The sudden hype surrounding ERC-404 tokens has boosted millions of dollars in trading volumes since its inception in early February, but has seemingly caused Ethereum network fees, known as “gas,” to soar to an eight-month high.
However, developers of DN-404 say they have created a new structure that uses two contracts to achieve similar goals as ERC-404, minus the problems.
Both contracts are experimental and ‘unofficial’.
A group of Ethereum application developers started a new token contract on Monday to solve apparent drawbacks associated with the experimental standard known as ERC-404s, which has exploded in popularity, contributing to network congestion and driving up the reimbursements.
DN-404, short for ‘Divisible NFT-404’, is a token implementation based on the existing token standards ERC-20 and ERC-721 and claims to provide ‘full compliance’ with these frameworks. On Ethereum, ERC-20 is the agreed upon framework for token issuance, while ERC-721 is for non-fungible tokens (NFTs).
Developers of DN-404 say they created this framework after ERC-404 caused gas prices to spike due to the way the latter worked.
ERC-404s drove millions of dollars in trading volumes, but seemingly caused Ethereum fees to soar to an eight-month high since inception in early February.
Partly due to the ERC-404s, transaction costs shot up to as much as $840 for a transaction (for a specific project), they marked up, which “would normally have cost $50.”
As of Tuesday trackers show the average gas fee for swap transactions is $20, up from $5 at the start of this month. Some, like DN-404 developer @PopPunkOnChain, have done so attributed this spike to the growth and use of ERC-404 contracts.
Gas refers to the fees Ethereum users pay to ensure their transactions are included in the first block by network validators. These validators are incentivized to include transactions that pay the highest fees rather than on a first-come, first-served basis. This means that fees for popular tokens can often reach thousands of dollars.
A spike in gas prices over the weekend to as much as 360 gwei (one unit of ether) raised concerns among market observers about its long-term usefulness and caused a sharp sell-off among popular projects.
Experimental and unofficial
ERC-404 is not an officially recognized Ethereum token standard – the 404 is a nod to the ‘404 not found error’ message on websites. However, several projects joined the ERC-404 story after launch, collectively achieving a market capitalization of $209 million within a few days. data kept by CoinGecko.
ERC-404 has that too sparked criticism among Ethereum developers for associating ERC with the name. However, in messages to CoinDesk, the team explained that the name helped it gain popularity and build a following around what it set out to do.
ERC-404 allows multiple wallets to directly own one NFT and in the future create a use case where that specific exposure can be tokenized and used to take out loans or stakes.
In simple terms, it can be thought of as combining tokens and NFT ownership in a way that can create liquid markets for a project’s tokens and related NFT collections.
DN-404 achieves the same goal by using two contracts that track and process user balances and NFTs in different ways.
As of Tuesday, neither DN-404 nor ERC-404 have been officially recognized by the nonprofit Ethereum Foundation, but they can still be used freely within the network.
ERC-404 developers say they are actively working on an Ethereum Improvement Proposal (EIP) for the official recognition of the experimental token standard. EIP is the process of introducing a new feature or functionality into Ethereum. The EIP process may take some time and cannot be completed quickly, developers added.
“We also released a tweet calling on the developer community to review and contribute their ideas as we would like to make a transparent, open, and collaborative effort to reach consensus on a standard that works,” said @Hohenheim0x, a ERC- 404 developer, in a direct message.
“Additionally, we are in the early stages of exploring a foundation to further develop the standard, drive adoption and support the ecosystem of builders that have quickly formed to take advantage of this new technology,” he added .