The build of ERC-404 seeks to merge cryptocurrency and nft functionality, but ethereum watchers are concerned about gas optimization and rug pulls already occurring.
Pandora, the first asset under an experimental ethereum (eth) standard called ERC-404, pumped around 12,000% in less than a week due to hype and speculation surrounding the new development.
The asset opened trading around $250 on February 3 and grew to over $30,000 per token on February 9, according to data from Dextools. This token has attracted $80 million in trading volume in 24 hours and has a supply of 8,000 coins.
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Due to its initial success, crypto exchanges Binance and OKX activated support for ERC-404 assets in their web3 wallet services, further reinforcing the attention paid to this emerging standard.
Other development teams behind tokens like Monarch and DeFrogs have also joined the hype, introducing tokens built with the standard and even allocating a portion of the supply to Pandora holders.
ERC-404 explained
ERC-404 is an intersection between ERC-20, the de facto standard for cryptocurrencies issued on ethereum, and the ERC-721 design employed by non-fungible tokens (NFTs), according to the team's GitHub repository.
ERC404 is a mixed experimental implementation of ERC20/ERC721 with native liquidity and fractionation. While these two standards are not designed to be combined, this implementation strives to do so as robustly as possible while minimizing tradeoffs.
pandara GitHub
This unofficial decentralized architecture seeks to combine features from both sectors, allowing developers to create fractional nft collections that users can trade on open markets like Uniswap.
Fractional NFTs already exist, but they require creators to lock the underlying digital collectible in a vault and issue derivative tokens for each nft. This is accompanied by a liquidity crisis and the issued tokens sometimes lose price parity with the market value of the nft.
The ERC-404 standard hopes to solve this by injecting additional liquidity into NFTs and allowing multiple users to own a single nft. While the standard is currently unofficial, meaning it is not yet recognized by the ethereum foundations, there are rumors of a proposal to address this issue and unlock additional utilities, such as staking.
