A new experimental token called ERC-404 is making strides on Ethereum and now also on Pulsechain, Solana, and other networks. Its hybrid nature between the standard ERC-20 and ERC-721 attracted early adopters of these fractionalized NFTs. The EIP for new token standard inclusion hasn’t even been accepted, and the innovation is already taking place, promising a new flourishing market and meeting the need for fractionalized assets.
What is ERC- 404
ERC-404 is an experimental and unaudited mix between ERC-20 and ERC-721 token standards with native liquidity and fractionalization. ERC-20 is a standard token on Ethereum, while ERC-721 is an NFT. Up until now, these two tokens were separate, but ERC-404 is a hybrid, allowing for NFT fractionalization and creating a completely new set of game theories around tokenomics and utility. The first iteration of the new unofficial standard is project Pandora, created by developers known under pseudonyms “ctrl” and “Acme” and launched on February 5. It allows multiple wallets to own a portion of a single NFT which means that an NFT like Cypherpunk could be owned by multiple people if deployed as an ERC-404. From its creation, the market cap of PANDORA surpassed $300 million and the price climbed from $250 to over $32,000 within a few days. This surge was caused by a limited supply of just 8,000 tokens and a huge demand for them. There are already multiple hybrids launched and listed on Coinmarketcap and Coingecko. ERC-404 is a merger of the best properties of the ERC-20 and ERC-721 standards. It has the potential for liquidity and divisibility of fungible tokens and the scarcity and uniqueness of NFTs. Moreover, token creators can customize their behavior and attributes.
The innovation of hybrid ERC-404
he ERC-404 standard has gained instantaneous traction within the crypto community and was adopted by developers on blockchains other than Ethereum with different tweaks for different purposes; however, on Solana, @bozoHYBRID deployed a contract in the field of hybrid DeFi and NFTs referred to as NFTxTOKEN, and it came even before ERC-404s.
Solana’s hybrid token was the precursor to the ERC-404 craze, and despite the PANDORA pump, it still has better innovation and game theory.
The hybrid $bozo NFTs are inscribed on Solana and hold 800,000 tokens each. The hybrid model enables bidirectional trading, where 1 $bozo NFT is equal to 800,000 $bozo tokens, and vice versa. It’s the first deflationary NFT to ever exist, and NFT deflation occurs via token distribution.
When someone buys a $bozo NFT, swaps it for $bozo tokens, and sells those tokens, they are distributed to different wallets, reducing the chances of those tokens being swapped for an NFT again.
The hybrid model allows users to gain exposure to NFT price performance by buying the native coin on the open market, as NFTs and coins are priced at a 1:1 ratio. This fractionalization feature enables users to have exposure to NFTs even if they can’t afford to buy the entire NFT.
$bozo pioneers cross-market arbitrage liquidity injection by coupling NFT and token markets, and arbitrage opportunities are expected to increase liquidity and attract more market participants. This two-way liquidity portal is very innovative and aims to provide a new level of game theory around liquidity.
Why hybrid DeFi won't work on $ETH, why their "hybrid" tokens suck and how hybrid DeFi on $SOL can help it flip $ETH 👇— bozo HYBRID (@bozoHYBRID) February 9, 2024
Firstly, lets talk about the ERC404 tokenomics (I expect them to change them after they read this and understand, you're welcome 😂)
ERC404's are all 1 token… pic.twitter.com/I4wdVKOMch
On Polygon, a user called 0xmr33 launched XEN404 as a trailblazing project showcasing practical functionality through the innovative ERC404 protocol. What sets XEN404 apart is its burn mechanism and X1 chain integration. Users can not only burn XEN but also contribute to a significant component of the upcoming X1 chain initiated by Jack Levin. The burned XEN will give an allocation in the native token XN of the X1 chain, offering an additional layer of utility for participants. The XEN404 contract introduces a dynamic color change to the NFT. The change in color depends on the amount of burned XEN. As users burn XEN, the color of their XEN404 evolves. The color changes are not permanent, fostering an engaging competition among participants. If someone surpasses your burn amount, the color of your XEN404 adjusts accordingly, sparking intense super-burn wars. For specific operations and details, users can refer to the provided link: XEN404 Smart Contract Interaction.
