Let’s understand what is ERC-404 or DN-404
13 Feb 2024
Recently, ERC-404 has garnered a lot of hype and attention in the crypto community, as it represents a novel and innovative way to create and trade digital assets on the EVM blockchain. Yesterday, another similar token standard called DN-404 was introduced, claiming to be a better version of ERC-404. I am trying to create set of FAQs which may help to understand what is ERC-404 or DN-404 Token standards.
What is ERC-404 or DN-404 Token?
ERC-404 or DN-404 is an experimental token standard that combines the features of both fungible (ERC-20) and non-fungible (ERC-721) tokens.
Why do they say experimental Token standard?
As of today, it is not an official or audited standard by Ethereum. Both the token types are developed by a group of developers.
Is ERC-404 or DN-404 standard better than ERC721?
This depends on use cases, but yes in most cases this is the need. Last year there was a lot of boom in NFT and day by day it decreased, one of the main reasons is the liquidity issue due to less flexibility in the trading market.
This new Token type 404 allows more flexibility and liquidity in the NFT and DeFi sectors. This is also going to be a game changer for the WEB3.0 Gaming sector.
How ERC-404 or DN-404 Token standard works?
This Token standard works by linking every issued token to a non-fungible token. The associated NFT is minted to your wallet if you purchase a full token. If you opt to sell a fraction of the token, the linked NFT representing that fraction is burned. Thus, the token standard makes it possible for multiple wallets to hold fractions of one NFT.
In short, the 404 Token standard enables the native fractionalization of non-fungible tokens, which will make it possible to experiment with NFT use cases.
Which one is better? ERC-404 or DN-404?
ERC-404 is developed by the Pandora team, a group of anonymous developers. The premise of ERC-404 was to create a single contract that can act as both a fungible and non-fungible token.
DN-404 is developed by a team of six anonymous developers who are known for their contribution to Ethereum. DN-404 is uses two contracts – a “base” ERC20 with a “mirror” ERC721.
After ERC-404 standard become popular, DN-404 introduced by saying that ERC-404 doesn’t follow existing standards, is inefficient, and breaks at certain edge cases by DN-404 creators.
Remember, neither ERC-404 nor DN-404 are approved by Ethereum as official token standards. They are both experimental and unofficial proposals that have not gone through the formal Ethereum Improvement Proposal (EIP) process yet.
Conclusion:
ERC-404 and DN-404, both are trying to solve the same problem. However, they have some differences in their design and implementation.
- ERC-404 uses a single contract that can interact with both ERC-20 and ERC-721 contracts.
- DN-404 uses two contracts, a base ERC-20 and a mirror ERC-721. This helps to reduce gas fees.
Code Github: