Original author: Nanzhi

Original source: Odaily Planet Daily

In early February, the ERC-404 standard pioneered by Pandora set off a wave of exploration of the combination of FT and NFT. The market value of PANDORA tokens once exceeded US$300 million, but due to mechanism and application issues, the price inevitably fell and the market voice gradually decreased.

First of all, in terms of mechanism, the initial ERC-404 has problems such as high gas fees and inability to adapt to high total tokens. In terms of application, PANDORA itself has no use case and is more inclined to be a "hype" asset. At present, it has not effectively solved the problems of why to buy it and what advantages the use of ERC-404 has compared with the original technical form. It still needs to explore the combination with other applications, protocols or tracks.

Odaily Planet Daily will summarize in this article the recent projects that have made improvements or applied and integrated ERC-404, including mechanisms and applications, and explore future trends.

Update ERC-404 mechanism to improve NFT trading experience

In early February, a series of projects appeared to improve the usability of ERC-404 itself, including reducing gas fees and scalability. A series of improved protocols such as DN 404 and Miner were born.

Recently, Underworld cooperated with Floor Protocol to launch BT 404 and corresponding assets, which once again gained a certain amount of popularity and attention. The unit price once exceeded 2000 USDT. As of the time of writing, the floor price was approximately 700 USDT.

So what is BT 404 and in what aspects has it been improved?

The most important improvement of BT 404 at present is that it provides NFT locking function and transaction fee sharing function.

First, in the NFT dimension, under the native ERC-404 protocol, when the number of tokens held changes beyond an integer, the holder will gain or lose NFTs, but the distribution of NFTs and the corresponding rarity are random, and the user experience is similar to "drawing a blind box", which has both positive and negative effects on users. In this regard, BT 404 provides the locking and unlocking functions of NFTs, which increases the option of users to retain NFTs, but accordingly, as the locked amount of rare NFTs increases, new users will also lose the possibility of obtaining rare versions.

In addition, Underworld has established a P2P market for NFT transactions and added a transaction fee sharing function to BT 404. 100% of the transaction fees will be distributed to users, and users will receive a share based on the proportion of their orders placed on the market to the total number of orders.

Based on the above improvements, BT 404 retains the ERC-404 feature of "providing higher liquidity for NFT" while improving the "certainty of transaction objects". Initially, it is a simple enhancement of NFT transactions, answering the question of "what are the advantages compared to the original technical form", but there is no more improvement on "why buy".

Combine Meme narratives to bring native purchasing power to assets

According to the official Medium document, Color Protocol is an ERC-404 conversion protocol for Meme tokens, which allows the conversion of existing ERC-20 Meme tokens to ERC-404 standards. The protocol provides a new way for Meme artists to issue assets, linking their creative works with native Meme tokens.

The specific operating process is that Meme creators or token communities can create ERC-404 standard art assets through Color Protocol, and then Meme token holders can convert native tokens into these assets, and use the ERC-404 mechanism to convert them back to native tokens when needed.

Back to the first two questions, in addition to convincing people with their appreciation, many Meme tokens also have their "consensus" building needs, so these conversion assets have a natural purchase demand, answering the question of "why buy". In terms of "what are the advantages compared to the original technical form", the document states that creations in the form of NFTs have the problems of low liquidity and isolated value (that is, it has nothing to do with the market value of the Meme token itself). The combination model of ERC-404 can provide liquidity for assets, connect the value of artworks with the market value of Meme, and Meme has the characteristics of high growth rate and high upper limit, which brings the possibility of synchronous high growth for creative works and protocols.

Game asset application, transforming the props trading market

In what fields can ERC-404 be used? The combination with blockchain games was one of the directions envisioned when it was first created in February, and some projects have recently begun to adopt this standard. There is no need to elaborate on the purchase demand for game assets and props. What benefits will it bring if game assets are in the form of ERC-404 instead of the traditional ERC-721? The answer still lies in the liquidity of assets.

Previously, game assets required project parties to build their own P2P trading markets or trade through some general NFT trading platforms, which resulted in low efficiency, poor liquidity, and price differences. After converting assets to ERC-404, both users and project parties can create LP pools for assets, eliminating the need for point-to-point counterparties, bringing better liquidity, and promoting asset value discovery.

In addition, transactions in the NFT trading market often require paying transaction taxes to the project party, while the token LP pool is expected to waive this fee and even bring additional benefits to users who provide liquidity.

Recently, for example, Fusionist, led by Binance Labs, launched ACE Avatar (PeACE), which has multiple rights and interests such as PFP, DEX and market tax receipts. Base ecological chain game Ether Orb launched the game asset ORB, both of which were built using the ERC-404 standard, becoming the first step for the implementation of ERC-404 in the game ecosystem.

Pandora Releases Launchpad, Where is ERC-404 Heading?

Yesterday, Pandora released Launchpad. No specific details have been announced yet, but it can be seen from its promotional video that it will have the function of quickly releasing ERC-404 standard tokens and token management, further lowering the entry threshold.

From the above-mentioned latest cases, we can conclude that ERC-404 can give assets a high degree of liquidity, which is fundamentally different from traditional NFTs. However, the protocol needs to be combined with other tracks to bring a steady stream of purchasing power to assets. The combined fields and narratives may become another key. Whether it is Meme or blockchain games, the track scale exceeds 10 billion US dollars. If it can bring subversive experience to the users, it may be expected that several head protocols will be born again.