We Like the 404s
The true potential of 404s will soon become startlingly apparent. A transformative shift in the digital asset space is here that will permanently alter how both coins and NFTs are created, traded, and valued. 404s offer interoperability, efficiency, and utility previously unseen. 404s are a pivotal infrastructure for the future of blockchain ecosystems—a sum greater than its parts.
Since the early days of 2021's NFT mania, the fractionalization of unique NFTs into fungible divisible units has been attempted and experimented with in a variety of ways. Be it for shared ownership, buying into an NFT without committing to its full floor price, strengthening liquidity mechanics, or any number of other novel applications. "Tokenifying" NFTs is a nut the industry has long been trying to crack. NFTAMM protocols like NFTX and Sudo have been the primary players in this field, and they do great work providing crucial NFT infrastructure to the wider ecosystem. Recently, however, a new means of merging the uniquely collectible nature of NFTs with the divisible liquid mechanics of ERC-20 tokens has arisen: 404s.
404s came to public attention with the launch of ctrl’s Pandora, a pivot from Serec’s initial Emerald experiment. Pandora experienced massive price appreciation in a short period and naturally, heads began to turn. NFTs tied directly to tokens on chain, it seemed like the leap forward the space had been waiting for. Pandora was designed in such a way that every NFT was represented by an ERC-20, issued by the same contract. When someone has a whole ERC-20 (one token) they are issued an NFT, but if they sell a fraction of the token, the NFT is burned. So, if you hold 1 Pandora NFT, meaning you have 1 Pandora ERC-20, and you sell 0.25 of the ERC-20, the NFT would be burned and you would be left with no NFT and 0.75 ERC-20. People were very excited by this concept.
It wasn't long, however, before obvious flaws in Pandora's 404 implementation were pointed out. 0xQuit outlined in an 𝕏 thread how a user may be able to trick the smart contract into exchanging full NFTs for dust amounts of the ERC-20. These issues are solvable, but other greater design issues remained.
Enter DN404. DN404 is a redesign of the 404 mechanism.
Let's say you mint an NFT from a DN404 collection. As part of that transaction, you'd be issued your NFT on an ERC-721 contract as always, but under the hood, you'd be issued 1 token of the collection's ERC-20. Like all ERC-20s this token can be fractionalized. However, under DN404 if your balance in the ERC-20 drops below 1, your NFT is automatically burned. Similarly, if you hold two NFTs and, therefore, two ERC-20s but send 0.5 ERC-20 to another address, one of your NFTs would be burned and you would be left with a single NFT and 1.5 ERC-20 tokens. The separation of the NFT contract from the token contract solves both protocols being fulfilled, making it easier for NFT exchanges to exchange it as well as DEXs.
What happens when you transfer ERC-721 token IDs directly? You keep them! IDs are only burned on the direct transfer of ERC-20s to a contract or when enough of an ERC-20 is transferred to break apart whole ERC-20 tokens.
Scatter’s goal is and has always been to allow creators access to the best and most cutting-edge NFT technology available, and we see great promise in DN404. This is why we are pleased to announce that DN404 contracts will soon be deployable on Scatter.art
The emerging bullrun seems as if it will be unlike any other before. Future 404s will likely enable NFTs as a protocol to more regularly reach the kinds of insane heights that previously only the most manic meme coins have reached in the past. DN404s may even overtake pure meme coins as the vehicle for euphoria. Would you rather own only a generic ERC-20 token or also a funny liquid JPEG that has its own unique rarity? We’ve already seen major meme coins mint “official” NFT collections to be the face of their coin on the timeline. Why not launch both at the same time?