Intermediate
The ERC-404 is a new standard of Tokens on Ethereum which makes it possible to split the NFTS (non-fungible tokens) into smaller shares, exchangeable as traditional cryptocurrencies. By combining the advantages of ERC-20 (Fongible Tokens) and ERC-721 (non-fungible tokens) standards, this standard introduces the concept of semi-fongible tokens , which offer both divisibility and uniqueness as needed.
Imagine being able to buy a fraction of an expensive NFT, such as a Bored Ape Yacht Club (BAYC), for a few euros instead of spending tens of thousands of euros. This is exactly what ERC-404 allows, while increasing the liquidity of NFTS and democratizing access to these digital assets.
Table of contents
How does the ERC-404 work?
An advanced tokens management system
The ERC-404 is based on unique principles that harmoniously integrate the features of the ERC-20 and ERC-721 tokens. Here are its key mechanisms:
Dynamic splitting and conversion
When you split an NFT, ERC-20 tokens are generated to represent each fraction. These split tokens become directly exchangeable on platforms such as Uniswap or Sushiiswap, thus improving the liquidity of the NFTS. For example, an NFT worth 10 ETH could be split into 1,000 tokens ERC-20, each token representing 1/1000ᵉ of the NFT. This process guarantees native liquidity , allowing a greater number of users to invest in high -value assets such as a Bored Ape Yacht Club (BAYC) .
Reforming and burn of tokens
Conversely, when a user brings together enough tokens ERC-20 to reform an entire NFT, the intelligent contract performs a “burn” process: the ERC-20 tokens are destroyed, and the original NFT is recreated. This mechanism ensures that each NFT can regain its initial integrity, while preserving its rarity and uniqueness.
Practical cases: Personalization and liquidity
This flexibility makes the ERC-404 ideal for projects combining personalization and liquidity needs. Here are some examples:
Digital digital art
, digital works of art, often sold in the form of NFTS, sometimes reach astronomical prices. Thanks to the ERC-404, a famous work can be split into shares accessible to several investors, allowing everyone to have a fraction of the work while keeping it exchangeable.Video games and
Metals Digital active ingredients in video games, such as virtual terrain in The Sandbox or rare objects in Axie Infinity , can take advantage of the ERC-404. Developers could split expensive goods to allow several players or investors to co-possess them.Real estate tokenized
in real estate tokenization initiatives, physical good can be represented in the form of NFT. The ERC-404 would offer the possibility of splitting this NFT into fungible shares, allowing several investors to buy and exchange fractions of the property.Intellectual property : digital works of art, patents or copyright could be divided into fractions, facilitating their exchange or partial transfer.
Luxury collectibles
Luxury collections, such as rare cars or watches, could also use the ERC-404 to allow several investors to have a symbolic part while guaranteeing liquidity on the markets.
Origins and innovations of ERC-404: Focus on Pandora
Development of the standard: a response to an urgent need
The ERC-404 was created in 2024 thanks to the Pandora team, a group of developers seeking to transform the NFTS ecosystem. Their main objective was to resolve the lack of liquidity of high -end NFTs . These assets, often considered as digital works of art or rare goods, reach prices inaccessible for most investors. The lack of flexibility in transactions also limits exchanges and participation in these markets.
Pandora therefore relied on the forces of ERC-20 (Tokens Fongible) and ERC-721 (non-fungible tokens) to create a hybrid standard: ERC-404. This standard aims to make the NFTs more accessible , while providing them with native liquidity.
The Pandora project: clear ambitions for a revolution NFT
Pandora, the first project based on the ERC-404 standard represents a new vision of digital exchanges . The idea of the founders, operating under the pseudonyms Ctrl and ACME , was to unify the worlds of NFTS and fungible tokens to reduce barriers to entry and improve investment possibilities.
Pandora adopts a unique mechanism where each purchase of a pandora token leads to automatic creation of an NFT in the user's portfolio. Conversely, the sale of a token on a decentralized platform leads to automatic destruction of the corresponding NFT. This system guarantees perfect correspondence between the ERC-20 tokens and the associated NFTs.
Advantage of the ERC-404: accessibility and revitalization of exchanges
HUBS for fractional NFTS
With the adoption of the ERC-404, platforms like Opensea , specialized in NFTS, and Uniswap , oriented towards cryptocurrencies, could become central hubs for new types of digital assets . These hubs would play an essential role in:
Centralizing exchanges : Opensea could introduce sections dedicated to fractional NFTs, allowing users to sell or buy rare digital asset shares, just as they exchange complete works today.
Optimizing fractional transactions : Uniswap , thanks to its decentralized liquidity pools, could integrate ERC-404 tokens, offering a transparent and fluid environment for investors wishing to exchange their fractions.
These hubs would therefore act as technological and financial pillars to democratize investment in NFTS and strengthen their usefulness in the web 3 . They could also contribute to a better assessment of assets, by introducing more competitive markets and mechanisms for discovery of prices based on supply and demand.
