What is ERC-404? The bridge connects ERC-20 and ERC-721

ERC-404 is a standard that has been making waves in the community recently, with many people saying it is the future technology for NFTs. So what is ERC-404?
What is ERC-404?
ERC-404 is a token standard that combines the features of two standards including ERC-20 and ERC-721 (NFT). Normally, the ERC-20 token standard is not interoperable with ERC-721 because of its non-fungible characteristics. Therefore, the purpose of ERC-404 is to divide NFT fragments into tokens but retain the originality of ERC-721 and create a financial model in the NFT market.

However, the ERC-404 token standard is currently only a test version and has not been audited. Therefore, users should pay attention to security issues related to the ERC-404 standard.

Although ERC-404 is creating a phenomenon in the crypto market, this standard has not been proposed and developed through the Ethereum improvement proposals (EIP) and Ethereum Request for Comments (ERC). Therefore, many consider ERC-404 to be an experimental and unofficial standard within the ERC-404 network.

According to Cointelegraph's interview with the ERC-404 development team, the process of proposing ERC-404 in EIPs and ERCs is relatively complicated because of legal issues. However, ERC-404 will soon no longer be an “unofficial” token.

In addition, token standards such as ERC-20 and ERC-721 must pass audit, aiming for widespread use on the Ethereum network. ERC-404 has not yet gone through the audit process.
How ERC-404 works
To make it easier to imagine, I take the Pandora project - one of the pioneering dApps in ERC-404 as an example. Pandora is a project with a token count of 10,000 PANDORA (ERC-20), along with an NFT count of 10,000 Pandora NFTs (ERC-721). If a user purchases 1 PANDORA token on Uniswap, the user will immediately receive 1 Pandora NFT. This means the user's wallet has 1 NFT and 1 PANDORA token.

And if a user sells 1 PANDORA token, 1 Pandora NFT in the wallet will disappear. Conversely, in case a user buys 1 Pandora NFT on Blur, the user will also receive 1 corresponding PANDORA token.
Due to the unique characteristics of NFTs, users must have the corresponding token number to be able to receive NFTs. For example, in the Pandora project, users need to have 1 new PANDORA token corresponding to 1 Pandora NFT. Additionally, the rarity and characteristics of the NFTs users receive will be random

From here, users can see how ERC-404 solves a number of problems for NFTs, including high valuation barriers and poor liquidity in the NFT market.
Disadvantages of ERC-404
The potential and application of ERC-404 is relatively large, but currently the ERC-404 token standard is still in the early stages and there is not much confirmation of safety. According to account @0xQuit on X, ERC-404 smart contracts are showing danger when outsiders can easily steal both ERC-404 tokens and NFTs of the project.

Specifically, if a person has 1.5 PANDORA tokens and 1 Pandora NFT, then this person sells 0.3 tokens, then the Pandora NFT suddenly disappears.

As mentioned above, 1 PANDORA token corresponds to 1 NFT. Therefore, if there is enough 1 PANDORA token in the wallet, the NFT will never be lost.
Also according to account @0xQuit, smart contracts of the ERC-404 standard are not optimizing gas costs, when a normal NFT transaction only costs 45,000 gas, NFT Pandora costs 100,000 gas. This is the same for tokens.
Some outstanding ERC-404 projects
Below are some ERC-404 projects that are of interest to the community:

ANON: The ERC-404 project has a quantity of 64 NFTs and 352 ANON tokens.
DeFrogs: One of the hottest ERC-404 projects with 10,000 NFTs and 10,000 tokens.
Pandora: Pioneer project in the ERC-404 “niche” with 10,000 NFTs and 10,000 PANDORA tokens.
Fractional Wonder: Project with 10,000 NFTs and 10,000 WONDER tokens.
EGGX_ERC404: Project with 21,000 NFTs and 100,000,000 tokens