If you are following the latest developments in the crypto space, you may have heard of ERC 404, a new standard for non-fungible tokens (NFTs) that aims to address some of the limitations and challenges of the current ERC 721 and ERC 1155 standards.
What is ERC 404?
ERC 404 is a proposal for a new standard for NFTs that was submitted to the Ethereum Improvement Proposals (EIPs) repository on February 14, 2024, by a group of developers and researchers led by Vitalik Buterin, the co-founder of Ethereum. The proposal describes ERC 404 as “a standard interface for non-fungible tokens that allows for rich metadata, royalties, and interoperability across different platforms and protocols”.
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The main features of ERC 404 are:
Rich metadata: ERC 404 allows for more complex and expressive metadata for NFTs, such as descriptions, attributes, media files, provenance, certificates of authenticity, and more. This enables NFT creators to provide more information and context about their works, as well as to verify their ownership and authenticity.
Royalties: ERC 404 introduces a standardized way to implement royalties for NFTs, which means that the original creators of NFTs can receive a percentage of the sales revenue every time their works are resold on secondary markets. This creates a fairer and more sustainable model for NFT creators, who can benefit from the long-term value of their works.
Interoperability: ERC 404 enables NFTs to be compatible and transferable across different platforms and protocols that support the standard, such as Ethereum, Polygon, Flow, Tezos, and more. This enhances the liquidity and accessibility of NFTs, as well as the potential for cross-chain collaborations and innovations.
ERC 404 is important because it addresses some of the pain points and challenges that the current NFT standards face, such as:
Lack of metadata standards: The current NFT standards do not have a clear and consistent way to define and store metadata for NFTs, which leads to fragmentation and inconsistency across different platforms and protocols. For example, some platforms use JSON files to store metadata, while others use IPFS or Arweave.
Some platforms allow for arbitrary metadata fields, while others have predefined schemas. Some platforms store metadata on-chain, while others store it off-chain. This makes it difficult to access, verify, and display metadata for NFTs across different platforms and protocols.
Lack of royalty standards: The current NFT standards do not have a standardized way to implement royalties for NFTs, which means that each platform or protocol has to come up with its own solution or rely on third-party services. This creates a lot of complexity and inconsistency across different platforms and protocols, as well as potential legal and regulatory issues.
For example, some platforms use smart contracts to enforce royalties, while others use centralized databases or escrow services. Some platforms allow for customizable royalty rates, while others have fixed rates. Some platforms distribute royalties automatically, while others require manual intervention.
Lack of interoperability standards: The current NFT standards do not have a standardized way to ensure interoperability across different platforms and protocols that support NFTs, which means that each platform or protocol has to develop its own bridges or wrappers to enable cross-chain compatibility.
This creates a lot of overhead and inefficiency across different platforms and protocols, as well as potential security and scalability issues. For example, some platforms use custom tokens or contracts to represent NFTs on other chains, while others use proxy contracts or oracles. Some platforms require users to lock or burn their NFTs on one chain to transfer them to another chain, while others allow users to keep their NFTs on both chains.
By introducing a new standard that addresses these issues in a unified and consistent way, ERC 404 can significantly improve the user experience, the creator experience, and the developer experience of NFTs. It can also enable new possibilities and opportunities for innovation and collaboration in the NFT space.