Key Points
- The ERC-404, a new crypto market segment, experienced a significant decrease in market cap and popularity due to its alleged contribution to increasing Ethereum gas fees.
- Pandora, a token using the ERC-404 standard, experienced a surge in popularity but also contributed to a spike in Ethereum gas fees.
- The ERC-404 standard was blamed for the recent increase in Ethereum gas fees.
- ERC-404 aims to increase the functionality of ERC-721 NFTs by linking them to ERC-20, creating a divisible NFT that can be fractionally owned by multiple wallets.
- Developers of ERC-404-based tokens are working to reduce the associated gas fees, but critics argue that the new token standard requires optimization to mitigate its impact on Ethereum gas fees.
- The ERC-404 market cap decreased by 29.5% in 24 hours, and leading ERC-404 tokens such as Pandora, DeFrogs, and Rug experienced a decrease in prices over 20%.
The ERC-404, a new and popular crypto market segment, recently experienced a significant drop in market cap and traction. This was due to backlash for reportedly causing a spike in Ethereum gas fees.
Among the new tokens using the standard, Pandora, sparked a major trend last week, rallying over 200% according to CoinMarketCap.
Impact on Ethereum Gas Fees
However, this trend reportedly caused Ethereum gas fees to reach new highs last seen in 2023. On February 9, the average transaction cost on Ethereum hit 70 gwei, equivalent to over $60, with peak costs reaching 377 gwei, similar to levels observed on May 12, 2023.
Despite the spike highlighting a problem that L2 solutions are attempting to solve, the new ERC-404 standard was identified as the cause of the recent gas spike.
ERC-404 Standard Criticism
An anonymous gas auditor on X, known as Pop Chunk, reportedly faulted the new standard for the excessive Ethereum gas prices. Pop Chunk claimed that the ERC-404 transfer was three times more costly than the regular ERC-721A.
The ERC-404 aims to increase the functionality of ERC-721 NFTs by linking them to ERC-20. This creates a divisible NFT that can be fractionally owned by multiple wallets. Each wallet can then trade or stake its portion for loans, similar to fractional shares/stocks in traditional finance.
Developers Respond
One of the ERC-404-based Pandora developers, Ctrl, told Cointelegraph that they were working on significantly reducing the gas fees. However, Pop Chunk insisted that the new token standard required optimization to lessen its impact on Ethereum gas fees.
Over the weekend of February 11, Ctrl and Pop Chunk engaged in a debate over the ERC-404, leading Pop Chunk to create what he called the “Divisional NFT – DN404”. Pop Chunk suggested that Pandora could improve their user experience by building on top of this code.
Market Reaction
As of press time, details on DN404 were not yet available, and no projects were using it. However, the ERC-404 market segment witnessed a significant downturn as the market cap decreased by 29.5% in the past 24 hours, according to CoinGecko.
The prices of leading ERC-404 tokens, such as Pandora, DeFrogs, and Rug, dropped by over 20% in the past 24 hours before press time.
Future Impact
The reported impact of Ethereum gas fees from the recent ERC-404 craze could affect the standard’s future and the current projects linked to it, like Pandora. Whether Ethereum community members will adopt it as an EIP (Ethereum Improvement Proposal) remains to be seen.
