Watch out ERC-404, there’s another hybrid NFT standard in town

A New Standard for NFTs: Introducing DN404

In the world of decentralized finance (DeFi), non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs), innovation is constantly pushing the boundaries of what is possible. Just one week after the launch of ERC-404, a new unofficial Ethereum standard that aimed to combine the features of both fungible and non-fungible tokens, a team of developers has introduced an even better solution: DN404.

DN404, or “Divisible NFT,” is a proposed standard that seeks to bridge the gap between ERC-20 and ERC-721 tokens. According to the pseudonymous developer “cygaar,” the goal was to create a token standard that could serve as an NFT with built-in fractionalization capabilities. While ERC-404 has gained popularity, it has been criticized for not adhering to existing standards and being inefficient in certain cases.

Unlike ERC-404, which requires protocols to implement it in order for its tokens to function as intended, DN404 uses a different approach. It utilizes two contracts: a “base” ERC-20 and a “mirror” ERC-721. According to cygaar, this approach makes DN404 fully compliant with existing protocols right out of the box.

The majority of trading occurs on the base ERC-20 contract, where fractions of NFTs are traded. When base tokens are transferred, the corresponding mirrored NFTs are automatically burned and minted. This allows for seamless trading of NFT portions without the need for intermediaries.

The ultimate goal of DN404 is to enable NFTs to be traded on both NFT exchanges and decentralized exchanges, without any intermediaries. However, it should be noted that the code has not yet been formally audited, and users are advised to use it at their own risk.

ERC-404’s safety concerns raised

Last week, a developer known as “quit” from DN404 expressed concerns about a potential vulnerability in the ERC-404 standard. This vulnerability could potentially allow ERC-404 tokenholders to steal NFTs from lending protocols that have not been properly configured for ERC-404.

However, another developer named “ctrl” dismissed these concerns in an interview with Cointelegraph and argued that the vulnerability was caused by quit’s own contract, which did not properly implement the standard. He also mentioned that the project “Pandora” is currently auditing a more advanced version of the standard that addresses these integration issues.

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