Decoding 404s: How Activated NFTs Are Powering GameFi
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Decoding 404s: How Activated NFTs Are Powering GameFi
In the post-404 era, NFTs will become foundational components of the metaverse based on the value capture logic provided by GameFi.
Navigating Web3 tides with focused insightsAuthor: Jerry@TPDAO
Even without 404's (ERC-404 and its evolved derivative protocols), GameFi would still emerge as a key trending sector in this market cycle. You might be confused—this article focuses on the story after 404's activated NFTs, so why start by saying GameFi would thrive even without them?
Because AI and Web3 are converging within the metaverse at full momentum: decentralized computing power and storage (DePIN) continue to mature, AR/VR/XR immersive hardware keeps iterating, traditional finance gradually integrates with crypto markets, and AI breakthroughs such as Sora accelerate metaverse development. Projects like DeepLink have already emerged, offering ultra-low-latency cloud game rendering services for the metaverse—redefining remote gaming in the Web3.0 era with remote control capabilities, shared GPU resources, and cloud bandwidth to serve various applications including cloud gaming and the metaverse...
Driven by these developments, humanity is entering a digital society underpinned by blockchain-based economic restructuring. However, all of this requires suitable metaverse application scenarios. Within the narrative of metaverse construction, GameFi stands as the primary component of metaverse applications.
After moving past the speculative "metaverse memo" phase of 2021, we've entered a period of multi-dimensional, coordinated advancement in metaverse development—yet GameFi has somewhat lagged behind. The root cause lies in the fundamental flaw of last cycle’s GameFi model: under the X-earn paradigm, late-stage GameFi failed to capture NFT value, ultimately devolving into short-lived Ponzi schemes.
Within this broader context, we arrive at the core theme of this article: in the post-404 era, NFTs will become foundational components of the metaverse world by leveraging GameFi-driven value capture mechanisms. With liquidity challenges resolved, NFTs are poised to become mainstream assets in the crypto market.
I. 404 and NFT
Since the Pandora memo sparked by 404, extensive introductions to ERC-404 have already been published. We’ll briefly recap: ERC-404 is a hybrid protocol standard combining ERC-20 and ERC-721, enabling mutual conversion between NFTs and tokens. Under ERC-404, NFTs can be split and traded like fungible tokens, achieving native liquidity and fractionalization.
This native liquidity and fractionalization is crucial—it fundamentally differs from previous approaches to NFT fragmentation. Under the ERC-404 standard, an NFT can behave as a fungible token under certain conditions while retaining its non-fungible nature otherwise. This flexibility opens up broad interoperability across diverse use cases—whether in high-liquidity trading environments or in GameFi, blockchain games, and the metaverse where personalized, unique asset management is required.
The most basic value 404 brings to NFTs is unlocking liquidity. Take Pandora, the leading project based on the ERC-404 standard: its market activity is overwhelmingly dominated by FT (fungible token) trading, with NFT trading volume accounting for only about 1% of FT volume. Currently, the core liquidity of the Pandora series is almost entirely priced via Uni v3 AMMs.
In summary, NFT assets in the post-404 era possess three defining characteristics: “gacha-like minting,” “native fragmentation,” and “AMM liquidity.” GameFi projects continuously iterating on the 404 protocol are delivering fresh surprises to the market. For example, Project Matthew is the first ERC-404 token built on the BNB Chain (BSC), designed to serve as the core of the Matthew gaming ecosystem, providing utility and value for NFTs within the project.
The latest update: holders of MB4 can participate in a guessing game and earn rewards based on how closely their NFTs match the winning NFT:
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Airdrop Structure: The event consists of three stages: preview rewards, guessing any three MB4 NFTs while holding at least one NFT with similar attributes, and correctly guessing the winning NFT image to claim rewards.
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Prize Pool: The total prize pool for the current MB4 airdrop is $1 million, including Epic Matthew Land, $MC tokens, land upgrade scrolls, in-game gold, and various game items.
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Reward Distribution: Rewards are distributed based on attribute similarity between participants’ NFTs and the winning NFT. The higher the similarity, the greater the potential reward. The prize pool is evenly divided among all winners. If no one wins at a particular tier, the remaining pool rolls over to the next event.
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Legendary Tier: Users holding legendary-grade 404 NFTs can also share in a special Legendary Prize Pool, which accounts for 10% of the total prize pool.
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Claiming Rewards: Only users who have received the BinaryX IGO Matthew Box 404 are eligible for airdrop rewards.
II. GameFi and the Metaverse
Our logic for asserting that post-404 NFTs will activate GameFi stems from analyzing the root cause of last cycle’s GameFi collapse—under the X-earn model, GameFi failed to achieve sustainable NFT value capture, turning into short-term rug-pull schemes. We argue that even without 404’s, GameFi would still rise as a major trend in this cycle. Beyond our earlier narrative, we have empirical support: even after the last GameFi wave receded, gaming remained the most active segment in the industry, sustaining hundreds of thousands of daily unique active wallets.
