Pandora Research Report: A New NFT Fragmentation Solution Based on ERC404 Token Standard

Currently, ERC404 is undoubtedly a hot topic in community discussion on Twitter. Generally speaking, new asset issuance methods often lead to a new narrative for a certain period, and ERC404 is no exception, which has garnered widespread attention.

At present, the ERC404 standard is still in the experimental stage, and many development logic may be iterated in the near future, which is suitable for early attention and participation. In this article, Lulufriends compiles and summarizes information about ERC404 to provide readers with a preliminary overview of this new asset issuance protocol.

Overview

On February 2, 2024, the NFT fragmentation project Pandora was launched. The core technology is the new token asset issuance standard, ERC404. In Uniswap V3, users can purchase PANDORA, the project’s token of the same name, to obtain ERC404 tokens, which represents the user’s fragmented holding of Pandora Replicants NFT. Pandora Replicants are Replicant NFTs of the Pandora project with a total supply of 10,000. They are divided into five different-colored boxes, representing different levels of rarity. The rarity order from high to low is: red, orange, purple, blue, green, with specific quantities for each rarity currently undisclosed. New NFTs may be released from future boxes. The total supply of PANDORA tokens is also 10,000, with a current circulating supply of 5,000. The team bought back 5,000 tokens from the market for project operations and team rewards in the early stages of the launch. Additionally, the team retained 700 tokens for linear release within one month using Sablier. On the first day of the launch, the team used approximately 400 ETH to repurchase tokens, mainly due to liquidity distribution at different price levels on Uniswap V3, requiring adjustments to their LP after price changes. As of writing, the PANDORA token is priced at $2,375.76, with a 24-hour trading volume of $5.365 million; Pandora Replicants have a trading volume of 48 ETH, with 670 project holders.

Coinbase Member’s Involvement

The Pandora team currently maintains an anonymous status, and the exact number of members is unknown. From publicly available information, we can see three developers named Acme, ctrl, and Searn. Acme, the GitHub operator for the Pandora project, appears to be an engineer at Coinbase, as indicated by his social media accounts. Another developer, using the alias ctrl, is an investor in Syndicate and manages his own Web3 community.

ERC404: An Innovative Asset Issuance Mechanism

Pandora, primarily a project focusing on NFT fragmentation, centers around the ERC404 token standard, an experimental token standard positioned between ERC20 and ERC721. ERC404 tokens can be traded on platforms like Uniswap, similar to fungible tokens. One ERC404 token corresponds to one NFT. The mathematical relationship is as follows: nReplicant NFT = [nERC404], where nReplicant NFT represents the quantity of Replicant NFTs, nERC404 represents the quantity of ERC404 tokens, and [n] denotes the largest integer not exceeding that number. In simpler terms, owning a whole token allows for the possession of one NFT. For instance, if a user holds 0.5 tokens, he owns 0 NFTs; with 1 token, he owns 1 NFT; with 1.5 tokens, he owns 1 NFT; with 2 tokens, he owns 2 NFTs, and so on. Through the ERC404 standard, Pandora achieves a fractionalized effect similar to NFT fragmentation. Users interested in a particular NFT series can choose to hold a specific amount of tokens instead of complete NFTs, providing more flexibility in fund allocation and reducing the entry threshold for NFT investments.

NFT Burning and Re-minting Mechanism

Replicant NFTs differ from common ERC721 NFTs as they incorporate a burning and re-minting mechanism triggered by user actions such as transferring ERC404. Integer ERC404 tokens are bound to Replicant NFTs, so any changes in ERC404 tokens will affect Replicant NFTs. There are two scenarios: 1) when users sell ERC404 tokens, the Replicant NFTs in their wallets are burned, and 2) when users transfer tokens, the Replicant NFTs in the sender’s wallet are burned, and new Replicant NFTs are reminted in the receiver’s wallet. With each reminting, the features of Replicant NFTs are refreshed, and their rarity may change. Therefore, users dissatisfied with their NFTs can continuously transfer them to refresh until obtaining the desired NFTs. If users wish to sell or send their Replicant NFTs without altering them, they can do so on OpenSea or send them to another addresses. While ERC404 seems to positively impact NFT liquidity, its effectiveness depends heavily on the popularity and liquidity of the NFT market itself. However, the burning and reminting functionality holds significant potential in specific applications like gaming. ERC404 remains worth market attention, and further observation is required to assess its impact.

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