New Crypto Train ERC-404 Draws Attention, Project Shows Significant Profits!

The crypto world is witnessing a new trend with the emergence of tokens standardized under ERC-404. These tokens, still in the experimental stage, are catching the attention of investors, although they have not been fully audited by external parties.

ERC-404 is an unofficial Ethereum token standard that has gained popularity through Pandora. Currently, Pandora has a market capitalization of US$234 million.

At the time of writing this article, the PANDORA token is valued at US$29,000, having increased by over 5,000% since its launch on February 2, according to DEXscreener. On Blur, Pandora NFTs have a base price of 13.88 ETH or approximately (US$27,873) with over 1,400 owners.

Understanding ERC-404

ERC-404 is a token standard that combines the easily tradable ERC-20 (regular tokens) and the non-fungible ERC-721 (NFT) tokens.

Through this mechanism, it means that for every purchase of one token, one NFT is received, and if one token is sold, one linked NFT is burned.

In the case of Pandora, the project issued 10,000 ERC-20 tokens along with 10,000 "Replicant" NFTs. If a user buys one full PANDORA token, one Replicant NFT is automatically minted to their wallet.

Conversely, if a user sells their token, the linked NFT will be burned. Users have the option to trade tokens on decentralized exchanges like Uniswap or trade NFTs on popular markets like Blur and OpenSea.

Interestingly, the standard also includes rare components. Each time a Replicant NFT is minted, it comes with a "score" of rarity, with green indicating common value and red indicating the rarest.

Risks of ERC-404 Tokens

Source: Photo by Towfiqu barbhuiya on Unsplash

The ERC-404 system could be one way to make NFTs more flexible, have more utility, and increase in value. However, according to WuBlockchain, there are several risks associated with this new standard, including:

Unrecognized Status: ERC-404, although following the ERC standard format, is not officially recognized as an Ethereum standard. It is only experimental and has not been accepted by the Ethereum Foundation. Without official support, the use of ERC-404 may remain limited.

Inability to Choose NFTs: ERC-404 has shortcomings in transactional aspects. For example, when purchasing ERC-404 tokens on Uniswap, users cannot choose which NFT they will receive. This could be a practical issue as there is no way to select desired NFTs.

Manipulation Potential: There is a risk of manipulation of NFT scarcity. If the scarcity determination algorithm can be predicted, it could be exploited by attackers to selectively mint rare NFTs, influencing the market and fairness of distribution.

Experimental Stage: ERC-404 is still very early and experimental. Therefore, investors are advised not to get too caught up in the hype and FOMO, considering that practicality and long-term stability still need to be evaluated.

So, while ERC-404 offers innovative possibilities, there are several risks to consider before fully adopting this mechanism.

*Disclaimer:

This content aims to enrich reader information. Always conduct independent research and use disposable income before investing. All buying, selling, and crypto asset investment activities are the reader's responsibility.