ERC404 is a new type of smart contract, mixing ERC20 and ERC721 properties in a new way
ERC20 is designed to create fungible tokens on Ethereum, like USDT
ERC721 is designed to create NFTs like the JPGs you love and hate
ERC404 is like their child 👶
2/12
Let me break it down in simple terms using USDT as example
ERC404 is basically a token with a limited supply of, let’s say 10,000
Each token you buy in full unit (1 USDT) automatically mints a “replicant”, which is its NFT
Each NFT is burned if you sell the token
3/12
Let’s go even simpler
Buy 1 token = get 1 NFT
Sell 1 token = burn 1 NFT
Plot twist:
if you only buy 0.9 tokens, you don’t get an NFT, but if you follow up with another 0.1 token, and your wallet now has 1 full token, you get an NFT
4/12
Where it gets interesting is that the NFT collection becomes highly liquid since it’s also a tradable token with its own marketcap
The 2nd plot twist is that as each NFTs get burned or minted, there are always new trait combinations
Why should you care about that?
5/12
The Pandora rocket just doesn't stop 🚀
The NFT is up to 11.5 ETH this morning, and the native token -
$256M marketcap.
Both are up 120% on the day and effectively doubling on a daily basis.
Just wow.
The way the ERC404 contract works when minting NFTs is that traits are randomly assigned over and over
You could get a rare NFT worth more than the price of the token
Each NFT has a rarity score, so you could make a profit selling the NFT, then buy more tokens and NFTs
6/12
Something people struggle to understand is that while you have the token AND the NFT, they are linked
That means you can’t sell the NFT and keep the token
The new buyer effectively receives the token + NFT, so you have to play your cards right
Let me explain
7/12
If you have 3 NFTs, with 1 rare and 2 commons, but want to sell your token, be careful
It’s not yet clear which NFT will burn if you sell, so I’d recommend you sell the NFT you don’t want first
That way, you can keep what you want without any risk
8/12
This is a great new concept as the NFT collection will get new items over time and will likely completely change as the token sales grow
And there will be a ton of new use cases in the future
Here are 3 concrete example applications for you 👇
9/12
🎨 Generative Art
@jackbutcher
could launch a new ERC404 Opepen edition with new traits overtime
🎮 Gaming
New skin combinations for weapons could be a fun way to utilise the new contract
🏠 Real estate
Fractional ownership could be used to create a more liquid market
10/12
An important disclaimer to note is that ERC404 is very new and has not yet been verified by
@ethereum
That means no official audit of the contract has been done yet, and there could be vulnerabilities
As always, be careful and DYOR, the web3 space is extremely volatile
11/12
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