Blockchain Industry at Odds Over Revolutionary ERC-404 Tokens

The unconventional ERC-404 standard sparks debates on its potential impact within the crypto community.

A novel Ethereum token standard, ERC-404, has ignited both acclaim and skepticism among seasoned players in the blockchain arena.

ERC-404, blending the technology of ERC-20 tokens and ERC-721 used in nonfungible tokens (NFTs), has captured attention for its applications, especially in fractionalized NFT ownership. This innovative standard divides ownership of NFTs like the Bored Ape Yacht Club among various wallet holders.

Introduced earlier this year by pseudonymous developers "ctrl" and "Acme" under the Pandora project, ERC-404 tokens, notably the Pandora ERC-404 tokens, have surged by an impressive 530%. Currently valued at $23,484, with a market cap of $235 million, these tokens are set to undergo further developments. The roadmap includes plans to reduce protocol gas fees by 28% to 50%.

However, not everyone shares the enthusiasm for ERC-404's future.

Miguel Prada, Co-founder and Tech Lead at Diva Staking, expressed reservations about ERC-404 not adhering to standard ERC procedures, posing uncertainties about its role in the Ethereum ecosystem. He noted:

"The fact it is not a standard is a significant limitation that means it will be constrained by those who integrate it independently. It could become a de-facto standard with time, but nobody knows if any DeFi project or exchange will ever accept such a token."

While acknowledging ERC-404's potential to inject liquidity into the relatively illiquid NFT market, Prada cautioned against its limitations, especially concerning NFTs representing Real World Assets (RWA).

Ryan Lee, Chief Analyst of Bitget Research, echoed concerns about ERC-404's experimental status and its absence from the Ethereum Foundation's ERC standard. Lee emphasized the need for time to test the longevity of ERC-404, given existing protocols like ERC3475 and ERC3525 within the ERC standard.

In contrast, Akash Mahendra, Head of Developer Relations at Haven1, hailed ERC-404 as a "game changer." Mahendra contended:

"This new, experimental standard has the potential to turn the world’s second-largest blockchain into a leader in real-world asset tokenization and opens up a wide variety of new avenues for utility."

Mahendra highlighted the groundbreaking nature of ERC-404, allowing users to own tokens conforming to both ERC-20 and ERC-721, akin to holding an "exchange-traded fund in the decentralized finance world."

Despite the growing momentum, ERC-404 awaits official acceptance by the Ethereum Foundation and is pending review as an Ethereum Improvement Protocol. Mahendra, emphasizing the risk, urged cautious navigation in the absence of an official approval stamp:

"This is a risk investors must be mindful of before allocating to new ERC-404 projects. Without an audit, there is always a greater risk of bugs and, therefore, a greater potential for losses. So tread carefully as we await the verdict on this exciting innovation."

(Photo Source / Blockonome)