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A few days ago, ERC-404 tokens exploded in popularity on the Ethereum blockchain. However, as quickly as the hype rose, the prices of these tokens have taken a nosedive, experiencing double-digit daily losses.
The initial excitement surrounding the experimental ERC-404 token standard has waned, paralleled by a surge in Ethereum gas fees. The trend of ERC-404 tokens may have caused a spike in Ethereum gas fees, reminiscent of levels last seen in 2023.
On February 9, the average transaction cost on the Ethereum network reached 70 gwei, equating to over $60. Peak costs soared to 377 gwei on the same day, drawing comparisons to the gas fee levels witnessed on May 12, 2023.
The original token developed under the ERC-404 standard, named Pandora, achieved a peak market cap of $324 million on Feb. 9. However, its value has since been halved to $150 million, with each token now trading at less than $15,000.
Pop Chunk, an anonymous gas auditor on X, has pointed fingers at the ERC-404 standard for the exorbitant Ethereum gas prices, asserting that ERC-404 transfers are three times more costly than the normal ERC-721A.
The Birth of ERC-404: A Blend of ERC-20 and NFTs
To understand the dynamics at play, it's essential to grasp the purpose of ERC-404. This token standard aims to enhance ERC-721 NFTs by binding them to ERC-20, resulting in a divisible $NFT (DN) that can be owned by multiple wallets.
Each wallet can trade or stake its fractional ownership for loans, resembling fractional shares or stocks in traditional finance. ERC-404 represents a unique fusion of ERC-20 tokens and NFTs, essentially introducing native fractionalization to the world of NFTs.
Despite its innovative approach, ERC-404 has faced criticism, particularly regarding transaction fees. The burning and re-minting of NFTs on the Ethereum mainnet are deemed expensive, contributing to the perceived inefficiency of the ERC-404 implementation.
Enter DN-404: A Rival Implementation Emerges
In response to the drawbacks of ERC-404, a group of developers is on the verge of releasing an alternative implementation known as Divisible $NFT, abbreviated as DN-404. Cygaar, a pseudonymous developer, announced the imminent release, emphasizing the team's dedication to crafting efficient and improved code.
We've legitimately been working around the clock getting the DN404 (divisible $NFT) code ready over the weekend.
— cygaar (@0xCygaar) February 11, 2024
Big shoutout to @optimizoor @0xQuit @AmadiMichaels @PopPunkOnChain @0xjustadev for grinding through this.
As per reports, there have, however, been tensions between the Pandora team, the creators of ERC-404, and the developers behind DN-404.
As the crypto community waits for more information, one question remains: Is DN-404 better than ERC-404? A battle for token supremacy is raging, and only time will tell which will prevail.