Today, with the rapid development of blockchain technology, innovation never stops. Following the introduction of the ERC-404 standard, a new standard called BC-404 has emerged, bringing new possibilities to the NFT market. BC-404 (Bonding Curve 404) - the first deflationary NFT contract in the cryptocurrency world, based on the improvement of ERC-404. This article will delve into the BC-404 standard, which combines the advantages of ERC-404 and innovates upon them.

ERC-404 Protocol Standard:

Looking back over the past six months, ERC-404 is one of the most exciting innovations in the field of Ethereum ecosystem asset issuance. ERC-404 is an open-source experimental token standard for creators and developers, developed by the Pandora team in early February. It is a hybrid implementation of ERC-20/ERC-721, with native liquidity and fragmentation features. This is achieved through the quantity correspondence logic between FT and NFT, namely the "minting and burning" mechanism of NFTs.

In simple terms, some blue-chip NFT projects, especially those with rare attributes, have prices so high that they become illiquid and difficult to circulate. Therefore, the proposal of ERC-404 is a major improvement for these originally illiquid NFT projects. These high-priced NFTs can be split and traded on some mainstream trading markets, just as convenient and fast as buying token assets like BTC and ETH.

BC-404 Token Standards:

At first, Color Protocol launched the ERC-404 conversion platform for Memecoin. Meme artists and the community can create their Meme NFT collections in ERC-404, and holders can convert their Memecoin into NFTs.

Combining the Bonding Curve model, COLOR has proposed the BC-404 standard based on ERC-404. The required number of tokens to generate NFTs will continue to increase until reaching the preset upper limit. Therefore, early participants will have a cost advantage.

• In the ERC-404 contract, Token and NFT are in a fixed ratio. The contract deployer can initially define how many ERC-404 Tokens an address needs to hold in order to generate an ERC-404 NFT. For example, 1 $Pandora Token can generate 1 Pandora NFT, but if your address only holds 0.9 $Pandora, you will not be able to generate a Pandora NFT.
• BC-404 integrates the Bonding Curve model, changing the fixed quantity of BC-404 tokens required to generate BC-404 NFTs to an increasing quantity. With the generation of each new BC-404 NFT, this value will rise continuously, meaning that each new NFT will be harder to generate than the previous one.
• When deploying the BC-404 contract, the deployer can set the initial difficulty of generating the first BC-404 NFT (i.e., how many BC-404 Tokens an address needs to hold) and the incremental value of the difficulty for generating each subsequent BC-404 NFT.

1. BC-404 standard bond curve model:

Overall, BC-404 can be designed with three different difficulty models. Color defines the NFT generation difficulty as 'BC Count': linear increase, accelerated slope curve increase, curve rise, and gradually decreasing slope.

2, BC-404 NFT token content:

As the number of BC-404 Tokens required to generate each BC-404 NFT varies, the token content of different NFTs also varies, which corresponds to the number of tokens held. In contrast, each ERC-404 NFT carries a fixed number of tokens.

3, BC-404 NFT number:

Due to the difference in token content between BC-404 NFTs, their values also vary. To reflect this characteristic in the NFT market, the BC-404 contract associates the NFT ID with the token content of the NFT (BC count at the time of generation):

• For example, when a user purchases the BC-404 NFT with ID #1868, they will receive 1868 BC-404 tokens along with the NFT.
• Holders and traders can clearly determine the token content of each NFT through the wallet or ID in the NFT market.
• NFT ID does not have to start from #1, and can depend on the initial BC count set by the deployer of the BC-404 contract.
• NFT ID does not need to be continuous and can depend on the BC count increment mode set by the deployer.
• Each NFT ID is unique and generates a higher BC count than any previous one when creating an NFT, giving each BC-404 NFT its unique history.

4. NFT Destruction Mechanism and Deflation:

• BC-404 NFT trading and transfer: Similar to ERC-404, NFTs will remain unchanged when transferred, and an equivalent amount of tokens will be transferred with the NFT.
• BC-404 Token trading and transfer: likely to trigger the destruction of BC-404 NFT, depending on whether there are enough remaining tokens to support the transferred NFT, similar to ERC-404 V1.
• Any BC-404 NFT ID will only appear once. Once destroyed, the ID cannot be regenerated; therefore, the destruction of BC-404 NFT means a reduction in the BC-404 NFT collection, assuming that the contract sets a fixed total token supply.

