Author: Frank, PANews
Before the Spring Festival, the ERC-404 concept became popular, and the price surge of related tokens triggered the Fomo sentiment in the community. Among them, Pandora, the first token adopting the ERC-404 standard, soared from the opening price of US$212 to a maximum of US$31,401, an increase of about 148 times. However, after a month of development, the transaction of Pandora NFT is almost silent, and the number of transactions on Blur in 6 days (March 2 to March 7) is only 7. The market performance of other 404-like products is also mediocre.
The hybrid protocol is a new token standard that combines the functions of traditional homogeneous tokens (such as Bitcoin, Ethereum and other FT tokens) and non-homogeneous tokens (such as artworks, collectibles and other NFT tokens), allowing both divisible and indivisible tokens in the same token system. Its purpose is to provide native liquidity and divisibility for tokens, giving users more flexible usage methods.
The current progress of major agreements:
In the field of hybrid protocol for graph and currency, the focus is currently on the two major public chains, Ethereum and Solana. It is still unclear which team came up with this concept. However, compared with who is the first mover, who can achieve real innovation and lead this field forward may be more important. The following is the progress of several major protocols:
ERC-404 Pandora
The ERC-404 contract attempts to create a bridge that combines the divisibility of ERC20 with the uniqueness of ERC721 to form a hybrid token that can be used as both a standard token and a non-fungible token.
Pandora is the first project built on the ERC404 token standard and was launched on February 2. The opening price was $212 and it soared to $31,401, an increase of about 148 times.
Currently, the NFT market of this project is obviously in a cold state (probably related to the high floor price, which was 4.99 ETH on March 8), and the V2 version is undergoing code review.
Tiny SPL NUTS
The original goal of Tiny SPL was to eliminate the storage cost of tokens on Solana, allowing large projects to distribute tokens directly to users at a very low cost, but the main reason for its popularity is that the first issued token NUTS can be traded as a regular token and NFT, providing transaction diversity. Tiny SPL was launched on January 27. The first token was NUTS, with a maximum price of 2.694 (free mint).
Currently, the project plans to build itself into a protocol platform capable of mixing graphs and coins. It recently announced a partnership with LIGMA and is about to launch Launchpad. However, the project has not yet been open sourced, which is why many community members are skeptical.
DN-404
DN404 is another hybrid protocol for NFTs on Ethereum. It prioritizes improving the liquidity and accessibility of NFTs, providing a more adaptable and efficient structure for the tokenization of assets. It combines the characteristics of fungible and non-fungible tokens, innovates the interaction and management of NFTs, reduces transaction costs, and optimizes data storage.
On February 25, SHIB officially announced that it had entered the experimental testing phase of the DN404 standard.
In the short term, the ERC-404 used by Pandora and others has not brought much improvement to the problem of NFT liquidity, but if you understand the internal logic of the image-coin hybrid protocol, it is not difficult to find its wide range of application scenarios, which may effectively improve the development of multiple industry tracks.
Blockchain game scenarios: Enhance the liquidity of game assets and realize cross-game circulation of assets
For now, blockchain games may be the largest application market for hybrid graphics and tokens. For blockchain games, NFTs issued with the ERC-721 protocol can be used as carriers of rare game assets, while Tokens issued with ERC-20 are used as circulating game currencies. Previously, most blockchain games adopted a dual-token model or a triple-token model that combined these two. However, due to the one-time casting and pending order circulation characteristics of NFTs, many props in blockchain games have a good price except for the scarce ones, and ordinary props are difficult to circulate. On the other hand, even props with good scarcity will not circulate quickly due to insufficient versatility.
When the 404-type hybrid protocol is introduced, blockchain games will undergo great changes. For example, ordinary NFT props can be decomposed into game currency through the hybrid protocol. This conversion may be more important to provide NFT with a more practical value anchor, thereby increasing the value retention rate of NFT and reducing the huge fluctuations in the NFT market. From another perspective, this protocol may break through the boundaries between different blockchain games and even realize the cross-game circulation of assets.
