Bankless: A Brief Overview of the Key Innovations and Importance of ERC-404

Original author: WilliamM.Peaster

Compiled by: Yvonne, Mars Finance

In the Ethereum ecosystem, we have fungible ERC-20 tokens for digital cash use cases and non-fungible ERC-721 tokens for digital collectibles use cases.

But what if you could merge the highlights of these two worlds?

ERC-404, a new experimental token standard, was born for this purpose. In today's article, let's introduce you to the basics of the ERC-404 standard and the first project built using this specification, Pandora.

What is ERC-404?

101: ERC-404, developed by the Pandora team, is a new unaudited token standard designed to bridge the gap between fungible tokens and NFTs.

How does it work? ERC-404 creatively mixes elements of the ERC-20 and ERC-721 standards, which traditionally do not interact with each other. Its ERC-721 approach differs from the conventional one, relying on token minting and burning for partial transfers.

The standard's GitHub page states: "This aspect of the conceptual design is well thought out, aiming to create an NFT with native fragmentation and liquidity, encouraging certain aspects of trading/participation to generate a unique set of characteristics."

Why is it important? We have already seen NFT fragmentation protocols, where you can lock an NFT and effectively issue its fragments. In contrast, the design of ERC-404 aims to achieve native fragmentation within NFT projects implementing this standard. This opens up new avenues for experimenting with and trading NFTs.

Pandora 101

Basics: Pandora is the first project based on the ERC-404 standard, offering 10,000 ERC-20 tokens and 10,000 associated "Replicant" NFTs. If you purchase 1 complete PANDORA token on an exchange, 1 Replicant NFT will be generated in your wallet. If you sell 1 PANDORA token, the associated NFT will be destroyed.

How rarity works: Each time a Replicant NFT enters your wallet, a unique rarity will appear. The most common replicas are green, while the rarest are red.

Thus, you can use Pandora tokens to "reselect" the rarity of the Replicants you receive. Since the series is named Pandora and Replicants currently appear as boxes, it is certain that they will "open" later to reveal something.

Supported platforms: Since ERC-404 is experimental, many platforms cannot automatically support this standard. However, PANDORA has already been traded on decentralized exchanges like Uniswap and NFT markets like Blur and OpenSea.

To the moon: Since the launch of PANDORA and Replicants, their value has soared within a week due to the influx of excited traders. PANDORA has increased by +440% during this period, with a current price of approximately $8,385 (around 3.52 ETH), while the minimum price of Replicants on Blur is currently about 3.7 ETH.

A fleeting craze or a lasting narrative?

Basics: Pandora is an interesting experimental implementation of the ERC-404 standard. Its code is not gas-efficient, but it achieves fragmentation innovation at the level of NFT smart contracts, paving the way for more experiments in the future.

Worth noting: Looking ahead, more cryptocurrencies will be launched on ERC-404, and more platforms will integrate this technology. In this regard, we have already seen some smaller projects, such as Wasabi Protocol and Peapods Finance, recently start adopting this technology.

Please note: ERC-404 is currently unaudited, which means there may be potential vulnerabilities that have not yet been discovered. In other words, do not invest too much money in ERC-404 projects, as you cannot afford losses during the early experimental phase. Additionally, when you sell PANDORA tokens, the last Replicant you receive will be destroyed, so make sure you do not accidentally destroy one you want to keep.