The ERC-404, by combining increased accessibility and facilitated exchanges , could transform NFTS into a type of active as fluid and accessible as cryptocurrencies. By making platforms like Opensea or Uniswap of neuralgic centers for these transactions, he opens up new perspectives for users and developers in the blockchain ecosystem.
The challenges of the ERC-404: technical complexity and limited adoption
Limited adoption: a standard still not recognized by Ethereum
Currently, ERC-404 is an experimental , which means that it has not yet obtained the status of protocol officially recognized by Ethereum . This recognition involves the process of proposal and approval of the EIP ( Ethereum Improvement proposals) , which involves several stages:
- Submission and validation : Developers must submit detailed technical documentation, explaining the objectives, advantages and implications of the standard.
- Community exams : The proposal is evaluated by the Ethereum , including developers, researchers and major actors in the ecosystem.
- Safety audits : The standard must be rigorously tested to ensure that it does not have flaws likely to be exploited.
- Formal adoption : Once approved, the standard is integrated into the heart of Ethereum , such as wallets and platforms.
Why is official recognition crucial?
The lack of official recognition considerably limits the potential of the ERC-404. Here is why:
Lack of integration into existing tools : popular portfolios like Metamask or Ledger and platforms like Opensea or Uniswap do not automatically take charge of this standard, making its use more complex. For example, a user may have trouble visualizing their NFT fractions or making transactions directly from their wallet.
Confidence and adoption : official recognition by Ethereum would strengthen the credibility of the standard , reassuring both investors and developers. This would also encourage projects to adopt this standard, creating a network effect.
NFTS splitting: existing solutions and the contributions of the ERC-404 standard
Currently, several platforms offer solutions to split NFTS by creating ERC-20 tokens which represent partial property. Projects like Fractional.Art , Unic.ly , and N FTX allow NFTS holders to transform these unique assets into fungible tokens, thus increasing their liquidity and making premium NFTS accessible to a larger number of investors. However, these solutions are based on specific intelligent contracts which add a layer of complexity and often require the integration of dedicated platforms. In addition, they do not benefit from universal standardization, which limits their interoperability with all web3 tools.
This is where the ERC-404 . By natively integrating the fractionation and fungibility into a single standard, ERC-404 simplifies the process of creating, managing and rejoining NFTS fractions. Unlike current solutions, it allows increased interoperability and more fluid management, without depending on complex intelligent contracts. In addition, thanks to the automation of the creation and destruction of NFTS linked to split tokens, ERC-404 reduces the costs and risks linked to personalized configurations. It thus opens the way to generalized adoption and even greater democratization of access to NFTS, while standardizing a practice which remains fragmented today in the web 3 ecosystem.
The future of the ERC-404: challenges and opportunities
Future adoption: what obstacles to overcome?
For the ERC-404 to become a recognized and adopted standard, several adoption challenges remain to be met. These obstacles concern as much the official recognition by Ethereum , as the integration into the web 3 ecosystem and acceptance by the general public .
Recognition by Ethereum
currently, the ERC-404 is an experimental standard not officially validated by the EIP process ( Ethereum improvation proposition) . Such recognition is crucial to guarantee standardization and interoperability with other projects and platforms.Integration into portfolios and
DApp for the ERC-404 to find its market, it must be implemented in the main tools of the web 3 ecosystem, in particular :
- Wallet : hot wallet S like Metamask, Trust Wallet or Exodus and cold wallet S like Ledger will have to integrate this standard to allow fluid management of semi-fongible tokens.
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Adoption by the public
even if developers and platforms adopt the ERC-404, its success is based on the enthusiasm of the public . The format should find its market and prove its added value :- Knowledge of users : The general public will have to understand the functioning of semi-fongible tokens and their usefulness in concrete scenarios (fractional investments, collective property, etc.).
- Convincing use cases : ERC-404 must demonstrate that it meets real needs and provides practical solution to existing issues, such as access to high-end NFTs or the creation of new types of digital assets
Realization of an accessible web3
By making digital assets more liquid and accessible, the ERC-404 could bring the web3 closer to real democratization. The financial, technical and educational barriers would be reduced, paving the way for massive adoption.
Conclusion on the ERC-404
ERC-404 has the potential to become a major advance in the web3. If its adoption remains uncertain, its potential to transform the NFTS market remains strong. To find out more about projects like Bored Ape Yacht Club , the web3 or fungibility , click on the fat words to explore our dedicated items.
FAQ on the ERC-404 standard
- What is ERC-404?
- A hybrid standard combining the ERC-20 and ERC-721 tokens to create semi-fongible tokens.
- What are its advantages?
- Increased accessibility, better liquidity and new use cases.
- What are his challenges?
- Official format and adoption recognition.
- What projects do this standard use?
- Pandora is the first to fully exploit the ERC-404.
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Yohan Uzzan
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
