📄 What is ERC-404

ERC-404 is an Ethereum token standard that combines aspects of both ERC-20 fungible tokens and ERC-721 non-fungible tokens (NFTs) into a single contract.

The key innovation is using token burning and minting of ERC-721 NFTs to enable native fractionalization - splitting an NFT into smaller fungible ERC-20 tokens that represent shares of that NFT.

This is different from other fractionalization methods where an NFT is locked up and separate ERC-20 shares are issued against it. With ERC-404, the fractional shares are built directly into the standard itself.

The goal is to create NFTs with embedded fractionalization and increased liquidity out-of-the-box. The ERC-20 fractions can trade on decentralized exchanges, while the ERC-721 NFT can still be used in NFT marketplaces and protocols.

This opens up new opportunities for trading and experimenting with NFTs - for example, collecting fractions over time to redeem for the full NFT, or mixing traits by combining different fractional NFTs.

So in summary, ERC-404 essentially bakes fractionalization and liquidity directly into the NFT standard itself in an innovative way. It unlocks new potential use cases at the intersection of fungible and non-fungible tokens.