What Is ERC-404? The Experimental ‘Semi-Fungible’ Ethereum Token Standard

By Sunil Gavhane

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What Is ERC-404

ERC-404: Ethereum has two main types of tokens: ERC-20 tokens, which are all the same (fungible), and ERC-721 tokens, or NFTs, which are unique (non-fungible). Now, there’s a new, unofficial type of token called ERC-404 that tries to mix features of both into a “semi-fungible” digital item.

What is ERC-404?

ERC-404 is a new type of digital money rule made by people using the names “ctrl” and “Acme” on the Ethereum computer network.

Token standards are official guidelines that control how tokens work on blockchain systems like Ethereum.

The ERC-404 token standard mixes parts of ERC-20 and ERC-721 to make “semi-fungible” tokens. These tokens use qualities from both replaceable and unique tokens.

How does ERC-404 work?

NFTs are one-of-a-kind and cannot be divided, so you can’t own just a part of an NFT.

ERC-404 gets around this problem by using a process to create and delete tokens, allowing parts of a digital collectible to be transferred.

When you buy a whole token, a special digital item (NFT) is created in your digital wallet. If you sell part of this token, the digital item is removed. If someone collects enough parts of the token to make a whole one, a new digital item is made for them automatically.

What’s so special about it?

The ERC-404 token standard makes it possible to break NFTs into smaller parts. This lets people create new ways to use and trade NFTs, encouraging them to try out new things with NFTs.

The people who made the token standard want to make a type of NFT that can be easily divided into smaller parts, easily traded, and promotes trading or collecting specific features.

The Pandora project team, which uses a technology called ERC-404, says their system lets NFTs (digital items) have a price that updates automatically to the lowest market price. This is because it uses a special method to ensure there are always buyers and sellers available. This means that people owning these NFTs can sell them whenever they want without waiting for a single buyer, thanks to a pool of money that supports buying and selling.

Also, NFTs can be broken into smaller parts directly, without needing to lock them up or use other services to create shares of them.

The Pandora team also suggests that gaming NFTs could be used in a way where they randomly get destroyed and made again.

ERC-404 projects

  • Pandora: Pandora is an early project using a special kind of digital token rule called ERC-404. It has 10,000 PANDORA tokens and another 10,000 digital items called “Replicant” NFTs. When you buy a PANDORA token from a place where people trade these tokens, you automatically get a Replicant NFT in your digital wallet.
  • DeFrogs: DeFrogs is a set of 10,000 digital artworks of Pepe the Frog, also using a version of the ERC-404 token rule. It’s known as the first collection of its kind that people can use as their profile picture and is made to decrease in number over time, making it unique.
  • Monkees: Monkees is another collection of digital pictures you can use as profile pictures, following the same ERC-404 token rule. It includes 100 digital items, each with ten different features and six characteristics.

The future of ERC-404

ERC-404 is different from the well-known ERC-20 and ERC-721 standards because it is “experimental” and not official. It hasn’t been checked as an Ethereum Improvement Proposal (EIP) or fully audited. This means there might be hidden problems, making it risky for people who own these tokens.

The team says that they are trying to use two different standards together in a strong and careful way, even though these standards are not meant to be combined. They admit that this is an unusual way to use ERC-721.

Since ERC-404 is not an official token standard, many NFT platforms and marketplaces don’t automatically support it.

The group creating the token standard wants to make it an official suggestion for improving Ethereum, which might take a long time. But, by skipping the usual steps for approving token standards, they might inspire other projects to do the same. This could result in more token standards being released without proper checks, posing risks to users.

Disclaimer: The information on this website isn’t meant to be taken as advice for investing money. Investing involves uncertainty, and there’s a chance you could lose your money when you invest.

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