🧨 This Spring Festival is really lively. The leader of ERC-404: Pandora’s Box has increased 5 times in 2 days and 30 times in a single week.
Then we won’t have any rest during the Spring Festival either! Pumping will now take you to understand the unique protocol of ERC-404 and the fields in which it may shine in the future.
💡 ERC-404 is a new Ethereum token standard proposed by developers with the online names "ctrl" and "Acme" in early 2023. It combines the characteristics of fungible tokens (ERC-20) and NFTs (ERC-721) to create a "semi-fungible" bundled token.
This new standard allows for the existence of an asset in the NFT and DeFi fields that can be held as an NFT and can be freely traded and divided like a fungible token. ERC-404 attempts to solve some limitations of the existing NFT market, such as liquidity. Insufficient security and tradability issues of high-value NFTs.
✨ Features
1️⃣ Combination of uniqueness and divisibility:
Tokens under the ERC-404 standard have both the uniqueness of NFTs (each token has a unique ID and metadata, making it irreplaceable) and the divisibility and liquidity of fungible tokens (tokens are Coins are freely transferable and can be divided into smaller shares)
2️⃣ Token minting and destruction mechanism:
When an ERC-404 token is minted, a unique NFT is generated that can be freely traded as a fungible token on a decentralized exchange (DEX). If this fungible token is destroyed (e.g., via trade or otherwise), the NFT linked to it will also be destroyed. This mechanism allows the rarity and collectible value of NFTs to be combined with the liquidity and accessibility of fungible tokens
3️⃣ Native support for subdividable NFTs:
ERC-404 allows fractional transfer of NFTs through the use of token minting and destruction mechanisms. This means that users can own part of the NFT, but do not have to own it completely. If a wallet collects a full token by purchasing enough subdivided tokens, a new NFT will be automatically minted into the wallet.
🌰 For example:
For example, when you own 0.5 ERC-404 tokens, NFT will not be minted into your wallet. Until you purchase 0.5 more tokens and collect 1 token, an NFT will be automatically minted into your wallet!
4️⃣ Improved liquidity and tradability:
The ERC-404 standard greatly increases the liquidity of NFTs by making them divisible and traded as fungible tokens. This solves a major limitation of the existing NFT market, which is that high-value NFTs are often difficult to trade due to a lack of buyers.
5️⃣ Interoperability:
ERC-404 tokens can interact seamlessly with protocols in the fungible token and NFT space, merging two previously separate realms. This provides developers with new possibilities, such as the propagation and division of in-game NFT assets.
✨ Problems that can be solved
1️⃣ Enhance liquidity
The ERC-404 standard greatly increases the liquidity of NFTs by allowing them to be divisible and traded as fungible tokens.
2️⃣ Lower the entry barrier
Owning a piece of a high-value NFT lowers the barrier to entry and expands the base of potential investors and collectors.
✨ Problems
1️⃣ Arbitrage opportunity to increase NFT rarity
Take the leading $PANDORA as an example. $PANDORA bundles a set of NFT boxes with different rarities (the order of rarity from high to low is: red, orange, purple, blue, green). Each transaction or transfer will result in The NFTs in the wallet are destroyed and re-minted.
This means that if you are not satisfied with the rarity of the NFT, you can continue to trade until you mint a satisfactory rare NFT and sell it at a higher price. This leaves a room for arbitrage.
Of course, this may also be a mechanism intentionally left in during the design to increase liquidity.
2️⃣ Randomness of NFT destruction
Let’s use $PANDORA as an example: For example, if you have 2 $PANDORA tokens, you also have 2 NFTs, a green box NFT with the lowest quality, and a red box NFT with the highest quality.
At this time, if you sell a token, an NFT in your wallet will be destroyed. You definitely want to destroy low-quality NFTs, but the existing mechanism has a half probability of destroying high-quality red boxes.
💡 The most suitable field for ERC-404 to enter may be NFT assets that reconstruct blockchain games
For example, in some games, players need to divide an NFT asset in the game, which can be a piece of land, a prey, or even a piece of cake😆?
In the past, the concept of NFT was an indivisible individual. Now with the introduction of ERC-404, NFT assets can be subdivided. Any player can automatically cast a complete NFT after collecting "NFT fragments", which greatly improves the chain. Flexibility and liquidity of gaming assets
So I think the area where ERC-404 can shine the most is perhaps in blockchain games. If you have any other opinions, you are welcome to discuss them with Pumppump!
If you gain something, you can give a like and follow, encourage me, and continue to output high-quality content for everyone~❤️
