#ERC404 is a new token standard for digital assets on the #Ethereum blockchain developed by pseudonymous creators " #ctrl  and " #Acme ."

Token standards are formal sets of rules and protocols that determine the behavior of tokens on blockchain networks such as Ethereum.

The ERC-404 token standard combines features of ERC-20 and ERC-721, enabling the creation of "semi-fungible" tokens that employ features from fungible and non-fungible tokens.

How does ERC-404 work?

NFTs are non-fungible, meaning that they are unique and indivisible; you can't own fractions of an NFT.

ERC-404 circumvents this limitation by using token mint and burn mechanics to enable fractional transfers of an NFT.

Issued tokens are linked to an NFT. If you buy a full token, the linked NFT is minted to your wallet. If you sell a fraction of the token, the linked NFT is burned. If a wallet holding fractions of a token purchases enough fractions to hold a complete token, a new NFT is minted automatically.

What's so special about it?

The ERC-404 token standard enables native fractionalization of NFTs, creating new primitives and new mechanics built atop them. This, in turn, allows for experimentation with NFTs and the trading of them.

The token standard's creators suggest that the goal is to create an NFT with "native fractionalization, liquidity and encourages some aspects of trading/engagement to farm unique trait sets."

The team behind #PANDORA , a project using ERC-404, claims that it effectively enables NFTs built using the standard to "effectively have a token price that reflects a floor price in real-time" because it allows for "actual native liquidity." Rather than needing a single counterparty to buy their NFT, holders of ERC-404 tokens can sell at a time of their choosing if there's a liquidity pool.

Furthermore, instead of having to lock up or wrap NFTs and issue shares against them, fractionalization of NFTs can be achieved natively without relying on third-party protocols and solutions.