However, unless the fundamental flaws that led to high failure rates in last cycle’s GameFi are addressed, this new wave may merely add more experimental case studies to the space—GameFi without activated NFTs can test metaverse application scenarios but cannot bear the weight of building a full metaverse economy.
During the last bull market, when metaverse narratives, NFTs, and X-earn GameFi were all speculative frenzies, we established back in 2021 our research theme: “Analyzing the Construction of the Metaverse Economy Based on DeFi, GameFi, and SocialFi.” After completing Part One, “DeFi: From Data Asset Management to Allocation of Production Factors,” we previewed Part Two—defining GameFi as Version 0.01 of metaverse applications and restructured production relations.
But soon after, most GameFi projects collapsed, and our research on Part Two was shelved. Now, in the post-404 era, even legacy GameFi NFT assets are being revitalized. In this article, we take “Project Matthew” (a pre-404-era initiative) as a case study to illustrate how NFT assets gain foundational utility in the metaverse after being empowered by post-404 liquidity—continuing our original research theme. Project Matthew is a space-themed simulation game built on the Ethereum blockchain. Players assume the role of space explorers tasked with building and managing their own space bases, mining resources, recruiting soldiers, and engaging in battles to expand territory and power. Players earn virtual currency (“Matthew Coin”) by completing missions, participating in events, and trading—using it to purchase assets or cash out. They can also obtain NFT assets (virtual items and tools) within the game. Interoperability has been implemented, allowing digital assets from other games to be used in Project Matthew.
Project Matthew exemplifies how pre-404 NFTs can be reactivated by 404’s innovations—a classic case of how 404’s unlock GameFi’s potential. Take Matthew Land NFTs: there are three main types—Operation Zone, Fault Zone, and Overload Zone—each offering distinct benefits that significantly impact development progress. Lands come in five quality tiers: Worn, Common, Rare, Epic, and Legendary. Higher-tier lands offer greater advantages such as increased resource output, enhanced lab functionality, lower energy consumption, and faster transaction speeds. High-quality land significantly boosts overall efficiency. Each plot has a unique set of attributes that can profoundly affect gameplay strategy, ultimately shortening or extending return periods.
* Note: This comparison chart estimates the maximum difference in $MC yield between different land qualities to help players better understand how land quality affects return cycles.
In the post-404 era, land NFTs now possess both asset value and liquidity—a critical missing piece that breathes life into the entire economic system. Players can either develop their land for long-term strategic gains or tokenize and liquidate it via FTs. Furthermore, they can conduct crowdfunding for major assets or infrastructure and distribute ownership权益 accordingly.
When discussing post-404 Project Matthew, we must fully recognize that beyond unlocking liquidity, 404 enables richer user rights in blockchain games, GameFi, and the metaverse—such as partial ownership, allowing multiple users to co-own a single NFT (e.g., land, buildings, spacecraft), sharing proportional rights based on token holdings.
Therefore, we anticipate that post-404 GameFi implementations will become foundational applications of a blockchain-based metaverse economy. Of course, beyond GameFi, we can look forward to further pathways empowering metaverse residents through build-oriented identity and contribution-based rights—such as SocialFi. Our third installment in the “Analyzing the Construction of the Metaverse Economy” series will explore “From SocialFi to AllFi: The Material Foundation of Human Digitization and the Value Basis of Metaverse Construction.” And all of this hinges on the foundational role of post-404 NFTs.
Here, we must ask: how critical is the emergence of “post-404 NFTs as foundational elements,” validated through GameFi practice, to the metaverse?
We previously touched on this in “Using ‘Civilization as Limit’ to Discuss the Value Logic of ‘Bear Market Bottoming’”: we’re mobilizing cutting-edge technologies—advanced chips, integrated circuits breaking Moore’s Law, next-gen networking (5G/6G), VR/AR/MR/XR hardware, advanced virtual engines, interaction tech, wearable biosensors, and precise motion-capture systems—to enable physical feedback, movement rules, and deep immersion in the metaverse. But if the metaverse is merely a highly immersive digital space, is all this effort justified?
Even if it evolves into a complete social operating ecosystem, without blockchain/Web3 decentralization, token (FT/NFT) mechanisms, and DAO governance to reconstruct a better societal framework and governance model for human evolution, the transformative significance of this societal leap would be nullified.
Conclusion
To summarize: we observe that NFTs fulfill their foundational role in metaverse construction precisely through application scenarios like GameFi. This topic was already discussed during Element’s筹备 phase in 2021, in a KOL-style article I wrote for Wang Feng, where the pioneering statement “Don’t talk about the metaverse without NFTs” originated. Yet in that cycle, NFTs remained mere PFP memos driven by speculation, and both the metaverse and GameFi quickly faded from mainstream attention.
Now, 404 arrives just in time. Though still imperfect and facing issues—such as the risk of NFTs being indiscriminately transferred or burned, thereby undermining their uniqueness, immutability, rarity, and status as essential, valuable metaverse foundations—ERC-404 serves as a crucial catalyst.
As outlined in this article, we believe the protocol will undergo further iterations and innovations, and the application layer holds vast untapped potential. The metaverse narrative promises significant growth opportunities for all participants.
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