ERC404 Improved Protocol: Second Value Exploration

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Last week, ERC 404 became one of the hotly discussed topics and attracted widespread attention. At the same time, Ethereum’s Gas fees continue to rise due to the launch of various ERC 404 projects. The average Swap fee during the peak period is approximately 40 ~ 50 USDT. However, ERC 404’s popularity began to decline rapidly this week. Among them, the leading project PANDORA has dropped by approximately 52% compared to its peak, and other ERC 404 projects have also experienced earlier and larger declines, with some even approaching zero.

What is the ERC404 protocol?

Official information describes ERC404 as an experimental, hybrid ERC20/ERC721 implementation with native liquidity and fragmentation. This is very abstract. In plain language, this protocol allows NFTs to be split and traded like tokens, a swap agreement for tokens.

Imagine that ownership of an expensive, illiquid blue-chip NFT like PUNK could be traded as a liquid asset on mainstream exchanges, as if it were a regular ERC20 token asset.

That is to say, the ERC404 protocol solves the liquidity problem of NFTs. However, it is different from the fragmented method of solving NFT liquidity that has been popular for some time. The ERC404 protocol can combine the tokens into one, but they can be bought and sold separately at the same time.

Improved ERC 404

What are the problems with ERC 404? Among them, the most intuitive one for users is the Gas problem. Compared with conventional ERC 20 token transactions, the cost is much higher, and it is more prominent on networks with limited performance such as Ethereum. Slow Mist Cosine once said: "ERC 404 has also developed a whitelist mechanism so that some pairs/routers do not have to deal with NFT frequently. They can just handle the FT transaction. Anyway, the accounts are in the contract and cannot disappear." On the other hand, , because ERC 404 is a new mechanism and has potential security risks. Although there have been no large-scale attacks yet, it will take time to test.

Miner launches improved protocol ERC-X

Miner launched a new protocol ERC-X based on ERC 404, and also released the first token MINER based on ERC-X, with a total supply of 100,000 TOKEN/NFT. Miner stated that ERC-X is an optimized experimental standard with the following features and functions:

• Versatility: Functions from multiple standards can be used in ERC-X, including ERC 20, ERC 404, ERC 721, ERC 721 A, ERC 721 Psi, ERC 1155 and ERC 1155 Delta, etc.
• Low Gas: ERC-X has high gas efficiency and can be fully scaled according to the size of the project.
• Comprehensiveness, variability: All standard features of ERC 20 are reintroduced. With a few line changes, the token's NFT counterpart can appear as ERC 721 or ERC 1155.

One of the most critical improvements to ERC-404 is its gas-friendliness. It solves the original problem of ERC-404 being unable to adapt to high total token demand. Specifically, the total supply of MINER was originally planned to be set to 1 million, but since Metamask kept crashing due to its inability to handle the purchase of more than 30,000 NFTs at a time, it was decided to limit the supply to 100,000. This improvement helps improve user experience and reduce transaction costs.

ERC 404 Plus

The Bitcoin chain game project Bitcoin Cats published an article on the X platform and proposed an optimization protocol called ERC 404 Plus. ERC 404 Plus gives users more flexibility to choose between NFTs (non-fungible tokens) and FTs (fungible tokens), and greatly reduces the gas required for transactions and transfers.

BitcoinCats 404 is the first asset created using the ERC 404 Plus protocol and can only be minted by bridging Ordinals’ BitcoinCats NFT before the deadline. The distribution and sale of the converted NFT will start on February 16, and the converted NFT can be traded on Uniswap, Blur, OpenSea and other platforms.

What is Pandora doing?

Pandora, the leading ERC 404 project, has recently done some work in maintaining token liquidity. On February 12, Pandora Labs announced that Wasabi Protocol became its 404 ecological partner. Wasabi is an on-chain leveraged trading protocol that allows users to long or short PANDORA with a maximum three times leverage.

Pandora has also locked a large amount of liquidity for the token, including 5,623 WETH and 725 PANDORA, of which the value of ETH is approximately $14 million.

Most importantly, Pandora announced a series of improvements, including:

• Systematically improve ERC 404 design and implementation to move closer to standardization;
• Add a pool that supports permanent token ID;
• Improved branching logic to reduce gas costs for some common transfer situations;
• Improved integration capabilities and release of external protocols;
• Token licensing is implemented by supporting EIP-2612.

Pandora said that after completing these improvements, it will be able to better connect with external protocols and implement more use cases.

in conclusion

Although the concept of integrating graphics and currency is not proposed by Pandora for the first time, the popularity of ERC 404 proves that its implementation idea has certain value. After solving the pain point problem of high gas, it is expected to support the secondary discovery of value through more use cases.

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