ERC-404 Token Standard

Understanding ERC-404 Tokens

ERC-404 introduces the concept of semi-fungible tokens. Created by developers, pseudonymously known as “ctrl” and “Acme from Pandora Labs,” this experimental token standard aims to combine the best of both worlds: the liquidity of ERC-20 with the uniqueness of ERC-721.

The ERC-404 standard conceptualizes a new class of tokens that are both divisible and unique. This innovative approach opens several possibilities for digital assets, allowing for fractional ownership of NFTs and expanding the utility and liquidity of digital assets on the blockchain.

How ERC-404 Tokens Work

Understand that each ERC-404 token is linked to an NFT. This means that when you purchase a token, a corresponding token is minted in your wallet. Similarly, when you mint an NFT, you’ll receive a fungible token associated with it.

Selling a fraction of a token will burn the NFT associated with it. And interestingly, when you collect enough fractions of the token to form a whole token, a new NFT is minted. This makes sure that each integral token always associates an NFT with it.

The best part is that both the tokens and the NFTs can be traded independently.

Key Takeaways

• ERC-404 introduces fractional ownership to NFTs, combining features of ERC-20 and ERC-721 standards, enhancing liquidity and accessibility in the NFT ecosystem.

• ERC-404 allows users to buy and sell fractions of NFTs, enabling broader participation in high-value assets and creating new investment opportunities.

• Unlike existing methods, ERC-404 facilitates fractionalization directly within the token standard, eliminating the need for additional platforms or intermediaries.

• The ERC-404 standard may encourage wider adoption of NFTs beyond art and collectibles, fostering innovation in sectors such as real estate, gaming assets, and intellectual property rights.