ERC404: New Possibilities for NFT

ERC404 is an experimental technical solution that combines ERC20 and ERC721 standards, featuring native liquidity and fragmented semi-homogeneous characteristics. It establishes a corresponding mutual conversion relationship between NFTs and FTs through the protocol, achieving NFTs with variable internal attributes.

Unlike mainstream NFTFi projects, the ERC404 asset series establishes bilateral liquidity using existing facilities of NFTs and FTs, featuring new characteristics such as "card-drawable", "native fragmentation", and "AMM liquidity". This brings more innovative gameplay and development potential to NFTs.

The design of ERC404 includes:

• Lossy encoding scheme, allowing the number of ERC20 tokens and the ID of ERC721 tokens to use the same data structure.
• The Mapping function tracks account status, handling the destruction and reconstruction of NFTs during token transfers.
• A pseudo-random number generation mechanism based on NFT ID to implement the "card draw" gameplay.

Pandora is the first project based on the ERC404 standard, issuing 10,000 PANDORA tokens corresponding to 10,000 NFTs. It introduces rarity design to encourage users to obtain NFTs of different rarities through transfers and transactions.

However, ERC404 is still in the early experimental stage and poses some risks and challenges:

• High standard complexity, may have unknown security vulnerabilities
• Destroying NFT assets is uncontrollable
• Gas fees are relatively high
• Not yet officially included in the Ethereum EIP proposal

In the future, ERC404 assets may play a role in scenarios such as GameFi across the entire chain and functional NFTs. However, their development still needs time for validation, and investors should carefully assess the associated risks.