Just a week following the introduction of ERC-404, an unofficial Ethereum standard aimed at blending the functionalities of fungible and non-fungible tokens (NFTs), another development team has stepped forward claiming to offer an improved alternative with DN404.
Dubbed the "Divisible NFT" standard, DN404 shares similarities with its ERC-404 counterpart, aiming to function as a hybrid ERC-20/721 token. According to a post dated February 12 by pseudonymous developer “cygaar,” the proposed standard seeks to enable NFT holders to trade fractions of their NFTs with others.
Expressing the ultimate goal, cygaar stated, “Our ultimate goal is to create a token standard that can serve as an NFT with native decentralization built in.” They argued that while ERC-404 has garnered popularity, it “does not adhere to existing standards, is inefficient, and breaks down in certain edge cases.” However, Cygaar elaborated that DN404’s approach involves two contracts: a "base" ERC-20 and a "mirror" ERC-721, asserting they are "fully compliant" with the protocol "out of the box."
Cygaar outlined that the majority of transactions occur on ERC-20 token contracts, serving as an integral component of the NFT. Upon the transfer of the underlying ERC-20 token, the mirror NFT is automatically generated and destroyed.
Wallets holding a token amount equivalent to at least 1 base unit will receive NFTs on the mirror contract. Conversely, if a wallet contains an amount below the minimum base unit, the NFT will be invalidated. The overarching objective, as described by Cygaar, is to enable users to trade fractional NFTs without intermediaries, facilitating NFT trading on NFT exchanges and decentralized platforms.
Despite the innovative strides, developers caution that the code "has not undergone formal review, so use it at your own risk." In a development from the previous week, a DN404 developer known by the pseudonym “quit” raised concerns about a potential ERC-404 vulnerability, suggesting that ERC-404 token holders could exploit NFTs deposited into lending protocols misconfigured for ERC-404. However, ERC-404 developer “ctrl” refuted these claims in an interview, attributing the vulnerability to a contract incorrectly utilizing the standard, as created by “quit.”
Meanwhile, Pandora, an upcoming ERC-404 project, is exploring "more mature iterations of the standard that address integration issues," as stated by the developer.
