ERC-404: The Next Generation of Ethereum Tokens…or a Scam | TKX Weekly
by @uuwagyuu
sponsor TKX CAPITAL
Pandora has quickly become a standout in both the crypto and NFT markets, grabbing attention with its significant market cap growth and unique features. Essentially, Pandora is the first to implement the ERC-404 standard, blending the ease of trading with regular tokens and the uniqueness of non-fungible tokens (NFTs). Pandora’s approach to solving NFT liquidity issues and pioneering new ways to interact with digital assets has gained rapid recognition among crypto community.
Introduction
ERC-404 emerges as an experimental token standard on Ethereum, with the aim of transforming how digital assets are issued, owned, and traded. Unlike traditional standards that treat fungible tokens (FTs) and non-fungible tokens (NFTs) as distinct categories, ERC-404 introduces a hybrid model that merges the advantages of both. This integration marks a departure from previous approaches to fractionalized NFTs, which often involve locking the NFT in a smart contract and issuing separate fungible tokens as representations of ownership shares. Instead, ERC-404 enables direct fractional ownership within the token standard itself, simplifying the process and eliminating the need for external mechanisms or intermediaries.
Enhancing NFT Liquidity
ERC-404 solves a big issue in blockchain: NFTs are tough to sell because each one is unique. Traditional NFTs, which are valued for being one-of-a-kind, struggle to find buyers quickly. This makes them less useful for owners. But ERC-404 changes that by linking regular tokens with NFTs, making it simpler to own and trade special digital items. And now, with ERC-404, these assets can even be traded on platforms like Uniswap. This opens up the NFT market to more people, making it livelier and easier for everyone to join in.
How It Works
ERC-404 presents the opportunity for assets to leverage both native liquidity, similar to ERC-20 tokens via liquidity pools, and the distinct, indivisible nature of ERC-721 tokens.
At the core of ERC-404 lies its utilization of “pathing,” an innovative encoding strategy enabling the coexistence of token amount data and unique token IDs (typical of NFTs) within the same space. This approach assumes that minor transfers, which may disrupt the allocation of unique IDs, are either insignificant or can be disregarded.
ERC-404’s most significant advancement is its capacity to enhance the liquidity of a standard ERC-20 token through liquidity pools on AMM, while also allowing for the fractionalization of non-fungible assets without compromising their unique attributes.
Metrics
Pandora is the first project to implement ERC-404. In just under a week, the total volume on Dexes has already reached $270M.
Summary
Pandora’s use of the ERC404 standard represents a potential breakthrough in blockchain tech. It could redefine how we engage with digital assets, especially in gaming, collectibles, and decentralized finance. But, there are risks with experimental tech like this, including potential complexities in merging standards within ERC-404.
Reference
https://medium.com/@pandora404/pandora-nft-token-erc404-your-questions-answered-5174919f6569
https://dune.com/novaresearch/pandora-erc404
https://www.coindesk.com/tech/2024/02/09/what-is-erc-404-the-experimental-standard-whose-first-token-has-rocketed-12000-in-one-week/
https://cryptobriefing.com/what-erc-404/
