The ERC-404 token standard, the crypto industry’s latest narrative, has generated a lot of interest. But lately this initial excitement has faded significantly. Pandora, the leading token using this standard, witnessed a staggering 40% drop in market value in just three days.
Is the ERC-404 narrative losing the hype?
cryptokoin.comAs you can see from , Pandora, which was the first to adopt the ERC-404 standard, suddenly shined in the market. The project blends the fungibility of ERC-20 tokens with the uniqueness of rare Non-Fungible Tokens (NFT). The token has enjoyed a meteoric rise, rising 12,500% last week. This innovative approach promised a new era of tokenization, with Pandora tokens reaching an all-time high of $32,836. However, the sharp decline caused doubt among investors and enthusiasts. This caused him to question the sustainability and future of ERC-404 tokens.
Criticisms of the ERC-404 standard
The ERC-404 standard, developed by the pseudonymous duo “ctrl” and “Acme”, remains experimental. Meanwhile, it should be noted that it lacks official review through the Ethereum Improvement Proposal process. Its innovation reverses traditional NFT fractionation by creating entire ERC-721 tokens from smaller ERC-20 fractions.
However, critics have expressed concerns about the standard’s practicality and efficiency. A developer known as “Quit” has highlighted potential vulnerabilities in unstructured lending pools for ERC-404, allowing users to exploit the system and withdraw high-value NFTs instead of their fungible fractions. Such criticisms underscore the experimental nature of ERC-404 and the unforeseen difficulties it faces in real-world applications.
The sudden drop in prices of leading representatives raises doubts
Following these tokens, there was an increase in Ethereum gas fees. This makes adoption even more difficult. Increasing transaction costs attributed to burning and reminting NFTs on the Ethereum main-net highlight inefficiencies in implementing the standard. This has led to skepticism regarding the economic feasibility of ERC-404 tokens, especially in a market sensitive to transaction fees. A user named Pop Punk said, “An average ERC-404 transfer is 125,000 gas units. That is, more than 3 times the gas of an average ERC-721 transfer. “This is nightmare fuel,” he says.
Despite these challenges, the ERC-404 standard has attracted attention for its unique approach to NFT fractionalization. The ability to buy and sell fractions of tokens on decentralized exchanges made NFTs liquid. This idea is new to NFTs. Additionally, it treats them like regular ERC-20 tokens. Still, the decline in prices of Pandora and other ERC-404 tokens such as DeFrogs (DEFROGS) and Monarch (MNRCH) raises doubts. It questions the long-term success and acceptance of this standard in the crypto community.
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