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Just a week after the introduction of ERC-404, a new hybrid token and NFT standard known as DN404 has emerged, claiming to address the inefficiencies of its predecessor.
Introducing Divisible NFT (DN404)
Developed by a group of developers, DN404, or Divisible NFT, aims to improve upon the functionalities of ERC-404 by offering a more efficient and compliant solution. According to one of the developers, cygaar, DN404 seeks to be a hybrid ERC-20/721 token with native fractionalization built-in.
Key Differences and Features
While ERC-404 requires protocols to implement its standard for tokens to function properly, DN404 takes a different approach. It utilizes two contracts: a base ERC-20 and a mirror ERC-721, which are fully compliant with existing protocols. The bulk of trading occurs on the ERC-20 token contract, allowing for seamless fractionalization of NFTs.
Functionality and Safety Concerns
DN404 enables users to trade portions of NFTs without intermediaries, facilitating trading on both NFT and decentralized exchanges. However, developers caution that the code has not undergone formal auditing, urging users to proceed with caution.
The premise of ERC404 was to create a single contract that can act as both a fungible and non-fungible token.
— cygaar (@0xCygaar) February 12, 2024
However, this can't be done without introducing exploits and breaking standards.
Our approach instead uses two contracts - a "base" ERC20 with a "mirror" ERC721.
Safety and Vulnerability Issues
Concerns about the safety of ERC-404 were raised by DN404 developers, suggesting a vulnerability that could potentially result in the theft of NFTs deposited into improperly configured lending protocols. However, ERC-404 developer "ctrl" dismissed these concerns, attributing the vulnerability to improper use of the standard by other projects.
Conclusion and Future Outlook
As the competition between DN404 and ERC-404 unfolds, developers continue to iterate on these standards to enhance functionality and address safety concerns. With both standards vying for dominance in the hybrid token and NFT space, the landscape of decentralized finance (DeFi) and NFT trading is poised for further innovation and evolution.
8/ Now, remember how Pandora uses the max token ID to determine what kind of transfer to execute.
— quit (👀,🦄) (@0xQuit) February 8, 2024
Also remember that depositor 2 has 1*10^18 tokens to available to withdraw.
Let's withdraw some of those tokens. Not all, but just a small fraction...like maybe 38,916 of them. pic.twitter.com/iffHJEDyS0