for more democratic access to high-value digital assets and opens up unique possibilities for how we interact with art, collectibles and even real estate in the digital sphere.
• Allows for wider usability in digital asset management!
• Native Liquidity: Unlike traditional NFTs, these tokens incorporate built-in liquidity mechanisms to facilitate smoother transactions and fractional ownership.
• Programmable Scarcity: Token supply can be dynamically adjusted through code, providing opportunities for innovative tokenomics models and adaptive scarcity.

So how does ERC-404 work?

• ERC-404 works by linking every issued token to an NFT! It serves as a source for verifying the status and ownership of the token. NFTs can have a base unit, which is the minimum amount of tokens that can be transferred or exchanged.
• If the base unit is 1000, the token can be divided into 1000 fractions, representing 1% of the NFT.
• Tokens can also have a total supply, which indicates the maximum number of tokens that can be issued on an NFT.
• The ERC-404 standard uses a burn and mint mechanism. This is how you can transfer partial NFTs. If you purchase a full token, an associated NFT will be created in your wallet. If you sell a portion of your tokens, the associated NFT will be burned.
• However, if enough fractions are repurchased, new NFTs will be burned.
• The Burn, Mint mechanism forms the core of the ERC-404 operation!

ERC-404 Project

Although it is a recent example, ERC-404 already boasts several tokens, including:

• Pandora: One of the first projects to adopt the ERC-404 token standard. It consists of 10,000 PANDORA ERC-20 tokens and 10,000 linked “Replicant” NFTs. When you purchase PANDORA tokens on an exchange, a Replicant NFT will be created in your wallet.
• DeFrogs: A collection of 10,000 Pepe-the-Frog themed NFTs using a variant of the ERC-404 token standard, marking it as the first ERC-404 PFP collection and claimed by its creator to be deflationary. While purchasing DEFROGS tokens on Uniswap, the buyer not only acquires tokens, but also receives DeFrogs NFTs through the Mint contract.
• Monkees: Another popular PFP collection using the ERC-404 token standard, Monkees consists of 100 NFTs with 10 properties and 6 characteristics.

current scenario

On February 5, 2024, the first ERC-404 token, Pandora ($PANDORA), was launched. Since then, I have gone through many ups and downs. The token’s market capitalization is close to $180 million. Let’s look at some other interesting facts.

• According to recent CoinGecko data, ERC-404’s current market cap is $176,321,562. With a 24-hour volume of $24,535,317 and an average price of $17,485.16, it continues to attract significant interest from investors and traders alike.
• It is worth noting that the token price has experienced significant volatility since its debut. On February 9, Pandora’s market capitalization hit an impressive high, with total value exceeding the $300 million threshold and trading volume reaching $71,542,503.

Source: CoinGecko

• DeFrogs ($DEFROGS), Rug ($RUG), Monarch ($MNRCH), and Froggy Friends ($TADPOLE) have been added to the list of ERC-404 tokens.
• DeFrogs shines with a current price of $723.05 per token and a cumulative market cap of $7,689,095. The rug is listed at $265.62, giving it a total market value of $2,648,135.
• Monarch’s price is $102.11, valuing the company at $935,948. Froggy Friends, on the other hand, are selling for a reasonable price of $54.29 each, and their 32.7% appreciation suggests a positive outlook.

Source: CoinGecko, date: February 14, 2024

conclusion

The emergence of ERC-404 has caused mixed emotions among traders. With widespread acceptance in a very short period of time, ERC 404 is already meeting its competitors! A similar concept known as Dividable NFT (DN404) will soon emerge, boasting an “energized” approach. In the face of competition from DN404, the need for simplified coding to mitigate the increased transaction costs associated with ERC-404 is critical. To overcome a challenge, you have to win it!

Despite the obstacles, the emergence of this new token marks a pivotal moment in the NFT sector! However, due to its informal nature, many NFT platforms do not support it. The emergence of these tokens could lead to more unaudited token standards hitting the market, which could be another risk. The token has seen a rapid increase in demand in a very short period of time, suggesting a lot of scope for the future.