If you don’t know what ERC-404 is, you should read this first.

ERC-404 is an unofficial Ethereum Token Standard that combines the popular ERC-20 (the liquid tradable nature) and ERC-721 (the non-fungible nature) standards.

The biggest issue with this token standard was the high transaction fees of Ethereum.

And that’s when DN-404 arrived.

What is DN-404?

ERC-404 launched by Pandora aimed to enable users to split and merge NFTs (fractionalization) with relative ease.

The issue? This approach caused a surge in Ethereum transaction fees, prompting concerns about its real-world usability.

ERC-404s spurred millions of dollars in trading volumes, but seemingly caused Ethereum fees to spike to eight-month highs since its start in early February.

DN-404 aka Divisible NFT-404 entered the game with a different smart contract structure and the promise of a 20% reduction in transaction fee impact.

The way ERC-404 works is, that it creates a single contract that can act as both a fungible and non-fungible token.

But this can’t be done without introducing exploits and breaking standards, says Cygaar, one of the devs of DN-404.

Instead of using a single contract like ERc-404, their approach instead uses two contracts – a “base” ERC-20 with a “mirror” ER-C721.”

How Does DN-404 Work?

DN404 is a unique protocol designed to streamline the functionalities of ERC721 (non-fungible tokens) and ERC20 (fungible tokens) standards. Here’s a breakdown of how it works:

Separation of ERC721 and ERC20 functionalities: DN404 splits the functionalities of ERC721 and ERC20 into distinct contracts from the very beginning. This means there are two separate contracts: DN404 for handling logic, storage, and permissions related to ERC20 tokens, and DN404Mirror for handling ERC721 functionalities.

Unified interface: Despite having separate contracts for ERC721 and ERC20, DN404 only exposes an ERC20 interface to users. This simplifies the user experience by presenting a single interface for token interactions, even though both ERC721 and ERC20 functionalities are supported under the hood.

Passthrough functionality: DN404Mirror acts as a bridge or passthrough for ERC721 interactions. When users interact with DN404Mirror using ERC721 interfaces, it defers all the logic to DN404 but emits its own events. This ensures that ERC721 functionalities are maintained while leveraging the underlying ERC20 infrastructure.

Standardization and clarity: By using DN404, protocols and applications can ensure consistency in token interactions. Each contract address follows a single standard, making it clear for developers and users alike what functionalities are supported.

Efficiency and safety: The implementation of DN404 aims to be efficient and safe for usage. While the creator acknowledges that the concept of 404 might be seen as a gimmick, they recognize the demand from the community for such a solution and have optimized its implementation accordingly.

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