What is ERC-404?
ERC 404 is a new protocol that has emerged as a new crypto narrative and since it is being hyped so much so in the last few days it has made the ETH gas fee super high.
To understand we have to look at the two prevailing standards The ERC-20 and ERC-721
ERC-20 are the fungible tokens which means if you have an ERC-token and exchange it with another ERC-20 token it would make no difference.
For example if you have 1 Tether USD (USDT) and exchange it with another Tether USD (USDT) then it is an equal exchange.
ERC-21 tokens are non fungible tokens and the common term used for them is NFT
Users can mint a piece of art as an NFT
As each piece of art is unique, the uniqueness is preserved in the NFT.
In this context we can say that coins can have either fungible or non fungible properties.
So finally we have the answer to What is ERC-404
With ERC-404 implementation a coin would have both fungible as well as non fungible properties.
This means a user can have partial ownership of an NFT of choice.
Currently to sell NFT's one needs to list them on a marketplace like opensea however with the ERC-404 protocol NFT's can be sold via a DEX.
Illiquidity in the NFT market is a perpetual problem faced by NFT holders
A school of thought suggests that this would fix the illiquidity problem of the NFT's
How ERC-404 implementation works?
When a user buys 1 ERC-404 token an NFT corresponding to that token gets minted in the users wallet
When a user sells 1 ERC-404 token the NFT gets burned.
This implementation means a user can sell the NFT via a DEX as soon as it is available in the wallet at the floor price.
What are the potential use cases of ERC-404?
Any field where both NFT's and tokens are needed is a great opportunity for the ERC-404 implementation.
- Areas like WEB3 gaming could find plenty of uses for ERC-404
- Even online gambling could embrace ERC-404
- ERC-404 based projects could over take the conventional NFT's
Which project is based on ERC-404?
A project by the name of Pandora is the first to implement the ERC-404
They came out with 10,000 ERC tokens as an experiment.
Being the first it soon became a market leader in no time.
It is ironic that ERC-404 is inspired by a project called $EMERALD which failed due to an exploit.
Looking at some of the leading projects in terms of market cap
Pandora is a leader with the price at $20,282 per token and a market cap of $161.43M (self reported)
Defrogs Priced at $1314 and a self reported market cap of $13025644
Monarch token priced at $896 with self reported market cap of $6969766
ERC-404 could have a lot of potential, use cases and adoption going forward. Pandora has taken the route to bypass the Ethereum Improvement Proposal making it both innovative as well as adding a degree of risk to the protocol.
For more details refer to : pandora