Today, blockchain technology is developing rapidly, and innovation never stops. After the advent of the ERC-404 standard, a new standard called BC-404 came into being, bringing new possibilities to the NFT market. BC-404 (Bonding Curve 404) - Based on the improvement of ERC-404, the first deflationary NFT contract in cryptocurrency. This article will explore in depth the BC-404 standard that combines the advantages of ERC-404 and innovates it.
ERC-404 protocol standard:
Looking back over the past six months, ERC-404 is one of the most exciting innovations in the field of Ethereum ecosystem asset issuance. ERC-404 is an experimental token standard that was open-sourced by the Pandora team for creators and developers in early February. It is a hybrid ERC-20/ERC-721 implementation with native liquidity and fragmentation. This is achieved through the quantity correspondence logic between FT and NFT, that is, the "casting and destruction" mechanism of NFT.
In layman's terms, some blue-chip NFT projects, especially those with rare properties, are priced so high that they are hard to circulate. The introduction of ERC-404 is a major improvement for these NFT projects that originally lacked liquidity. These expensive NFTs can be split and traded in some mainstream trading markets, just as conveniently and quickly as buying token assets such as BTC and ETH.
BC-404 Token Standard:
At the beginning, Color Protocol launched an ERC-404 conversion platform for Memecoin, where Meme artists and communities can create their Meme NFT collections in ERC-404, and holders can convert their Memecoin into NFT.
Combined with the Bonding Curve model, COLOR proposed the BC-404 standard based on ERC-404. It stipulates that the number of tokens required to generate NFTs will continue to increase until the preset upper limit is reached. Therefore, early participants will have a cost advantage.
In the ERC-404 contract, the ratio of tokens to NFTs is fixed. The contract deployer can initially define “how many ERC-404 tokens an address needs to hold to generate one ERC-404 NFT”. For example, 1 $Pandora Token can generate 1 Pandora NFT, but if your address only holds 0.9 $Pandora, you cannot generate a Pandora NFT.
BC-404 incorporates a Bonding Curve model that changes the number of BC-404 tokens required to generate a BC-404 NFT from a fixed number to an increasing number. This value will continue to rise with each new BC-404 NFT generated, meaning that each new NFT will be more difficult to generate than the previous one.
When deploying the BC-404 contract, the deployer can set the initial difficulty of generating the first BC-404 NFT (i.e., how many BC-404 Tokens an address needs to hold) and the incremental value of the difficulty of generating each subsequent BC-404 NFT.
1. BC-404 standard bonding curve model:
In general, BC-404 can be designed with three different difficulty models. Color defines the difficulty of NFT generation as "BC Count": linear increase, accelerated slope curve increase, and rising curve with gradually decreasing slope.
2. BC-404 NFT token content:
Since the number of BC-404 tokens required to generate each BC-404 NFT is different, the token content of different NFTs is also different, that is, holding a different number of tokens, corresponding to the number of NFTs generated. In contrast, each ERC-404 NFT carries the same fixed number of tokens.
3. BC-404 NFT Number:
Since the token contents of BC-404 NFTs vary, their values also vary. To reflect this feature in the NFT market, the BC-404 contract links the NFT ID to the token contents of the NFT (the BC count at the time of generation):
For example, when a user purchases a BC-404 NFT with ID #1868, they will receive 1868 BC-404 tokens along with the NFT.
Holders and traders can clearly determine the token contents of each NFT through the ID in their wallet or NFT marketplace.
NFT IDs do not have to start at #1, and can rely on the initial BC count value set by the BC-404 contract deployer.
NFT IDs do not need to be consecutive and can rely on the BC count increment mode set by the deployer.
Each NFT ID is unique, and generating an NFT will always face a higher BC count than any previous one, giving each BC-404 NFT its own unique history.
4. NFT destruction mechanism and deflation:
BC-404 NFT Trading and Transfers: Similar to ERC-404, the NFT will remain unchanged when transferred and an equal amount of tokens will be transferred along with the NFT.
BC-404 token transactions and transfers: are likely to trigger the destruction of BC-404 NFTs, depending on whether there are enough remaining tokens to support the NFTs held after the transfer, similar to ERC-404 V1.
