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Main features ERC-404 Standard of ethereum

Features of the new ERC-404 standard on Ethereum

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The ERC-404 standard represents a significant innovation in the Ethereum blockchain, merging the features of fungible tokens (ERC-20) and non-fungible tokens (NFTs, ERC-721) into a single framework. This experimental standard aims to leverage the liquidity and fractionation of NFTs, opening new possibilities in the DeFi (decentralized finance) and NFT sectors. The adoption of ERC-404 allows for greater flexibility in the use and trade of tokens, as they can exhibit both fungibility and non-fungibility depending on specific applications.

One of the first projects to adopt this standard is Pandora, which launched a collection of 10,000 digital assets, both fungible and non-fungible. In this scheme, each holder of a fungible Pandora token also receives an associated NFT, which is minted or burned with every fungible token transaction, allowing for the fractional trade of NFTs. This mechanism has not only generated a significant trading volume, exceeding 100 million dollars in a week, but has also been noted for its rapid increase in value.

Main Features of the ERC-404 Standard

Combination of ERC-20 and ERC-721: ERC-404 merges the functionalities of fungible tokens (ERC-20) and non-fungible tokens (NFT, ERC-721), offering a hybrid approach. This allows ERC-404 tokens to represent both fungible and non-fungible assets, depending on the application needs.
Native Fractionation of NFT: One of the most significant innovations of ERC-404 is its ability to natively fractionate NFTs. This means that NFTs can be divided into smaller parts, facilitating their trade and increasing their market liquidity.

Native Liquidity: Unlike traditional NFTs, which can be difficult to trade due to their unique nature, ERC-404 tokens integrate native liquidity mechanisms. This makes it easier to buy and sell these tokens, even in fractions, on centralized and decentralized exchanges.

Experimental and In Testing Phase: It is important to highlight that ERC-404 is considered an experimental standard and is still in its early stages of adoption. It is undergoing rigorous testing to ensure its robustness and reliability before a potential wider adoption.

Early Adoption and Use Cases: Despite being an experimental standard, projects like Pandora have adopted ERC-404, demonstrating its viability and market potential for tokens that combine fungible and non-fungible characteristics. This underlines the market interest and confidence in this new standard.

Differences with the ERC-1155 Standard

The ERC-404 proposal, while similar to the ERC-1155 standard which also allows for the transfer of fungible and non-fungible tokens in a single transaction, is distinguished by its focus on liquidity and native fractionation. However, it is important to note that ERC-404 still needs to be audited for its official incorporation into the Ethereum repository, remaining in an experimental phase during its first weeks of testing.

ERC-404 tokens like Pandora can be acquired both on decentralized exchanges (DEXs) as well as on NFT markets thanks to their hybrid nature. This offers users the possibility to trade these tokens on platforms like Uniswap or to trade them as fractionated NFTs on markets like Blur, providing a new dimension of trading and ownership.

Investment in cryptoassets is not regulated, may not be suitable for retail investors and the entire amount invested may be lost. It is important to read and understand the risks of this investment, which are explained in detail.

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