Since the start of February, a new experimental Ethereum token standard has taken web3 by storm.
ERC-404, the novel token standard has given rise to a subclass of crypto assets that have garnered a market cap of over $300m.
ERC-404 tokens such as DeFrogs have changed the NFTs narrative forever with a new and innovative hybrid approach.
The interest generated by these new tokens can be reflected in their price action, for instance, DeFrogs went from a few dollars to its all-time-high of $ 3,987.97within 3 days.
What is ERC-404?
First, a token standard is a set of rules determining how a cryptocurrency or token is created, functions, behaves and interacts within a particular blockchain network.
On the Ethereum blockchain, there are two prominent token standards, ERC-20 which is the standard for fungible tokens and ERC-721, the standard for non-fungible tokens (NFTs).
ERC-404 combines both of these standards into one and the result is a semi-fungible token that can be an NFT or a typical token.
This means that ERC-404 tokens can be traded on NFT marketplaces as well as on exchanges.
ERC-404 is therefore an experomental token standard for digital assets on the Ethereum blockchain that has the properties of both an NFT and a token.
It was developed by two pseudonymous creators “Ctrl” and “Acme”. The token standard was named after the “404 not found” error message that is displayed when we try to access web pages that are no longer available.
Understanding ERC-404
To understand ERC-404 we first need to understand the meaning of “fungible”.
Fungible refers to when an item is replaceable or interchangeable with another identical item of the same type and still performs the same function whilst retaining the same value.
A $100 bill can be replaced with any other $100 bill and still retain the same value and perform the same function.
ERC-20 tokens are fungible and can be fractionalized i.e. they can be broken down into small fractions. This is why they are the token standards for coins on the Ethereum blockchain.
Meanwhile, ERC-721 is the standard for non-fungible tokens (NFTs), these types of tokens can not be fractionalized i.e. you can not own 0.2 or 0.45 of an NFT. It's either you have a whole or nothing.
ERC-404 tokens merge these two properties and features. You can either own an entire NFT or own fractions of it, consequently, you can trade these fractions on exchanges or trade the entire NFT on an NFT marketplace.
But how?
Mint and Burn
ERC-404 tokens can pull this off through a mechanism known as “mint and burn”.
When ERC-404 tokens are issued each NFT is bonded with an ERC-20 token.
If the NFT is broken down into fractions the NFT is burnt and the tokens can be traded. If anyone accumulates enough tokens to form a whole an NFT is automatically minted to their wallet.
That is, ERC-721 tokens are tied to ERC-20 tokens, where an ERC-20 token only represents an NFT when it is a whole token, not a fraction.
Once a whole (1,2,3…N even numbers) is broken down into fractions for trading as an ERC-20 token, the NFT is burnt.
When enough tokens to form a whole are accumulated, for instance, two complementary fractions (e.g. 0.4 and 0.6) this will form a full token and a new NFT is minted to the wallet of the owner.
This new innovative token standard ensures fractionalization of NFTs making them more liquid, instead of waiting for a buyer on an NFT marketplace you can easily sell it on an exchange that it is also listed on.
Let's highlight some notable ERC-404 projects.
DeFrogs 
One of the pioneering ERC-404 projects, DeFrogs is both the first PFP ERC-404 project as well as the first ERC-404 meme coin.
The hybrid(ERC-721 + ERC-20), semi-fungible project created by the pseudonymous creator "Dalt Wisney" is a 10,000 collection of cartoon Pepe-and-DeGods-inspired PFPs. DeFrogs’ combination of meme culture with the ERC-404 narrative has been able to garner a buzzing and growing community. (Tg: @DeFrogs)
DeFrogs launched via a fair launch (coingecko.com/learn/what-is-a-fair-launch-in-crypto) on Uniswap, with 80% of the supply added to the liquidity pool while just 1% of DeFrogs supply is currently listed on Opensea.
DeFrogs is tradable on supported exchanges and NFT marketplaces, Defrog is listed on exchanges such as MEXC, CoinW, BingX and AscendEX(BitMax).
At the time of writing the market cap of DeFrogs is $11.9m and is currently trading at $1,050. DeFrogs have established themselves as not just one of the key ERC-404 projects but one of the major projects of 2024 so far.
With more than enough room for growth and its ever-growing community, DeFrogs is poised to attain blue-chip status.
Other ERC-404 Projects
Apart from DeFrogs, there have been other ERC-404 projects pushing the narrative forward. One such project is
Pandora: A collection of 10,000 ERC-404 tokens created by the pseudonymous “Ctrl” and “Acme” the creators of the experimental token standard.
Pandora is the very first ERC-404 token making it the first semi-fungible ERC-404 token to be listed and traded on a centralized exchange. With a positive reception, Pandora has seen its market cap climb over $200m since its launch via Uniswap.
The Future of ERC-404
The ERC-404 is still “experimental” This means it is an unofficial token standard because it has not undergone an EIP review, the Ethereum Improvement Proposal (EIP) is the process of introducing a new feature or functionality to Ethereum.
Despite this, the innovative nature of this standard has made its reception more positive and there are indeed plans to submit an official Ethereum Improvement Proposal for the new token standard.
What DeFrogs and other ERC-404 tokens have done is nothing short of revolutionary the idea of owning an NFT and a fungible token combined in a single token is very attractive to crypto enthusiasts this accounts for the positive price action that followed ERC-404 projects at launch.
The future of the ERC-404 token standard is worth looking forward to.
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