Any BC-404 NFT ID will only appear once. Once destroyed, the ID cannot be reproduced; therefore, the destruction of a BC-404 NFT means a reduction in the BC-404 NFT collection, assuming the contract sets a fixed total token supply.
This makes BC-404 the first deflationary NFT contract in cryptocurrency.
Colorpepe：
$colorpepe is the first BC-404 asset and generates the first pepe PFP series from $PEPE, deployed on Base. It combines the uniqueness and scarcity of NFTs with the popularity and liquidity of Memecoin. The conversion pool allows users to convert $PEPE to the BC-404 standard (cross-chain bridging when necessary), giving native Memecoin assets NFT properties.
Conversion Details:
Free conversion: Just pay for gas, no additional costs.
Reversible conversion: $colorpepe can be converted back to $PEPE at any time, and the corresponding amount of $colorpepe will be destroyed.
Limited Supply: The total supply of $colorpepe tokens is limited, and there is a time window for conversion.
Whitelist priority: The conversion is divided into two stages, the first stage is limited to whitelist addresses, and the second stage is open to the public.
p.s: Make sure you have some $PEPE (ETH mainnet) and enough $ETH to pay for gas fees in your wallet.
Features of BC-404:
1. Decentralized value consensus
BC-404 gives NFTs their inherent unique value through their various token contents. Unlike traditional methods, BC-404 does not preset the rarity rules of NFTs, but allows the market and community members to independently determine the aesthetic value of NFTs. BC-404 only designs the numerical uniqueness of NFTs (ID equals token content, determined by code and generation history). This approach is more in line with the spirit of blockchain decentralization and also provides more possibilities for the valuation of NFTs. For the BC-404 NFT series, issuance is just the beginning, and its final form will be jointly shaped by the market and the community.
2. Increased scarcity of NFTs
Under the new minting and destruction mechanism, the scarcity of the BC-404 NFT collection will increase in tandem with the token trading volume. The deflation mechanism of NFT offsets the problem that the token liquidity in Dex (AMM) is greater than the NFT liquidity in the peer-to-peer order market, maintaining the trading vitality and profitability of the NFT market (the circulation of NFTs will decrease, and it will become more difficult to obtain NFTs through token purchases).
3. Improve reset mechanism
Unlike the ERC-404 standard, where transferring tokens to reset an NFT only incurs gas fees (negligible in low-fee networks), when transferring tokens under BC-404, a higher BC count will be faced to generate a new NFT. This design effectively increases the cost of reset and reduces the possibility of low-cost arbitrage, thus helping to maintain the long-term healthy development of the NFT market.
4. Rich trading strategies
BC-404 provides market participants with more strategic options, increasing the fun and depth of trading. When seeking to acquire more NFTs, investors need to weigh multiple factors: (1) the market premium of existing NFTs and their token content (2) the token cost required to generate new NFTs (this cost will continue to increase) (3) the randomness of generating new NFTs
This complex decision-making process not only increases the interest of the market, but also encourages participants to think and analyze market dynamics more deeply and make wise investment decisions.
Potential challenges and prospects
Although BC-404 has brought many innovations, its complex mechanism may take some time for market participants to fully understand and accept it. How to effectively explain the advantages and operation methods of BC-404 to users will be a major challenge in the early stages of project promotion. Secondly, BC-404 balances the liquidity of tokens and NFTs through its unique mechanism, but how to maintain this balance in actual operation and avoid extreme situations will be an issue that requires continued attention.
in conclusion
BC-404 introduces a new value dimension to the NFT market - token content, which will become an important measure of the value of a single NFT. Looking ahead, BC-404 not only brings new possibilities to the NFT market, but also provides a new dimension for the value assessment of digital assets. Its emergence marks that NFT is moving towards a more complex and diversified direction, integrating token economics, deflation mechanisms, and dynamic pricing models. As the technology matures and the market accepts it, we can expect to see more innovative applications based on BC-404, truly expanding the audience of the 404 ecosystem and making it prosperous.