Imagine owning a tiny piece of a famous piece of digital art.
Imagine owning a tiny piece of a famous piece of digital art. Sounds impossible, right? Well, thanks to ERC-404 tokens, it’s becoming a reality. This new and exciting way to own NFTs is changing the game.
Instead of buying a whole NFT, you can now buy a small part of it. This means more people can enjoy owning a piece of something special, and it makes NFTs more accessible to everyone. Let’s dive in and learn more about how the ERC-404 token standard shaping the future of digital arts.
Key Takeaways:
- ERC-404 Token Standard allows multiple people to own parts of a single NFT, making high-value digital assets more accessible.
- By merging properties of ERC-20 and ERC-721 tokens, ERC-404 enables fractional ownership, enhancing NFT liquidity.
- The best use cases of the ERC-404 token standard include real estate, art, collectibles, gaming, and more, democratizing asset ownership and investment.
- The top ERC-404 projects on the Ethereum blockchain are $PANDARO and $DEFROGS.
How ERC-404 Tokens Work?
ERC-404 tokens function by combining the properties of ERC-20 and ERC-721 token standards.
As discussed above, an ERC-404 token represents a fractional ownership of an NFT. When an NFT is divided into ERC-404 tokens, each token becomes a divisible unit representing a portion of the NFT. These tokens are fungible, meaning they can be traded like regular digital currencies (similar to ERC-20 tokens).
The key mechanism is the link between the ERC-404 token and the underlying NFT. When someone owns all the ERC-404 tokens associated with an NFT, they effectively own the entire NFT. This is achieved through smart contract logic that manages the relationship between the tokens and the NFT.
If someone sells part of their ERC-404 tokens, they are essentially selling a portion of their ownership of the NFT (not the entire NFT). The remaining tokens still represent ownership of the NFT. Conversely, if someone accumulates enough ERC-404 tokens, they can “burn” them to claim ownership of the entire NFT. This system allows for fractional ownership and increased liquidity for NFTs.
Use Cases of ERC-404 Token Standard
ERC-404 opens up a vast array of potential applications. Here are some prominent use cases:
- Real Estate: Expensive properties can be tokenized into ERC-404 tokens, allowing multiple individuals to own fractions. This democratizes access to real estate investments and enhances liquidity.
- Art and Collectibles: High-priced artworks or rare collectibles can be divided into ERC-404 tokens, enabling broader participation in ownership and potential price appreciation.
- Collateralization: ERC-404 tokens can serve as collateral for lending protocols, expanding the range of acceptable assets.
- Liquidity Provision: Fractional ownership of NFTs can improve liquidity by increasing the number of potential buyers and sellers
- Gaming and Metaverse: Virtual items, characters, or land within a game can be represented as ERC-404 tokens. Fractional ownership of in-game assets can create dynamic economies within virtual worlds.
- Tokenization of Assets: Real-world assets (RWAs) like commodities, bonds, or intellectual property can be tokenized and fractionalized.
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