What is ERC404?

ERC404 is an innovative hybrid protocol that combines the features of ERC20 and ERC721, enabling native liquidity and fractionalization of NFTs. It can be simply understood as a tool for “token-NFT” conversion. Users who purchase an asset through the ERC404 protocol, whether it is a token or an NFT, will ultimately receive both types of assets. For example, in the case of Pandora, users can purchase $PANDORA tokens or buy Pandora NFT mystery boxes on Blur. If a user only purchases one $PANDORA token, they will receive one $PANDORA token and one Pandora NFT.

This means that through the ERC404 protocol, NFTs can be freely traded like traditional tokens. The ERC404 protocol greatly improves the liquidity and utility of NFTs. It is important to note that each NFT corresponds to an integer number of tokens. If a user owns 1.5 $PANDORA tokens, they will only receive 1.5 $PANDORA tokens and 1 Pandora NFT.

What is Pandora?

As the first project to use the ERC404 protocol, Pandora consists of 10,000 NFTs and 10,000 corresponding ERC20 tokens. Pandora connects NFTs and tokens through a simple and intuitive mechanism. Whenever a user purchases a $PANDORA token, the corresponding NFT will automatically appear in their wallet. Selling the token will destroy the NFT. Each $PANDORA token represents a Pandora NFT, but the rarity of the NFT is not uniform and is randomly distributed. This is similar to a lottery game, encouraging users to trade to increase their chances of obtaining high-rarity NFTs. Pandora not only provides users with a flexible trading platform but also introduces NFTs of different rarity levels, providing users with more choices and enhancing the liquidity of the NFT market.

Pandora Website (Source: www.pandora.build)

The Pandora project quickly became the market’s focus since its launch on February 2. The token’s price once soared to $32,838 each, and the current market value exceeds $150 million. The project’s core lies in its Replicant NFT, which includes boxes of different colors representing different species, each color representing a different rarity. So far (as of the deadline on February 23), Pandora has attracted more than 1,500 holders, the NFT floor price remains at 9.9 $ETH, and the total transaction volume exceeds $550 million.

Pandora Token Data (Source: https://dexscreener.com/ethereum)

Replicant NFT Data (Source: https://blur.io/collection/pandora-replicants)

Project Background

The Pandora project was launched by an anonymous team, with some key members gradually revealed, including former Coinbase engineer Acme, Syndicate investor Ctrl, and the mysterious figure Searn. Although the team information has not been fully disclosed, it is not difficult to see from the Pandora mechanism design that the project team has a deep understanding and innovative spirit in the NFT field.

Problems Pandora Solves

As an NFT fragmentation platform implemented through the innovative ERC404 protocol, Pandora is a real game-changer. It cleverly combines the features of ERC20 and ERC721, bringing native liquidity and fractionalization to NFTs. For example, rare NFTs like CryptoPunks can now be freely traded on exchanges like ordinary tokens, no longer limited to traditional NFT markets. This breaks down the barriers between NFTs and tokens and increases the liquidity of the NFT market, successfully solving the problem of insufficient liquidity in the NFT market.

Project Advantages

Through the ERC404 protocol, Pandora allows users to indirectly own NFTs by holding Pandora tokens. This mechanism not only lowers the barrier to entry for the NFT market but also increases the flexibility and fun of the market. Users can now change the characteristics and rarity of NFTs through simple token transfer operations, opening up a new way of interaction. While providing NFT liquidity, ERC404, and Pandora also expand the application of NFTs in DeFi services, such as lending, staking, perpetual contracts, and wallets.

The ERC404 protocol’s “token-NFT” unification (semi-fungibile) mechanism blurs the boundaries between artwork and tokens. Compared to traditional NFT fragmentation logic, the solution provided by ERC404 is more intuitive and efficient. The ERC404 protocol successfully builds a bridge between ERC-20 and ERC-721. Unlike the previous ERC20 and ERC721, Replicant NFTs have burning and re-minting mechanisms that are triggered when users make transfer transactions using the ERC404 protocol.

Since each NFT corresponds to an integer number of tokens, Replicant NFTs will also change when ERC404 tokens change. When a user sells an ERC404 token, the Replicant NFT in their wallet will be burned (destroyed). When a user transfers tokens, the Replicant NFT in the sender’s wallet will be burned, and a new Replicant NFT will be re-minted in the receiver’s wallet. Each time a re-mint occurs, the Replicant NFT’s attributes will be refreshed, and its rarity may also change.

Users who are dissatisfied with the NFTs they hold can continuously transfer them to refresh the NFT rarity until they are satisfied. If a user does not want to change their Replicant NFT (does not want to burn and re-mint) but wants to sell it or send it to another user, they can sell the Replicant NFT on OpenSea or send it to another address. While obtaining high-rarity NFTs, it also increases the liquidity of the market.

Protocol Comparison (Source: https://www.pandora.build/)

$PANDORA Tokenomics

$PANDORA

Pandora has not announced its tokenomic model, and has issued 10,000 ERC-20 tokens and 10,000 associated Replicant NFTs. The project team bought back 5,000 tokens in the early stage, the part of the buyback is mainly used for team rewards, at the same time, 700 tokens will be linearly unlocked through Sablier, to ensure the continuous stability of the tokenomics.

How to Own $PANDORA

To own $PANDORA tokens, you can buy them on CEX such as the reputable Gate.io. All you need to do is create a Gate.io account, complete the KYC process, and then fund your account to buy $PANDORA tokens directly.

Future Development

Based on its current market performance, the success of Pandora has proven the practicality and innovation of the ERC404 protocol. Although it is still in its early stages and needs to be reviewed by the ERC standard, the project’s early performance, especially in terms of market capitalization and liquidity growth, has demonstrated its enormous potential.

Applying the ERC404 protocol has shown the market the seamless integration between tokens and NFTs, as well as the infinite possibilities for innovation. Overall, the launch of the ERC404 protocol and Pandora marks the beginning of a new era of symbiosis between tokens and NFTs, providing users with more flexible capital allocation options, lowering the market entry barrier, and bringing more fresh blood and opportunities to the entire NFT market.

Conclusion

The Pandora project demonstrates the huge potential of the ERC404 protocol. Allowing users to directly sell NFTs to Uniswap liquidity pools without the need to place orders and wait, greatly enhances the liquidity of NFTs. It also allows users to redraw and obtain rarer NFTs by transferring tokens to new wallets, bringing new gameplay to the NFT market.

The emergence of the ERC404 protocol successfully builds a bridge between ERC-20 and ERC-721. The ERC404 protocol is not only a major upgrade to NFT liquidity but also brings more possibilities for diversified applications in the entire NFT market, opening up new horizons for NFT development. And the popularity of Pandora also proves the market’s enthusiastic response and recognition of emerging crypto projects.

Finally, it is still necessary to remind everyone that the project is still in its early stages. More observation and cautious trading are still needed.