Що таке ERC-404? Перспектива поєднання токенів та характеристик NFT

ERC-404 is an experimental token standard that creatively merges the divisibility and high liquidity of ERC-20 fungible tokens with the uniqueness of ERC-721 non-fungible tokens.

At its core lies the "mint and burn" mechanism: when your token holdings reach a full unit, the system automatically mints a corresponding NFT for you. If you sell part of your tokens and your balance drops below one, the associated NFT is automatically burned.

01 The Birth of a Standard: From "Not Found" to New Discovery

The name ERC-404 draws inspiration from the widely recognized "404 - Not Found" error code on the internet, symbolizing its pursuit of an unexplored path. This experimental standard was introduced in February 2024 by developers known as "ctrl" and "Acme."

ERC-404 didn’t emerge out of nowhere—it was designed to address the persistent liquidity challenges in the NFT market. Before ERC-404, the industry had already explored various solutions.

For example, users could deposit NFTs into third-party protocols like Fractional or Flooring Protocol to receive ERC-20 tokens representing fractional ownership. However, this approach relies on trust in the protocol and carries the risk that the token’s value may decouple from the underlying NFT.

Additionally, concepts like "image-token interchange" seen in BRC-20 in_script_ions and projects such as Deez Nuts on Solana provided important inspiration for the creation of ERC-404.

02 Core Mechanism: Understanding the Dual Nature of "Image-Token" Smart Contracts

The key to ERC-404 lies in its "image-token duality." Rather than being a simple compromise, it uses sophisticated smart contract logic to allow a single token to exist in two states simultaneously.

The entire process is automated by smart contracts. When you buy or transfer tokens and your balance changes, the contract instantly calculates and triggers the minting or burning of NFTs.

Central to this process is a "lossy" metadata handling mechanism: when an NFT is burned due to token splitting, its unique metadata (such as artistic traits and rarity attributes) is lost. When tokens are recombined and an NFT is minted, the system generates a brand-new set of metadata according to preset rules.

This means the NFT you obtain by accumulating token fragments may have completely different attributes from the one that was burned, creating a dynamic experience similar to "blind boxes" or "card draws."

03 Value Proposition: Unlocking Liquidity and New Use Cases

ERC-404’s most immediate value is the unprecedented liquidity it brings to the NFT market. It splits high-value, complete NFTs into smaller, affordable ERC-20 tokens, dramatically lowering the investment threshold.

This opens up opportunities for a broader audience to participate in digital art, virtual real estate, and even luxury asset investment.

It introduces a native, standardized approach to "fractionalization." Unlike previous methods that relied on independent third-party protocols, ERC-404’s fragmentation and reassembly features are built directly into the token standard. Assets can move seamlessly between decentralized exchanges (like Uniswap) and NFT marketplaces (like OpenSea), sharing liquidity across both sides.

The dynamic nature of NFTs also fuels new application scenarios. In gaming, the attributes of a weapon or skin NFT might "evolve" as tokens are traded and recombined. In digital art, a piece’s appearance could change based on the proportion of tokens held by the community, creating more interactive forms of art.

04 Current Challenges: Risks and Controversies of an Experimental Standard

Despite its promise, it’s important to recognize that ERC-404 remains highly experimental and is not officially recognized. It has not been formally approved by the Ethereum Foundation nor entered the Ethereum Improvement Proposal process. This means its security and stability have not been validated through large-scale, long-term use.

High gas fees are a major obstacle in its early adoption. Frequent minting and burning of NFTs involve complex on-chain operations, sometimes causing transaction costs to exceed the value of the tokens themselves.

Arbitrage risk and price discrepancies also exist. In theory, a complete ERC-404 token (corresponding to one NFT) should have converging prices on both DEXs and NFT marketplaces.

However, because liquidity pools and pricing mechanisms are independent across the two markets, price gaps often occur in practice. This creates arbitrage opportunities but also brings price uncertainty for regular holders.

Moreover, the novelty of the code itself introduces security risks. Complex contract logic may hide undiscovered vulnerabilities, leaving room for malicious exploitation. Speculative sentiment is high; the price of the first project, Pandora, once fell sharply from a peak above $30,000, demonstrating extreme volatility.

05 Ecosystem Evolution: From ERC-404 to New Possibilities

ERC-404’s success has sparked rapid community response and innovation. To address its drawbacks—such as high gas fees and implementation complexity—developers have proposed various improvements.

Among them, DN404 is one of the main competitors. It uses a clearer dual-contract architecture: a base ERC-20 contract manages token balances, while a mirrored ERC-721 contract manages NFTs. This design is considered more in line with Ethereum standards, carries lower potential security risks, and has already gained support from platforms including Trader Joe.

Beyond technical standards, application projects based on the ERC-404 concept continue to emerge. The ecosystem, exemplified by Deez Nuts, showcases its vitality.

Reference Information for Selected ERC-404 Concept Tokens

(Data as of late November 2025; market conditions fluctuate in real time. Please refer to the latest data on Gate.)

Note: Cryptocurrency prices are highly volatile. The data above is a snapshot at a specific point in time and does not constitute investment advice. Always verify the latest market data on Gate before trading.

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You can check the latest prices, trading pairs, and market charts for tokens like Deez Nuts (DN) on Gate’s dedicated pages.

Future Outlook

As of December 8, the latest price trends for Deez Nuts (DN) on Gate reflect the broader ERC-404 ecosystem: moving forward through exploration, with both opportunities and volatility.

The market is still digesting the dual nature introduced by this new standard—on one hand, the excitement of NFT fractional liquidity; on the other, the uncertainty from an unfinalized standard and sharp price swings.

Whether this Ethereum "not found" territory will ultimately grow into a thriving "new continent" depends on the emergence of safer, more efficient technical solutions and the realization of real-world applications that go beyond pure financial speculation.