Ethereum ERC-404 Market Cap Shrinks 30% After Viral Run

The ERC-404 sector market cap shrinks as the hype surrounding the experimental standard cools.

ERC-404 robot pumping up in the gym.
Created by Kornelija Poderskytė from DailyCoin
  • The market cap of ERC-404 tokens has experienced a decline after recording meteoric gains last week.
  • The market cap decline coincides with a sharp decline in token prices.
  • ERC-404 tokens have received attention for offering a novel solution to problems plaguing the NFT market.

ERC-404 tokens have dominated the discussion in the crypto space since they burst into the scene in early February 2024. However, after a meteoric growth spurt in the past week, the hype around the experimental Ethereum token standard appears to be taking a breather.

ERC-404 Sector Market Cap Shrinks

Over the past 24 hours, the total market cap of tokens built on the experimental ERC-404 standard has faced increased volatility. At one point, the metric plunged over 30% before paring losses to about 7%, per CoinGecko data at the time of writing.

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The wild swings corresponded with sharp declines in the price of popular tokens built on the unofficial Ethereum token standard. For example, PANDORA, the first and most popular token built on the standard at one point, fell as much as 24% from highs of around $24,000 on Sunday, February 11, to below the $15,000 price point. At the time of writing, however, the asset has pared some of these losses to trade above the $19,000 price point.

PANDORA/USDC 4-hour candle chart.
PANDORA/USDC 4-hour candle chart. Source: TradingView

The price declines come amid profit-taking from early investors who have made significant gains following the token price explosions last week. 

At the same time, news that a separate team of developers is working on a more cost-efficient standard dubbed Divisible NFTs or DN-404 has likely given investors pause for thought.

Understanding The ERC-404 Hype

The ERC-404 standard combines the fungible ERC-20 standard with the non-fungible ERC-721 token standard.

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In practice, the token standard works by linking issued tokens to NFTs. When less than one token is sold, the linked NFT is burnt. A corresponding NFT is minted if tokens are accumulated to get a whole token. In this model, users can trade NFTs as usual or sell fractions of them as tokens.

The experimental standard has received significant attention as it takes a novel approach to solving NFT liquidity and fractionalization issues.

However, being an experimental and unofficial token standard, ERC-404 projects potentially face an increased risk of exploitation. At the same time, the model attracts additional transaction costs as users are not only paying to move tokens but also NFT minting and burning costs. This gas inefficiency has been the primary fuel for code optimization calls.

On the Flipside 

  • Despite the price drop, ERC-404 tokens have pared a significant amount of their losses.
  • Developers can still optimize the ERC-404 token standard to tackle current inefficiencies.

Why This Matters

The ERC-404 standard is the latest crypto narrative to spark excitement in the crypto market. Tokens tied to this standard have attracted hundreds of investors and over $200 million in market capitalization.

Read this to learn more about the experimental ERC-404 token standard:
What Is ERC-404, the Experimental Ethereum Token Standard?

Learn more about U.S. President Joe Biden’s recent laser eyes tweet:
Is Joe Biden’s Laser Eyes Tweet a Sign of Bitcoin Support?

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.