Blockchain community is divided over new ERC-404 tokens.

A new Ethereum token standard that has taken the blockchain sector by storm is drawing both praise and criticism from industry veterans.

Dubbed ERC-404, the standard combines the technology behind ERC-20 tokens with ERC-721, which is used to create non-fungible tokens (NFTs). One such use case is in fractional NFTs, where ownership of a single NFT, such as Bored Up Yacht Club, is divided into multiple wallet holders according to the ERC-404 standard.

ERC-404 was created earlier this year by anonymous developers known as “ctrl” and “Acme” under the Pandora project, which released the first ERC-404 token on February 6. Since then, Pandora ERC-404 tokens have returned an impressive 530% and are currently trading at $23,484 with a market value of $235 million. For the next steps in the roadmap, developers plan to reduce protocol gas fees by 28 percent to 50 percent.

Many of you have been asking about ERC404 optimization and how to improve and refine the standard, so we thought we'd share some initial test results.

The following is still a work in progress, so the numbers released may look a little different -… pic.twitter.com/dfr2A0CrUr

— Pandora (@Pandora_ERC404) February 13, 2024

However, not everyone is enthusiastic about ERC-404's prospects.

“The focus of negative feedback [ERC-404] It doesn't follow standard ERC practices and is technically not an ERC token,” said Miguel Prada, co-founder and chief technology officer at Diva Staking. 404 can work for Ethereum.

“It's a big limitation that it's not a standard, it means it's limited by the people who integrate it independently. It might become a reality later, but no one knows if any Defi project or exchange will accept such a change. Token.”

While Prada acknowledges the value of ERC-404 tokens in bringing liquidity to the highly illiquid NFT market, he warns of significant limitations. “For NFTs that represent RWA[real world assets]it's clear that you can't exchange a fraction of a token that represents different asset classes,” Prada said.

Ryan Lee, principal analyst at Bitget Research, agrees. Although Lee notes that the value of most ERC-404 tokens has skyrocketed shortly after their creation, he warns that the road to widespread adoption could be difficult.

“According to the entry in the ERC-404 code repository, the protocol is currently experimental,” Lee said. “ERC-404 is currently not formally included in the Ethereum Foundation's ERC standard.”

“In the ERC standard, it should be emphasized that there are many similar protocols that combine Fungible Token and NFT, such as ERC3475, ERC3525, etc. The current speculation around Pandora can be considered the market's desire to find new things and new types. Those on the Ethereum network properties, but its longevity still needs time to test.

But for Akash Mahendra, head of developer relations at Layer-1 blockchain Haven1, the new standard is a “game changer.” Mahendra said:

“This new, experimental standard has the potential to transform the world's second-largest blockchain into a real-world asset token and open up a wide range of new utility avenues.”

Mahendra explained that for the first time, users will be able to buy and own tokens that adhere to both ERC-20 and ERC-721, which is the equivalent of owning “an exchange-traded fund in a decentralized financial world.”

“If a user buys a full ERC-404 token, the NFT goes into their wallet, but if they choose to hold a fraction of the NFT as an ERC-20 token, they are vulnerable to price movements, not to mention rights,” he said. Mahendra

Although it is growing rapidly, ERC-404 has not yet been officially approved by the Ethereum Foundation and is still awaiting evaluation as an Ethereum upgrade protocol. Even Mahendra warns of the risks of the standard, which does not have an official seal of approval:

“This is a risk that investors should consider before investing in new ERC-404 projects,” he said. “Without auditing, there's always a greater risk of bugs, and therefore, greater potential for loss. So tread carefully as we await a verdict on this exciting innovation.”

Related: Ethereum Gas Fees Hit 8-Month High Amid ERC-404 Craze