A team of Ethereum programmers presented a new standard known as DN404, with the aim of offering improvements over the already experimental ERC-404.
A new tokenization standard that combines the features of fungible and non-fungible tokens has been introduced by a team of Ethereum programmers. It is about DN404, an experimental and unofficial standard, which aims to improve the performance and flexibility of projects based on ERC-404, a hybrid standard between ERC-20 and ERC-721, which has already been adopted by projects such as Pandora and DeFrogs.
According to its creators, DN404 offers an innovative solution, going one step ahead of the ERC-404 standard, to reduce gas costs, optimize data storage and facilitate interoperability between different platforms and ecosystems.
Let's remember that non-fungible tokens (NFTs) are unique and unrepeatable digital assets that can represent anything from art and music to collectibles and games.
However, NFTs have some limitations, such as lack of liquidity and difficulty in dividing or fractioning them into smaller parts. Therefore, some developers have created new token standards that seek to overcome all these challenges. One of them is DN404, a hybrid token standard, which combines the advantages of fungible and non-fungible tokens.
Seeking greater liquidity and accessibility in the NFT market
This new tokenization standard is based on ERC-404, a recently released unofficial token standard that allows the creation of hybrid tokens that can function as fungible tokens (ERC-20) or non-fungible tokens (ERC-721). .
The ERC-404 has the advantage that it can mint and burn NFTs on demand, as well as transfer them between different contracts. However, in addition to this functionality, the DN404 goes one step further and offers the possibility of dividing NFTs into smaller, marketable units. This means that ownership of an NFT can be divided among multiple owners, increasing its liquidity and accessibility.
The DN404 consists of two main components: a basic ERC-20 contract, which facilitates fractional trading of NFTs, and an ERC-721 contract, which is responsible for minting and burning NFTs.
In this standard, the ERC-20 contract issues a fixed amount of fungible tokens for each NFT that is minted, and burns them when the corresponding NFT is burned. The ERC-721 contract allows NFTs to be created and destroyed according to the rules defined by the token creator. In this way, the DN404 manages to combine the best of both worlds: the uniqueness and scarcity of NFTs, and the fungibility and liquidity of fungible tokens.
DN404: Fractionating NFTs
@Cygaar, an anonymous developer, leader of the DN404 project, proposes an innovative solution for the fractionation of NFTs. His method is to create a smart contract that emits fungible tokens that represent parts of an NFT.
These tokens can be freely exchanged in the market, without depending on centralized platforms or services. Furthermore, the smart contract ensures that the fungible tokens and the original NFT are always in sync. In this way, each time a token transfer is made, the NFT is destroyed and a new one is created, reflecting the change in ownership. Thus, users can recover the entire NFT if they own all the corresponding fungible tokens.
In short, the new DN404 standard proposes a solution that allows NFTs to be fractionated and marketed safely and efficiently, both on centralized and decentralized platforms.
This standard could offer greater liquidity to NFT owners, as well as new investment and staking opportunities. However, DN404 has not yet undergone a formal safety audit, so its use carries certain risks. Therefore, it is advisable to wait for security experts to review and validate the standard before it is widely adopted.
Prudence and caution, good advice before making an investment
Despite the statements of security and confidence that their developers have shown about the ERC-404 and DN404 standards, not everyone is convinced of the security and viability of these new projects.
A developer known as @quit has alerted about a possible flaw that could allow attackers to fraudulently mine NFTs in some of the lending protocols that use ERC-404.
On the other hand, one of the creators of ERC-404, @ctrl, has responded to these accusations by stating that the problem is due to a poorly implemented contract by @quit, and not the standard itself. The creator of the ERC-404 standard has also announced that an audit is being carried out to improve the protocol and resolve any potential existing vulnerabilities.
Despite these statements, confidence in the new token standard, which was presented a week ago, as reported this medium, has been affected by the controversy generated.
Users who want to experiment with these new standards should be aware of the potential risks and exercise caution. The ERC-404 has yet to demonstrate its reliability and usefulness to the crypto ecosystem, and DN404 has yet to go through an audit process that guarantees its reliability and efficiency.
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