This makes BC-404 the first deflationary NFT contract in the cryptocurrency space.

Colorpepe:

$colorpepe is the first BC-404 asset and generates the first pepe PFP series from $PEPE, deployed on Base. It combines the uniqueness and scarcity of NFTs with the popularity and liquidity of Memecoins. By allowing users to convert $PEPE into BC-404 standard (cross-chain bridging if necessary) through the conversion pool, it gives native Memecoin assets NFT properties.

Conversion details:

• Free conversion: only need to pay gas fees, no additional cost.
• Reversible conversion: $colorpepe can be converted back to $PEPE at any time, and the corresponding amount of $colorpepe will be destroyed.
• Limited Supply: The total supply of $colorpepe tokens is limited and the conversion has a time window.
• Allowlist Priority: The conversion is divided into two phases, with the first phase limited to allowlist addresses and the second phase open to the public.
• ps: Make sure you have some $PEPE (ETH mainnet) and enough $ETH to pay for gas fees in your wallet.

Features of BC-404:

1. Decentralized value consensus

BC-404 endows its NFT with inherent unique value through a variety of token content. Unlike traditional methods, BC-404 does not predefine the rarity rules of NFT, but allows the market and community members to autonomously determine the aesthetic value of NFT. BC-404 only designs the uniqueness of NFT in terms of value (ID equals token content, determined by code and generation history). This approach is more in line with the spirit of decentralization of blockchain and provides more possibilities for the valuation of NFTs. For the BC-404 NFT series, issuance is just the beginning, and its final form will be jointly shaped by the market and the community.

2. NFT Rarity Increased

Under the new mint-and-burn mechanism, the scarcity of the BC-404 NFT collection will rise in sync with the token trading volume, and the deflation mechanism of NFT offsets the problem of token liquidity being greater than NFT liquidity in the Dex (AMM), maintaining the transaction vitality and profitability of the NFT market (the circulation of NFT will decrease, and it will become more difficult to obtain NFT through token purchase).

3. Improved reset mechanism

Unlike the ERC-404 standard, transferring tokens to reset NFTs in the ERC-404 standard only incurs gas fees (which can be negligible in low-cost networks), while transferring tokens in BC-404 will face higher BC counts to generate new NFTs. This design effectively increases the reset cost, reduces the possibility of low-cost arbitrage, and helps maintain the long-term healthy development of the NFT market.

4. Rich trading strategies

BC-404 provides market participants with more strategic choices, adding fun and depth to trading. When seeking to acquire more NFTs, investors need to weigh multiple factors: (1) the market premium of existing NFTs and their token content, (2) the token cost required to generate new NFTs (this cost will continue to increase), and (3) the randomness of generating new NFTs.

This complex decision-making process not only increases the fun of the market, but also encourages participants to think deeply and analyze market trends to make wise investment decisions.

Potential Challenges and Prospects

Although BC-404 brings many innovations, its complex mechanism may require some time for market participants to fully understand and accept. How to effectively explain the advantages and operation of BC-404 to users will be a major challenge in the initial promotion of the project. Secondly, through its unique mechanism, BC-404 balances the liquidity of tokens and NFTs, but how to maintain this balance in actual operation and avoid extreme situations will be a problem that needs continuous attention.

Conclusion

BC-404 introduces a new value dimension, token content, to the NFT market, which will become an important measure of the value of a single NFT. Looking ahead, BC-404 not only brings new possibilities to the NFT market, but also provides a new dimension for the valuation of digital assets. Its appearance marks that NFTs are evolving towards a more complex and diversified direction, integrating tokenomics, deflationary mechanisms and dynamic pricing models. With the maturity of technology and market acceptance, we can expect to see more innovative applications based on BC-404, truly expanding the audience of the 404 ecosystem and making it prosperous.