ERC-404 and Stackset
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ERC-404 is an experimental token standard that combines elements of ERC-20 and ERC-721. It introduces native liquidity and fractionalization for NFTs.
In early February 2024, it gained attention with the launch of projects like $PANDORA and $DEFROGS. These projects showcased ERC-404 tokens as a novel concept, highlighting the potential opportunities it presents, although without specific utilities defined.
Stackset conducted a thorough examination of this concept to determine its viability for Stackset memecoins and NFTs.
However, in the case of Stackset, having a combination of NFT and token features under one platform is not ideal because:
ERC-404 does not distinguish between speculators who want to flip memes and NFT collectors thus removing a share of the max NFT supply from circulation. This makes the overall NFT economy unpredictable.
It does not support adding user-generated attributes.
It's still an experimental standard with no audit history.
It's very gas consuming due to the constant emission and burning of new NFTs.
On one hand, Stackset is a reliable memecoin issuer, which will attract the attention of degens seeking short-term exposure. On the other hand, for those who want to enhance their meme flipping game and appeal to NFTfi enthusiasts, Stackset offers an NFT card collecting game.
It is crucial to differentiate between these two distinct audiences to ensure that only interested parties acquire the NFTs.
To accomplish this, every collection launched by Stackset includes user-generated attributes. In order to receive an NFT, users must submit a form indicating their interest and requesting the NFT. This ensures that NFTs are not distributed to snipers or speculators who have no intention of activating them in the game, thereby reducing the potential NFT payout for interested members.
The ERC-404 frenzy is likely to attract numerous scams and rug pulls, given the absence of audit frameworks for these tokens at the moment. Currently, there are no bots, tools, or services capable of adequately auditing the code of ERC-404 tokens. In our pursuit of complete transparency, we will continue to utilize ERC-20 for our memecoins and introduce NFTs on the Zora network to minimize trading costs.
Why ERC-20 for memecoins?
To distribute NFTs, we will reward users who engage in trading or holding our memecoins, as well as those who complete social tasks to spread the word about Stackset and increase awareness.
Launching memecoins on a cheap EVM chain or rollup may lead to transaction spamming. Users might initiate multiple dollar-worth transactions to increase their chances of winning NFTs. However, this behavior is not healthy as it promotes the emergence of bot farms and decreases the chances of normal users winning an NFT. At the same time, we want to ensure that there is no minimal barrier to entry so that everyone can participate.
To address this issue, the high gas fees on Ethereum will make every transaction a meaningful entry and decrease the influence of bot farms.
As mentioned earlier, ERC-404 transactions suffer from poor optimization, leading to high transaction costs. To address this issue, we differentiate between two types: tokens and NFTs. For NFTs, we have taken steps to maximize trading cost efficiency by launching them on Zora, an Ethereum Layer 2 solution specifically designed for NFTs. These NFTs will be available for trading on Opensea, just like any other ERC-404 token, but will be much cheaper to trade (~$20 per trade vs. $0.01 per trade).