In today's rapidly developing blockchain technology, innovation never stops. Following the release of the ERC-404 standard, a new standard called BC-404 has emerged, bringing new possibilities to the NFT market. BC-404 (Bonding Curve 404) is the first deflationary NFT contract in the cryptocurrency field, based on improvements to ERC-404. This article will delve into the BC-404 standard, which integrates the advantages of ERC-404 and introduces innovations.
ERC-404 Protocol Standard:
Looking back over the past six months, ERC-404 has been one of the most exciting innovations in the field of asset issuance in the Ethereum ecosystem. ERC-404 was introduced by the Pandora team in early February as an open-source experimental token standard for creators and developers, combining features of ERC-20 and ERC-721 with native liquidity and fragmentation. This is achieved through the logic of quantity correspondence between FT and NFT, namely the "minting and burning" mechanism of NFTs.
In simpler terms, some blue-chip NFT projects, especially those with rare attributes, have prices so high that they become illiquid and difficult to trade. The introduction of ERC-404 represents a significant improvement for these NFT projects that previously lacked liquidity. These high-priced NFTs can now be traded in a fragmented manner on mainstream trading platforms, similar to purchasing token assets such as BTC and ETH.
BC-404 Token Standard:
Initially, Color Protocol launched the ERC-404 conversion platform for Memecoin, where meme artists and communities can create their meme NFT collections in ERC-404, and holders can convert their Memecoins into NFTs.
Combining the Bonding Curve model, COLOR introduced the BC-404 standard based on ERC-404. It stipulates that the required token quantity for generating NFTs will continue to increase until reaching a preset limit. Therefore, early participants will have a cost advantage.
In the ERC-404 contract, tokens and NFTs are in a fixed ratio, where the deployer can initially define "how many ERC-404 tokens an address needs to hold in order to generate an ERC-404 NFT," for example, 1 $Pandora token can generate 1 Pandora NFT, but if your address only holds 0.9 $Pandora, you cannot generate a Pandora NFT.
BC-404 integrates the Bonding Curve model, changing the required token quantity for generating BC-404 NFTs from a fixed amount to continuously increasing. With the generation of each new BC-404 NFT, this value will rise, meaning each new NFT will be harder to generate than the previous one.
When deploying the BC-404 contract, the deployer can set the initial difficulty for generating the first BC-404 NFT (i.e., how many BC-404 tokens an address needs to hold) and the incremental value for generating each subsequent BC-404 NFT.
- Bonding Curve Model of BC-404 Standard:
Overall, BC-404 can be designed with three different difficulty models, with Color defining the NFT generation difficulty as "BC Count": linear increase, accelerated slope curve increase, and curved rise with gradually decreasing slope.
- Token Content of BC-404 NFTs:
Since the required token quantity for generating each BC-404 NFT is different, the token content of different NFTs also varies, corresponding to the quantity of tokens held. In contrast, each ERC-404 NFT carries a fixed quantity of tokens.
- Numbering of BC-404 NFTs:
As the token content varies among BC-404 NFTs, their values also differ. To reflect this characteristic in the NFT market, the BC-404 contract links the NFT ID to the token content of the NFT (the BC count at the time of generation):
For example, when a user purchases BC-404 NFT with ID #1868, they will receive 1868 BC-404 tokens along with the NFT.
Holders and traders can clearly determine the token content of each NFT through the ID in their wallet or the NFT market.
NFT IDs do not need to start from #1 and can depend on the initial BC count value set by the deployer.
NFT IDs do not need to be consecutive and can depend on the BC count incremental mode set by the deployer.
Each NFT ID is unique, and generating an NFT will always face a higher BC count than any previous one, giving each BC-404 NFT its unique history.
- NFT Destruction Mechanism and Deflation:
BC-404 NFT Transactions and Transfers: Similar to ERC-404, NFTs remain unchanged when transferred, and an equivalent quantity of tokens will be transferred with the NFT.
BC-404 Token Transactions and Transfers: It may trigger the destruction of BC-404 NFTs, depending on whether the remaining tokens are sufficient to support the transferred NFT, similar to ERC-404 V1.
