• ERC404 is a new token standard on Ethereum, combining the attributes of NFTs and fungible tokens.
• For NFT traders, this means more liquidity and trading flexibility.

Tokens on Ethereum fall into two broad technical category standards: non-fungible ERC721 and fungible ERC20.

NFTs, or non-fungible tokens, are designed to be proof of ownership on the blockchain and each such token is unique. Fungible tokens, or simply known as cryptocurrencies, are not unique: one Shiba Inu token is the same as another Shiba Inu token.

But a new experimental token standard, dubbed ERC404, seeks to create a hybrid of these two patterns. Its implementation through an NFT collection of Replicants aroused the interest of traders, resulting in around US$87 million in total volume on decentralized exchanges and just under $1 million in total volume on NFT marketplaces in just the last week since its launch.

Users can sell their Replicant on popular NFT marketplaces like Blur It is Open sea or they can sell the fungible Replicant tokens on popular decentralized exchanges like Uniswap.

The price of a Replicant has increased from around 0.38 ETH on February 3 to over 4.26 ETH, giving the collection a fully diluted value of over $88 million, putting them on the market. 15 best NFT Collections.

A new Ethereum token standard

ERC404 is an experimental token standard on Ethereum, which means it has not yet received a full external audit.

Token standards are simply a set of rules that smart contracts must respect. O ERC20 token standard defines a series of rules that tokens must obey, while the ERC721 The token standard defines the rules for non-fungible tokens.

By combining these patterns, each Replicant has both token and NFT qualities.

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This is different from fractionalized NFTs, which divide a single NFT into tradeable parts, as it gives users the ability to sell shares of a single NFT, not an entire collection.

ERC404 greatly improves liquidity – availability of funds – for NFTs, which are typically highly illiquid assets.

Users don’t need to list their NFT and wait for someone to buy it – they can always sell the token on a decentralized exchange like Uniswap, which has $19 million in liquidity for the PANDORA/WETH trading pool.

The new token standard has some peculiar consequences.

If the user sells the fungible token, the NFT linked to it will be destroyed. This dynamic where a new NFT is created upon purchasing a full token has caused volume on decentralized exchanges to explode relative to volume on NFT markets, due to users attempting to “re-roll” to try and obtain a red Replicant, the highest rarity level available. In NFT collections, rare features command higher prices.

This frenzy benefited liquidity providers in the token’s Uniswap pool. The 1% fee on trades in this pool has yielded just under $1 million in fees since February 3rd.

Blur integrated the new standard into its marketplace in just two days. Others, like BananaGun, a Telegram trading bot, announced ERC404 support today. Multiple other NFT projects have launched, or announced that they will launch, also using this new experimental token standard.

Ryan Celaj is a data correspondent for DL ​​News in New York. Get in touch with tips at ryan@dlnews.com.

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