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NFT emerging project Pandora falls below $20,000, SlowMist raises multiple risks regarding "ERC-404"

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NFT emerging project Pandora falls below $20,000, SlowMist raises multiple risks regarding "ERC-404"

The Pandora project and its experimental token standard ERC-404 have successfully driven the fragmentation of NFT narratives and speculative market sentiment. The price surged from a low of $250 to $32,799, but began to decline after February 9th, falling below $20,000 to $19,668 at the time of writing, a drop of over 40%. SlowMist founder, Cai Yunge, has also pointed out multiple risks associated with this. How does the avatar project Pandora use ERC404 to bring NFT into the trading pool of Uniswap?

What is Pandora and ERC-404?

Previously reported, the Pandora project is based on the experimental token standard ERC-404, proposed by 0xacme, a former Coinbase employee, aiming to optimize the liquidity issues of NFTs.

To enhance the liquidity and composability of crypto assets, especially NFTs, ERC404 combines the applications of ERC20 and ERC721. Each token corresponds to an NFT. When a user sells an NFT, the token is automatically transferred. When a user sells a token, the corresponding NFT is burned until the token is purchased by another user, at which point the NFT is re-minted.

By designing NFTs combined with tokens, Pandora successfully revitalizes the narrative of fragmented NFTs and enhances liquidity. The potential applications in the future are full of imagination, such as introducing NFTs into the DeFi lending market, collateralization, and even derivatives, maximizing the liquidity and capital utilization efficiency of NFTs.

Loopify, the founder of Endless Clouds, described ERC-404 as follows:

ERC404 is essentially fragmented NFTs with the best UI/UX that traders need. That's what you need to know.

Pandora Falls Below $20,000

Pandora successfully drove the narrative and speculative sentiment of fragmented NFTs in the market. OKX and Binance quickly announced support for ERC-404. Its price rose from a low of $250 to $32,799, but began to decline after February 9, falling below $20,000 to $19,668 at the time of writing, a drop of over 40%.

Furthermore, other developers have started to try to improve ERC-404 or develop similar competitive token standards.

Pandora's official statement emphasizes exploring potential grants and developer incentive frameworks in the future to prevent excessive malicious competition.

SlowMist: Potential Risks of ERC-404

SlowMist founder Yu Xian raised several risks:

  1. Risk of indiscriminate distribution of NFT rarity: NFT rarity may be distributed indiscriminately to counterparties, potentially undervaluing rare NFTs.

  2. Risk of NFT burning: Due to the precision limit of homogeneous token FT, when the quantity of FT is less than an integer, it may accidentally burn NFTs.

  3. Risk of increased gas fees: This may lead to increased transaction costs.

  4. Disorder in market trading: If the contract owner executes revokeOwnership, the subsequent whitelist mechanism may not be updated, leading to market disorder.

Yu Xian pointed out that the ERC-404 standard is not yet mature, and different project parties may modify it, leading to unforeseen security risks.

Furthermore, ERC-404 is not an officially recognized token standard by Ethereum. Pandora is actively formulating Ethereum Improvement Proposals (EIPs), and the process may take some time.