Two Ethereum developers have introduced an informal and experimental Ethereum standard called “ERC-404,” which is set to combine both tokens and NFTs. The ERC-404 standard, which brings together Ethereum’s ERC-20 token and ERC-721 NFT standards, is poised to become the latest and most popular standard on the Ethereum Blockchain.
Hybrid NFT Era to Begin with ERC-404 Standard
Developed under a project named Pandora by developers using the pseudonyms “Ctrl” and “Acme,” the ERC-404 standard merges the ERC-20 token standard with the ERC-721 standard, which is exclusively used for NFTs, offering a different application. Despite its name, the ERC-404 standard has not yet been audited or officially recognized. The standard has not yet gone through an Ethereum Improvement Proposal (EIP) process to become a new standard on the network in conjunction with the ERC-20 and ERC-721 standards.
ERC-404 aims to link ERC-721 NFTs with ERC-20 tokens, ultimately providing what some describe as fractional NFTs, allowing ownership of a part of a single NFT and enabling trading or using it as collateral for loans, thus creating a significant use case. To clarify, the ERC-404 standard would allow ownership of a part of, for example, the famous Bored Ape Yacht Club’s piece number 5.
Ctrl, one of the lead developers of ERC-404, emphasized that getting an approved EIP is not easy, saying, “It’s a long process, there’s a lot to do […] Typically, the process takes several weeks.” Ctrl did not provide details on who is working on the standard but mentioned that they are collaborating with successful individuals in the field and are in a very good position to present the EIP to the community soon.
ERC-404 Standard Already Sparks Security Debate
Meanwhile, security debates have already erupted over the ongoing work on the ERC-404 standard. An Ethereum developer going by the name “Quit” recently suggested that NFTs using the ERC-404 standard could be vulnerable to theft if an ERC-404 token owner deposits the NFT into a misconfigured credit protocol. Quit claimed that a misconfigured protocol might not distinguish between an ERC-404 NFT and an ERC-721 NFT, potentially allowing NFT investors to claim an NFT they don’t own as part of their assets.
Ctrl responded to Quit’s statement by saying it was not viewed from the correct perspective, arguing that such an issue could only arise if a contract was misconfigured, likening it to “photographing a car with my lock open and explaining how to get inside.” The developer also added that leading cryptocurrency exchanges Binance and OKX have announced their support for the ERC-404 standard.
Moreover, Pandora’s first ERC-404 token, launched on February 5th, gained over 1850% in four days and reached a market value of nearly $293 million according to CoinGecko. Currently, CoinGecko lists 12 projects using ERC-404, including a frog-themed copy of the DeGods NFT collection with a market value of nearly $30 million and an ERC-404 based NFT pet rock collection.