A Deep Dive into the Latest Narrative of the ERC-404 Sector: Protocol Innovation and Application Deployment
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A Deep Dive into the Latest Narrative of the ERC-404 Sector: Protocol Innovation and Application Deployment
ERC-404 can bring high liquidity to assets, but requires the real purchasing power from other sector players.
Navigating Web3 tides with focused insightsAuthor: Nanzhi, Odaily Planet Daily
In early February, the ERC-404 standard pioneered by Pandora sparked a wave of exploration into combining FTs and NFTs. The PANDORA token market cap briefly surpassed $300 million. However, due to mechanism and application issues, it inevitably experienced price corrections and declining market attention.
On the mechanism side, early ERC-404 had issues such as high gas fees and incompatibility with tokens of large total supply. On the application side, PANDORA itself lacked use cases and was more of a "hype" asset. Critical questions—such as why users should buy it and what advantages ERC-404 offers over existing technologies—remain unresolved. Further exploration is needed regarding integration with other applications, protocols, or sectors.
This article by Odaily Planet Daily compiles recent projects improving or applying the ERC-404 standard, both in terms of mechanisms and real-world implementations, aiming to explore future trends.
Upgrading the ERC-404 Mechanism: Enhancing NFT Trading Experience
In early February, several projects emerged aiming to improve the usability of ERC-404 itself, including reducing gas costs and expanding functionality. This led to the creation of improved protocols such as DN 404 and Miner.
Recently, Underworld partnered with Floor Protocol to launch BT 404 and its associated assets, regaining significant attention. The price一度 surged past 2,000 USDT, and at the time of writing, the floor price stands around 700 USDT.
So, what exactly is BT 404, and how has it been improved?
The main improvements of BT 404 lie in introducing NFT locking and transaction fee sharing features.
First, on the NFT front: under native ERC-404, when a holder's token balance crosses an integer threshold, they receive or lose an NFT. However, NFT allocation and rarity are randomized, creating a "blind box" experience that can be both exciting and frustrating for users. BT 404 addresses this by adding NFT lock/unlock functionality, giving users control over retaining their NFTs. However, as more rare NFTs get locked, new buyers lose the chance to obtain those rare versions.
Additionally, Underworld built a P2P NFT marketplace and integrated a transaction fee-sharing mechanism into BT 404. All trading fees are distributed 100% to users, proportionally based on each user’s share of total listed orders on the marketplace.
With these enhancements, BT 404 retains the core ERC-404 advantage of providing higher liquidity for NFTs while improving certainty in trading outcomes. In essence, it represents a straightforward upgrade to NFT trading, answering the question of “what advantages does it offer over previous technologies.” However, it still doesn't fully address the “why buy” aspect.
Combining with Meme Narratives: Creating Native Demand
According to its official Medium documentation, Color Protocol is an ERC-404 conversion protocol designed specifically for meme tokens. It allows existing ERC-20 meme tokens to be converted into the ERC-404 standard, offering meme artists a new way to issue assets by linking their creative works directly to native meme tokens.
The process works as follows: meme creators or token communities can use Color Protocol to mint ERC-404-standard art assets. Holders of the original meme token can then convert their tokens into these assets and, when needed, use the ERC-404 mechanism to convert them back into the native token.
Returning to the two key questions: beyond price appreciation, many meme tokens rely on building community consensus, which creates inherent demand for these convertible assets—thus addressing the “why buy” question. Regarding “what advantages over previous technologies,” the documentation explains that NFT-form artworks typically suffer from low liquidity and isolated value (i.e., unrelated to the meme token’s market cap). By adopting the ERC-404 hybrid model, assets gain enhanced liquidity, their value becomes tied to the meme token’s market performance, and given memes’ potential for rapid growth and high ceilings, both the artwork and the protocol can scale together.
Gaming Asset Applications: Transforming In-Game Item Markets
What other fields can ERC-404 be applied to? Integration with blockchain games was one of the earliest envisioned directions when ERC-404 emerged in February, and recently some projects have begun adopting this standard. The demand for purchasing gaming assets and items requires little explanation. But what benefits does using ERC-404 instead of traditional ERC-721 bring? The answer again lies in asset liquidity.
Previously, game assets required either project-built P2P marketplaces or third-party NFT platforms, often suffering from inefficiency, poor liquidity, and price discrepancies. Converting assets to ERC-404 enables both users and developers to create LP pools for these assets, eliminating the need for direct counterparties and significantly improving liquidity and price discovery.
Moreover, trading on NFT marketplaces usually incurs platform transaction fees, whereas LP pools for tokens could eliminate such fees and even reward liquidity providers with additional yields.
Recently, examples include Fusionist—a project backed by Binance Labs—that launched the ACE Avatar (PeACE), which grants rights including PFP, DEX access, and market fee collection. Additionally, Ether Orb, a Base ecosystem blockchain game, introduced ORB, an ERC-404-based asset. These mark the first steps toward ERC-404 adoption in gaming ecosystems.
Pandora Launches Launchpad: Where Is ERC-404 Heading?
Yesterday, Pandora launched its Launchpad. While specific details have not yet been disclosed, promotional videos indicate it will support rapid deployment of ERC-404 standard tokens and token management tools, further lowering entry barriers.
From the latest cases discussed above, we can conclude that ERC-404 fundamentally enhances asset liquidity—a key distinction from traditional NFTs. However, sustained buying pressure requires deeper integration between ERC-404 protocols and other sectors. The choice of integration domain and narrative may become another critical factor. Whether through memes or blockchain gaming—both markets exceeding tens of billions of dollars—if ERC-404 can deliver transformative user experiences, it may give rise to several new leading protocols.
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