An unofficial Ethereum standard known as “ERC-404” is undergoing intensive efforts to submit an Ethereum Improvement Proposal (EIP), as revealed by one of its creators.
Developed by the pseudonymous figures “ctrl” and “Acme” within the Pandora project, ERC-404 combines the functionalities of ERC-20 fungible tokens with ERC-721 tokens, typically used for unique items such as those found in the Bored Ape Yacht Club (BAYC) collection.
Despite its title, ERC-404 has yet to undergo auditing, and the “ERC” designation is merely nominal.
In discussions with Daily Dose Crypto, ERC-404 developer ctrl acknowledged that obtaining approval for an EIP is a complex endeavor within the Ethereum community.
“It’s a lengthy process, filled with political intricacies. Typically, it takes a couple of weeks,” stated ctrl.
Ctrl remained guarded regarding the contributors to the proposal, revealing only that they have previous experience in this domain and are poised to submit an EIP imminently.
The objective of ERC-404 is to tether ERC-721 NFTs to ERC-20 tokens, enabling the creation of fractionalized NFTs. This functionality allows multiple wallets to collectively own fractions of a single NFT, like those found in the BAYC, and utilize these fractions for trading or staking.
The GitHub page of ERC-404 acknowledges that the standard is experimental and recognizes that the two standards it seeks to merge are not inherently compatible. Nevertheless, the project aims to integrate them as robustly as possible while minimizing tradeoffs.
Despite disclaimers, concerns regarding the project’s safety persist. A post dated February 8 by developer “quit” suggested that NFTs utilizing the ERC-404 standard might be vulnerable to theft by ERC-404 token holders if the NFT is deposited in a lending protocol that is not appropriately configured for ERC-404.
Ctrl dismissed the concerns raised in the post, arguing that quit “developed a contract that misuses ERC-404,” resulting in a vulnerability.
Crypto wallets from exchanges Binance and OKX have declared support for ERC-404. Ctrl emphasized that if quit’s concern was valid, it would have been exploited by now. He mentioned that Pandora is undergoing an audit of a more refined version of the standard that addresses integration.
Pandora, the first ERC-404 token launched on February 5 by the project, has experienced significant gains, reaching a market cap of nearly $293 million in just four days, according to CoinGecko.
CoinGecko lists 12 other projects that have been launched using ERC-404, including a frog-themed replica of the DeGods NFT collection with a market capitalization of nearly $30 million, and another project featuring a collection of ERC-404-based NFT pet rocks.