In today’s rapidly advancing blockchain technology, innovation never ceases. Following the emergence 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 cryptocurrency, based on improvements to ERC-404. This article will delve into the BC-404 standard, which integrates the advantages of ERC-404 while introducing innovations.

ERC-404 protocol standard:

Looking back over the past six months, ERC-404 has been one of the most exciting innovations in the Ethereum ecosystem’s asset issuance sector. Introduced by the Pandora team in early February, ERC-404 is an open-source experimental token standard for creators and developers. It combines features of ERC-20 and ERC-721, offering native liquidity and fractionalization. This is achieved through a logic of quantity correspondence between FTs (fungible tokens) and NFTs (non-fungible tokens), specifically through mechanisms for NFT “minting and burning.”

In simpler terms, for some blue-chip NFT projects, especially those with rare attributes, their prices can make them valuable but illiquid assets that are difficult to trade. ERC-404 represents a significant improvement for these NFT projects lacking liquidity. Expensive NFTs can now be fractionally traded on mainstream markets, similar to buying BTC or ETH tokens, making transactions more convenient and efficient.

BC-404 Token Standard:

Initially, Color Protocol launched the ERC-404 conversion platform for Memecoin, where meme artists and communities could create their Meme NFT collections within ERC-404. Holders could convert their Memecoins into NFTs.

Combining the Bonding Curve model, COLOR introduced the BC-404 standard based on ERC-404. It stipulates that the required token amount for generating NFTs will continuously increase until reaching a preset limit. Therefore, early participants will have cost advantages.

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

1. BC-404 standard bonding curve model:
   Overall, BC-404 can be designed with three different difficulty models. Color defines the difficulty of NFT generation as “BC Count,” which includes linear increase, accelerated slope curve increase, and curve rise with gradually decreasing slope.
   

2. BC-404 NFT token content:
   Because the required amount of BC-404 tokens to generate each BC-404 NFT varies, the token content of different NFTs also varies. This means that the number of tokens held corresponds directly to the number of NFTs generated. In contrast, each ERC-404 NFT carries a fixed and identical quantity of tokens.

3. BC-404 NFT number:
   Due to the varying token content among BC-404 NFTs, their values differ accordingly. To reflect this characteristic in the NFT market, the BC-404 contract links the NFT ID with the token content (BC Count at the time of generation):

• For example, when a user purchases a BC-404 NFT with ID #1868, they will receive 1868 BC-404 tokens alongside the NFT.
• Owners and traders can clearly determine the token content of each NFT through the ID in their wallet or in NFT marketplaces.
• NFT IDs do not need to start from #1 and can depend on the initial BC Count value set by the BC-404 contract deployer.
• NFT IDs do not have to be consecutive and can depend on the BC Count increment pattern set by the deployer.
• Each NFT ID is unique, and generating a new NFT always involves a higher BC Count than any previous one, thereby giving each BC-404 NFT its unique history.

1. NFT destruction mechanism and deflation:

• BC-404 NFT Trading and Transfer: Similar to ERC-404, when an NFT is transferred, it remains unchanged, and an equivalent amount of tokens moves with the NFT.
• BC-404 Token Trading and Transfer: Trading or transferring BC-404 tokens can potentially trigger the destruction of BC-404 NFTs, depending on whether the remaining tokens are sufficient to support the transferred NFT, akin to ERC-404 V1.
• Each BC-404 NFT ID appears only once. Once destroyed, an ID cannot be regenerated. Therefore, the destruction of BC-404 NFTs signifies a reduction in the BC-404 NFT collection, assuming the contract has set 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, generated from $PEPE to create the initial pepe PFP series, deployed on Base. It combines the uniqueness and scarcity of NFTs with the popularity and liquidity of Memecoins. Through a conversion pool, users can convert $PEPE into the BC-404 standard (with the option for cross-chain bridging if necessary), giving local Memecoin assets NFT properties.

Conversion details:

• Free Conversion: Only gas fees need to be paid, no additional costs.
• Reversible Conversion: Users can convert $colorpepe 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, with a time window for conversions.
• Whitelist Priority: Conversions occur in two stages, initially restricted to whitelisted addresses and then opened to the public.
• P.S.: Make sure your wallet holds some $PEPE (on the Ethereum mainnet) and enough $ETH to cover gas fees.

BC-404 Features:

1. Decentralized Value Consensus
   BC-404 imbues NFTs with inherent unique value through multiple token contents. Unlike traditional methods, BC-404 does not predefine rarity rules for NFTs; instead, it allows the market and community members to autonomously determine the aesthetic value of NFTs. BC-404 solely designs the numerical uniqueness of NFTs (where ID equals token content, determined by code and generation history). This approach aligns more with the decentralized spirit of blockchain and opens up more possibilities for the valuation of NFTs. For BC-404 NFT series, issuance is just the beginning; their final form will be shaped collaboratively by the market and community.

2. Increased Rarity of NFTs
   Under the new minting and burning mechanism of BC-404, the scarcity of the BC-404 NFT collection will rise in tandem with token trading volume. The deflationary mechanism of NFTs mitigates the issue of token liquidity being greater in decentralized exchanges (AMMs) than in peer-to-peer order markets, maintaining the trading vitality and profitability of the NFT market (the circulation of NFTs will decrease, making it more difficult to acquire NFTs through token purchases).

3. Improved Reset Mechanism
   Unlike the ERC-404 standard, where transferring tokens to reset an NFT incurs only gas fees (negligible in low-cost networks), transferring tokens under BC-404 will face a higher BC count to generate a new NFT. This design effectively increases reset costs, reducing the possibility of low-cost arbitrage, thereby helping to sustain the long-term health of the NFT market.

4. Diverse Trading Strategies
   BC-404 offers market participants more strategic choices, enhancing the depth and excitement of trading. Investors seeking to acquire more NFTs must balance multiple factors: (1) the market premium of existing NFTs and their token content, (2) the token cost required to generate new NFTs (which increases over time), and (3) the randomness of generating new NFTs.

This complex decision-making process not only enhances market excitement but also encourages participants to delve deeper into analyzing market dynamics and making informed investment decisions.

Potential challenges and prospects

Although BC-404 introduces many innovations, its complex mechanisms may require some time for market participants to fully understand and accept. Effectively explaining the advantages and operational methods of BC-404 to users will be a significant challenge in the initial stages of project promotion. Secondly, BC-404 balances token and NFT liquidity through its unique mechanism, but maintaining this balance and avoiding extreme situations in practical operation will be an ongoing issue that requires continuous attention.

Conclusion

BC-404 introduces a new dimension of value to the NFT market — token content, which becomes a crucial measure of individual NFT worth. Looking ahead, BC-404 not only brings new possibilities to the NFT market but also offers a new dimension for evaluating the value of digital assets. Its emergence signifies that NFTs are evolving towards a more complex and diversified direction, integrating token economics, deflationary mechanisms, and dynamic pricing models. With advancing technology and growing market acceptance, we can expect to see more innovative applications based on BC-404, truly expanding the audience of the 404 ecosystem and leading it towards prosperity.

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