Nfts
The Ethereum ERC404 experiment is an NFT-cryptocurrency hybrid – and it has already generated $87 million in transactions – DL News
- ERC404 is a new token standard on Ethereum, combining the attributes of NFTs and fungible tokens.
- For NFT traders, this means more liquidity and trading flexibility.
Tokens on Ethereum fall into two broad technical categories of standards: ERC721 non-fungible and ERC20 fungible.
NFTs, or non-fungible tokens, are designed to be proof of ownership on the blockchain and each token of this type is unique. Fungible tokens, or simply called cryptocurrencies, are not unique: one Shiba Inu token is identical to the other Shiba Inu token.
But a new experimental token standard, called ERC404, seeks to create a hybrid of these two standards. Its implementation through an NFT collection of Replicators aroused the interest of traders, which gave rise to approximately $87 million in total volume on decentralized exchanges and just under $1 million in total volume on NFT marketplaces in just the last week since launch.
Users can sell their Replicant on popular NFT marketplaces like Get confused And Open Sea or they can sell the Replicant fungible tokens on popular decentralized exchanges like Uniswap.
The price of a replicant increased from around 0.38 ETH on February 3 to over 4.26 ETH, giving the collection a fully diluted value of over $88 million, placing them in the top 15 NFT collections.
A new Ethereum token standard
ERC404 is an experimental token standard on Ethereum, meaning it has not yet undergone a full external audit.
Token standards are simply a set of rules that smart contracts must follow. THE ERC20 the token standard defines a series of rules that tokens must follow, while the ERC721 The Token Standard defines the rules for non-fungible tokens.
By combining these standards, each replicant has the qualities of both a token and an NFT.
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This is different from split NFTs, which split a single NFT into tradable pieces, because this gives users the ability to sell shares in a single NFT, not an entire collection.
ERC404 significantly improves liquidity – the availability of funds – for NFTs, which are generally highly illiquid assets.
Users don’t need to list their NFT and wait for someone to buy it – they can always sell the token on a decentralized exchange, like Uniswap, which has $19 million in liquidity for the trading pool PANDORA/WETH.
The new token standard has some bizarre consequences.
If the user then sells the fungible token, the NFT linked to it is destroyed. This dynamic where a new NFT is minted upon purchasing a full token has caused volume on decentralized exchanges to explode compared to volume on NFT marketplaces, due to users trying to “raise” to try to get a red replicant, the highest. rarity level available. In NFT collections, rare traits command higher prices.
This frenzy benefited liquidity providers on the token’s Uniswap pool. The 1% fee on transactions from this pool has brought in just under $1 million in fees since February 3.
Blur integrated the new standard into its market in just two days. Others like BananaGun, a Telegram trading bot, announced ERC404 support Today. Several other NFT projects have launched, or announced their launch, also using this new experimental token standard.
Ryan Celaj is DL News’ data correspondent based in New York. Contact us with advice at ryan@dlnews.com.