RWA scenario: creating a new paradigm for physical assets on-chain
RWA may also have a huge demand for image-to-coin hybrid. The characteristics of physical assets are closer to the properties of NFT, and the best way to split a high-value asset and lower the investment threshold is the ERC-20 token model. After introducing the image-to-coin hybrid protocol, more physical assets can be put on the chain more conveniently, and higher-value physical assets can also be more easily circulated by splitting them into tokens, and even achieve on-chain settlement of asset-derived income.
Taking the fractionalization of a property as an example, the operation mode of applying hybrid token hybrid protocol in the RWA field is as follows:
Asset evaluation and tokenization: First, the property is evaluated to determine its market value. Then, based on this value, a corresponding number of ERC20 tokens are issued to represent the ownership share of the property. At the same time, an ERC721 token is created as the unique digital certificate of the property. These two can be accomplished through a hybrid protocol
Fractional sales of assets: Investors can purchase ERC20 token shares of real estate to achieve small investments. The liquidity of ERC20 tokens allows investors to easily buy and sell their shares on the secondary market.
Changes and records of equity: When the ownership benefits change due to operations such as property leasing, repairs or re-evaluation, the distribution of ERC20 tokens is automatically adjusted through smart contracts.
Further financialization of assets: Based on the characteristics of real estate ERC20 tokens and ERC721 tokens, financial products can be further developed, such as issuing stablecoins using ERC20 tokens as collateral, or creating derivatives based on real estate returns.
NFTfi Market: Make NFT as Liquid as Defi
In the field of NFT, there have been split games before. However, these split products have not achieved much market impact. The main reason is that the previous split model is essentially to issue a set of tokens separately from NFT assets, which has poor scalability in interacting with NFT itself, and the asset ownership of users is not guaranteed.
Applying hybrid token protocols similar to ERC404 in the NFT market can promote a series of innovations, thereby truly expanding the scope and depth of NFTfi's applications. The following are several possible innovation directions and their potential impacts:
1. Enhanced Liquidity Protocol: Combining the liquidity of ERC20 and the uniqueness of ERC721, a new type of liquidity pool is created, allowing users to pledge NFTs or split them into tokens to participate in liquidity mining.
2. Cross-chain asset interoperability: Use the ERC404 protocol to design a cross-chain asset conversion mechanism to achieve the mapping and exchange of assets on different blockchains, such as mapping ERC721 tokens to corresponding tokens on other chains.
3. Decentralized lending platform: Develop a decentralized lending platform that supports ERC20 and ERC721 hybrid tokens as collateral, allowing users to pledge NFTs or their split tokens to obtain loans.
Other tracks: Economic models with high barriers to entry and poor liquidity all have opportunities
In addition to the above tracks where changes can be clearly seen, there are many other areas that are likely to undergo tremendous changes after the application of the GraphCoin Hybrid Protocol. In summary, tracks with the following characteristics are almost all suitable for innovative attempts using the GraphCoin Hybrid Protocol: 1. High investment threshold. 2. Insufficient asset liquidity. 3. Generally, a dual-token economic model is adopted.
Metaverse and Virtual World: Apply the ERC404 protocol in the Metaverse platform and virtual world to achieve split ownership and transactions of virtual assets (such as virtual land, buildings, artworks, etc.) while maintaining the uniqueness and scarcity of assets.
Social Media and Content Creation: Leveraging the ERC404 protocol, new business models are provided to content creators, allowing them to split and sell their work or profit from direct sales of unique content.
Financial derivatives and synthetic assets: Use the ERC404 protocol to create segmented and unique derivatives based on physical assets, crypto assets, or other financial indicators, such as synthetic tokens representing the performance of different assets.
Data ownership and personal privacy: Using the ERC404 protocol, a new data ownership and privacy protection mechanism is provided to users, enabling them to control and trade their personal data.
In general, the current image-coin hybrid protocol is still in a very early stage, and there is not even a unified industry term to define this model. But judging from the innovation needs we can see, the maturity of this protocol will bring about major changes in multiple encryption fields. If the inscription track ignited the recovery of the Bitcoin ecosystem, then the popularity of the image-coin hybrid protocol may ignite more dormant tracks.