Any BC-404 NFT ID will only appear once. Once destroyed, the ID cannot be regenerated. Therefore, the destruction of BC-404 NFTs results in a contraction of the BC-404 NFT collection, assuming the contract sets a fixed total token supply.
This makes BC-404 the first deflationary NFT contract in the cryptocurrency field.
Colorpepe:
$colorpepe is the first BC-404 asset, generating the first pepe PFP series from $PEPE, deployed on Base. It combines the uniqueness and scarcity of NFTs with the popularity and liquidity of Memecoins. Through the conversion pool, users can convert $PEPE into the BC-404 standard (cross-chain bridging if necessary), giving native Memecoin assets NFT properties.
Conversion details:
- Free Conversion: Only need to pay gas fees, no additional costs.
- Reversible Conversion: $colorpepe can be converted back to $PEPE at any time, and the corresponding quantity of $colorpepe will be destroyed.
- Limited Supply: The total supply of $colorpepe tokens is limited, and there is a time window for conversion.
- Whitelist Priority: The conversion is divided into two stages, with the first stage limited to whitelist addresses and the second stage open to the public.
- PS: Make sure your wallet has some $PEPE (on the ETH mainnet) and enough $ETH to pay for gas fees.
Features of BC-404:
1. Decentralized Value Consensus
BC-404 endows NFTs with inherent unique value through their multiple token contents. Unlike traditional methods, BC-404 does not preset rules for the rarity of NFTs, but allows the market and community members to autonomously determine the aesthetic value of NFTs. BC-404 only designs the uniqueness of NFTs in terms of value (ID equals token content, determined by code and generation history). This approach is more in line with the decentralized spirit of blockchain and provides more possibilities for the valuation of NFTs. For the BC-404 NFT series, issuance is just the beginning, and its final form will be shaped by the market and community together.
2. Increased Rarity of NFTs
Under the new minting and burning mechanism, the scarcity of the BC-404 NFT collection will increase in sync with token trading volume. The deflationary mechanism of NFTs counteracts the problem of token liquidity being greater than NFT liquidity in Dex (AMM), maintaining the trading vitality and profitability of the NFT market (the circulation of NFTs will decrease, making it more difficult to obtain NFTs through token purchases).
3. Improved Reset Mechanism
Unlike the ERC-404 standard, where transferring tokens to reset NFTs only incurs gas fees (negligible in low-fee networks), transferring tokens under BC-404 will face a higher BC count to generate new NFTs. This design effectively increases the cost of resetting and reduces the possibility of low-cost arbitrage, thereby helping to maintain the long-term healthy development of the NFT market.
4. Diverse Trading Strategies
BC-404 provides market participants with more strategic choices, increasing the fun and depth of trading. When seeking to acquire more NFTs, investors need to balance multiple factors: (1) the market premium of existing NFTs and their token content (2) the token cost required to generate new NFTs (which will continuously increase) (3) the randomness of generating new NFTs.
This complex decision-making process not only increases the fun of the market but also encourages participants to delve deeper into analyzing market dynamics and making wise investment decisions.
Potential Challenges and Prospects
Although BC-404 brings many innovations, its complex mechanism may require some time for market participants to fully understand and accept. Effectively explaining the advantages and operation of BC-404 to users will be a major challenge in the early stages of project promotion. Secondly, while BC-404 balances the liquidity of tokens and NFTs through its unique mechanism, maintaining this balance and avoiding extreme situations in actual operation will be an issue that requires continuous attention.
Conclusion
BC-404 introduces a new dimension of value to the NFT market - token content, which will become an important measure of the value of individual NFTs. Looking ahead, BC-404 not only brings new possibilities to the NFT market but also provides a new dimension for the valuation of digital assets. Its emergence signifies that NFTs are evolving towards a more complex and diverse direction, integrating token economics, deflationary mechanisms, and dynamic pricing models. With the maturation of technology and acceptance in the market, we can expect to see more innovative applications based on BC-404, truly expanding the audience of the 404 ecosystem and leading it towards prosperity.
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