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Blockchain

What is Ethereum's ERC-404 Token Standard? A Beginner’s Guide

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A wise person once said, 'Tokens represent not just assets, but ideas, movements, and revolutions'.  There is no other better quote available to take on the importance of tokenization.  As technology revolutionized industries with its use cases, new standards have been added to the industry with some extra features by ERC-404 Development Company. Some of you may have heard about Ethereum’s ERC-404! The latest token standard which made a wave in this technology.  

In this guide for beginners, we'll explain what the ERC 404 Token Standard is all about. We'll look at why it matters, what it can do, and what it might mean for blockchain technology.


What is an ERC-404 Token? 

The ERC-404 token standard is like mixing two types of tokens on Ethereum: ones that are all the same ERC-20 (Fungible) and ones that are unique ERC-721 (Non-Fungible). It's called ERC-404 because it sounds like the "404 error" you see on websites.

These tokens can be traded on some exchanges or even split into smaller parts, just like regular tokens. This helps solve a problem with unique tokens, where it's hard to sell just a bit of one. This could be used for lending money and other advanced things in the future.

You can also send these tokens in pieces, which isn't exactly like splitting NFTs, but it makes it easier to use them. If you split a unique token and trade it, it disappears, but you can make a new one if you get enough pieces again.


How ERC-404 works?

The ERC-404 token standard combines ERC-20 and ERC-721 tokens, where each one represents the other. When an ERC-404 token is used, it creates an ERC-721 token and links it to an ERC-20 token. This means holding the ERC-721 token gives ownership of the corresponding ERC-20 token.

To keep ERC-721 tokens unique, the ERC-404 standard uses a mint-and-burn method. When an ERC-20 token is split, the ERC-721 token is destroyed. But when complementary fractions are combined, a new ERC-721 token is created, sometimes with different attributes.

The ERC-404 standard hasn't followed the usual process for creating Ethereum tokens and hasn't been fully reviewed. It's still experimental and may have issues. Some developers are proposing better standards like DN-404, which could improve the gas usage of ERC-404. 
 

The Use Cases of ERC-404 Tokens

There are numerous use cases out there for ERC-404 tokens.  By letting people own just a piece of something valuable, they make it easier to buy and sell parts of expensive stuff like digital art or virtual land. This helps more people to join in markets that used to be hard to get into.

Think about having a share of famous art or investing in cool virtual worlds. It's all possible because of ERC-404. These tokens mix up regular trading with special ownership rights, opening up new ideas for NFT projects like.

The ERC-404 token standard helps out a lot. Like in Art & Collectibles, it lets anyone own a piece of fancy art or rare things. In Real Estate, people can chip in to buy a part of a property even if they don't have much money. For Gaming & Metaverse, gamers can easily trade parts of their game stuff. Plus, it lets people team up to invest in startups together, making it easier for everyone to own a small piece. 

ERC-404 vs ERC-20 vs ERC-721