#XEN404 is the first project on #Polygon with practical functionality using the #ERC404 protocol. Why do we say that?— 0xmr.33 (@0xmr33) February 9, 2024
XEN404 not only inherits the standard ERC404 protocol but also incorporates the advantages of @Pandora_ERC404, merging NFT and TOKEN into one.
In XEN404, you… pic.twitter.com/EkFzR1NVbj
On Pulsechain, the first PRC-404 contract was launched by @TantoNomini. The token is called GOFURUS, and it also exists on Ethereum as ERC-404. The total supply of GOFURUS on each chain is 10,000. Buying 1 unit from a liquidity pool automatically mints you one of 6 NFTs tied to that token. When you sell and your balance goes below 1, it automatically burns your NFT. The NFTs have a funny GOFURS ERC404 on Ethereum, which was an instant success as it gained $2.7 million in trading volume in one day.
Contract address for GOFURUS on both chains is: 0x54f667dB585b7B10347429C72c36c8B59aB441cb
After seeing how $PANDORA has performed I am pretty compelled by the concepts behind ERC404, which in a way bridges the gap between ERC20s and NFTs. To learn more, i deployed an ERC404 contract on both Ethereum and PulseChain called $GOFURS. learn more at https://t.co/BBuX7a4al2 pic.twitter.com/LBPg6dNPen— Dip Catcher Ⓜ️❇️🟠🎲🍀🛡🅿️ (@TantoNomini) February 9, 2024
The GOFURS team is now expanding the financial utility to covered call and put options protocol, allowing holders to earn yield on their GOFURS and speculators to bet on future price volatility. The token was launched on two chains to gain more adoption and to attract new, adventurous users to Pulsechain. The market cap of GOFURUS on Pulsechain surpassed $8 million, and on Ethereum, it’s almost at $7 million.
ERC-404 in real estate
While the ERC404 is very experimental and unaudited, and much caution needs to be taken when connecting the wallet to the contract, it needs to be said that it all leads to the most obvious use case of hybrid tokens in real estate. Real estate is the biggest market that could greatly benefit from the new standard, and it’s because of the following reasons:
- Fractional Ownership:
- ERC-404 tokens stand out by enabling fractional ownership of real estate properties. In contrast to traditional token standards like ERC-20 and ERC-721, ERC-404 allows multiple wallets to collectively own a portion of a single NFT representing a real estate asset. This innovation makes high-value real estate more accessible to a broader range of investors, breaking down barriers to entry.
- Enhanced Liquidity:
- Real estate, known for its typically illiquid nature, sees a transformation with ERC-404 tokens. By facilitating the trading of fractional interests in real estate on secondary marketplaces, ERC-404 tokens significantly increase liquidity. This advantage over other token standards positions ERC-404 as a catalyst for transforming the real estate market, providing investors with more flexibility and opportunities for liquidity.
ERC404 has swiftly evolved as an experimental and groundbreaking token standard, making waves not only on Ethereum but also on Pulsechain, Solana, and beyond. Despite the absence of EIP acceptance, ERC404’s hybrid nature, merging ERC20 and ERC721, has captivated early adopters, leading to the emergence of innovative projects like Pandora, bozoHYBRID, GOFURUS, and XEN404. The Solana hybrid token pioneered the ERC404 trend, introducing bidirectional trading and deflationary NFTs. XEN404, with its burn mechanism and X1 chain integration, stands out for practical functionality. GOFURUS is about to introduce options to Pulsechain. While caution is advised, ERC404’s potential in real estate fractional ownership and enhanced liquidity is evident, marking a transformative chapter in decentralized finance.