What Is ERC-404?

ERC-404 is an experimental token standard on the Ethereum blockchain that introduces a hybrid concept combining features of ERC-20 (fungible tokens) and ERC-721 (non-fungible tokens). It creates semi-fungible tokens, which can exhibit both interchangeable and unique characteristics within the same framework.

While ERC-20 tokens are identical and fully interchangeable, and ERC-721 tokens are unique and non-fungible, ERC-404 takes a middle approach. It blends both models to allow tokens that can behave like fungible assets in one context and like unique NFTs in another. This innovative design opens new possibilities for liquidity, accessibility, and tokenization use cases.

How ERC-404 Tokens Work

Semi-Fungible Structure
ERC-404 tokens are known as semi-fungible because they can shift between fungibility and non-fungibility. This adaptability allows developers to create assets that are divisible, tradeable, and unique — expanding how digital ownership can function in blockchain ecosystems.

Origin and Purpose
The standard was created by pseudonymous developers “ctrl” and “Acme” as a response to liquidity challenges in the NFT market. The goal was to connect the fungible and non-fungible worlds, allowing NFTs to become more liquid and accessible.

Mint-and-Burn Mechanism
At the technical level, ERC-404 relies on a mint-and-burn mechanism that enables fractional ownership of NFTs. This means that one NFT can be divided into smaller, tradeable units, allowing more users to participate in owning valuable assets. When tokens are recombined, the NFT can be “re-minted,” restoring its original form.

Gas Optimization
Since ERC-404 involves frequent minting and burning actions, developers are working to improve gas efficiency by reducing transaction costs and optimizing on-chain operations. This remains an area of ongoing experimentation and development.

Benefits of ERC-404

Fractional Ownership: Makes high-value NFTs accessible by dividing them into smaller tradable units.
Increased Liquidity: Helps unlock liquidity for NFT markets through semi-fungible design.
Innovation in Tokenization: Blends the ERC-20 and ERC-721 frameworks to enable new financial and creative applications.
Versatility: Allows developers to design flexible digital assets that can serve as both fungible and unique tokens.

Conclusion

ERC-404 represents a major experimental step in Ethereum token development. By merging the properties of fungible and non-fungible tokens, it introduces a semi-fungible model that enhances liquidity, accessibility, and innovation in the digital asset space. While still in its early stages, ERC-404 demonstrates how hybrid token standards could reshape asset ownership and market participation across blockchain ecosystems.