ERC-404: A Game-Changer or a Risk? Mixed Reactions From Industry Experts on New Ethereum Token Standard
Summary:
The new Ethereum token standard ERC-404, which combines the technology of both ERC-20 and ERC-721 tokens, is receiving mixed feedback from blockchain industry veterans. Despite its successful launch with Pandora ERC-404 tokens seeing a substantial rise in value, skeptics highlight the deviation from standard ERC protocols and the still experimental status of the protocol. Meanwhile, some industry insiders believe that ERC-404 has the potential to revolutionize real-world asset tokenization and broaden applications of the Ethereum network. The standard currently remains under review as an Ethereum Improvement Protocol.
The blockchain industry is buzzing about a novel Ethereum token standard, dubbed ERC-404, provoking mixed reactions from experts in the field. This innovative standard fuses the technology used in ERC-20 tokens with that in ERC-721, utilized for nonfungible tokens (NFTs) creation. Its application extends to fractionalized NFTs, allowing one NFT, such as Bored Ape Yacht Club, to be owned by several wallet holders under the ERC-404 framework.
The establishment of ERC-404 was initiated earlier this year by anonymous developers, known only as “ctrl” and “Acme”, within a project titled Pandora. Coincidentally, the first ever ERC-404 token, bearing the Pandora name, was issued on February 6. Since its inception, Pandora ERC-404 tokens have risen a striking 530% and presently have a trading value of $23,484 and a market capitalization of $235 million. Upcoming strategies from the developers include cutting protocol gas fees by an impressive 28% to 50%.
Nonetheless, not everyone is on board with the promise of ERC-404. Misgivings are primarily centered around its divergence from standard ERC protocols, thereby technically excluding it from the ERC token grouping, according to Miguel Prada, co-founder and tech lead at Diva Staking. Prada emphasized the non-standard nature of ERC-404 as a major restriction to its integration, and its uncertain future in the Ethereum ecosystem. Prada did find value in ERC-404's potential to bring liquidity to the scarce NFT market, but also cautioned about its inherent limitations concerning tokens representing Real World Assets (RWA).
Ryan Lee, chief analyst of Bitget Research, shared Prada's reservations about ERC-404. He highlighted the experimental status of the protocol and its current exclusion from the Ethereum Foundation's ERC standard. Lee also stressed that within the ERC standard, there already exist numerous protocols conglomerating Fungible Token and NFT, such as ERC3475, ERC3525, and more. He views the speculation around Pandora as the market's craving for innovation and novelty in Ethereum's asset types but notes that its success remains to be vetted over time.
Contrarily, Akash Mahendra, head of developer relations at layer-1 blockchain Haven1, sees ERC-404 as a "game changer." According to Mahendra, this avant-garde, probing standard could transform the world’s second-largest blockchain, Ethereum, into a pioneer in asset tokenization. With ERC-404, users can, for the first time, buy and possess tokens complying with both ERC-20 and ERC-721 standards – an experience likened to owning a decentralized finance-based exchange-traded fund. Mahendra warned about the possible risks of potential bugs and subsequent losses to investors due to the lack of an official approval stamp on the standard. Despite the growing interest, the Ethereum Foundation has yet to officially approve ERC-404, which is still up for review as an Ethereum Improvement Protocol. Mahendra cautioned investors to move carefully, as they anticipate the final decision on this innovative development.
Published At
2/13/2024 6:50:16 PM
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