Right now, Ethereum is becoming the forefront of innovation, continuously experimenting with tons of new standards, for example such as ERC-404.
This new standard is designed to facilitate the creation of a wide range of unique digital assets, including tokenized real-world assets (RWAs), in-game items (GameFi), and collectibles, expanding its use cases beyond NFTs.
ERC-404 holds significant potential in providing access to high-value assets without relying on potentially less liquid NFT marketplaces. So, what is ERC-404, then, and how does it work? Read more details on the article below!
What Is ERC-404?
ERC-404 is a new type of token that blends the characteristics of both regular cryptocurrencies (like Ethereum) and unique digital items (like NFTs).
Unlike some crypto such as Bitcoin or Polygomthat can be freely exchanged and traded on the market, NFTs are one-of-a-kind with different and unique values.
This mechanism introduces the concept of semi-fungible tokens, which means they can be divided and traded like regular currency, but each part still retains unique properties.
The goal of ERC-404 is to make NFTs more accessible and easier to trade. By allowing NFTs to be divided into smaller pieces, it becomes simpler to buy or sell them without finding a specific buyer for the entire NFT.
Every person can create fractional ownership of NFTs directly on the blockchain, eliminating the need for any centralized entity or intermediaries.
How Does That Work?
ERC-404 is a groundbreaking token standard that blends the worlds of fungible and non-fungible tokens. It’s essentially a hybrid creation, designed to introduce the concept of fractional ownership to the NFT space.
Just imagine owning a piece of a famous painting or a fraction of a collectible card. This is the essence of ERC-404. When you acquire an ERC-404 token, you’re not buying the entire NFT but a portion of it.
This fractional ownership is represented as an ERC-20 token thus allowing it to be traded on decentralized exchanges like any other cryptocurrency. The token can be maintained on NFT marketplaces as long as the underlying NFT component is still connected to it.
Essentially, ERC-404 opens up new possibilities for NFT ownership and trading. It democratizes access to high-value assets by allowing multiple people to share the asset ownership.
This new Ethereum standard could revolutionize the way we think about how digital assets and collectibles work.
ERC-404 vs ERC-721: What’s The Difference?
There are some important differences between the ERC-404 and ERC-721 concepts.
Interoperability
The experimental token standard ERC-404 is not compatible with other standards. Its smooth interaction with other token kinds is still being investigated.
Conversely, ERC-721 is a widely-accepted standard that has been around for a long and makes it easy to interface with other standards while preserving the distinctive characteristics of each token inside the Ethereum ecosystem.
Use Case
Beyond simply NFTs, ERC-404 seeks to facilitate the development of a wide range of unique digital assets, including tokenized real-world assets (RWA), GameFi goods, and collectibles. Its wide reach aims to give access to valuable assets without depending entirely on NFTs.
On the other hand, ERC-721 is made especially for non-fungible tokens (NFTs), which are perfect for uses where each token is distinct and cannot be swapped out, such as digital art, collectibles, and gaming goods.
Regulatory
Since ERC-404 is an unauthorized and experimental token standard, there are more regulatory unknowns and risks associated with it. Due to the lack of a formal audit or recognition, it is more vulnerable to regulatory scrutiny and possible non-compliance problems.
On the other hand, ERC-721 offers a better degree of security and regulatory compliance and is an officially recognized standard that is frequently audited and trusted within the Ethereum community.
The Futures of ERC-404
ERC-404 is an experimental mechanism that is implemented on the Ethereum network. It’s still under development and hasn’t been officially verified. Despite this, the creators plan to formally propose it as an Ethereum standard in the future.
Similar to other experimental projects, ERC-404 tokens also carry high risks. However, this unique concept has the potential to revolutionize how digital assets are worked and handled.
This token standard could enable fractional ownership of various assets, including NFTs, real-world items, and in-game items. This would expand the market beyond just normal NFT trading.
To accelerate adoption, the ERC-404 team is working on a faster protocol and developer tools. However, technical challenges remain and many platforms right now don’t support ERC-404 due to its experimental status.
Personal Note From MEXC Team
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