What is BC-404? Exclusive Review of the New NFT Standard

In today’s rapidly evolving blockchain technology landscape, innovation never ceases. Following the release of the ERC-404 standard, a new standard named BC-404 has emerged, bringing new possibilities to the NFT market.

BC-404 (Bonding Curve 404) builds upon the ERC-404 improvements, introducing the first deflationary NFT contract in cryptocurrency. This article will delve into the BC-404 standard, which combines the strengths of ERC-404 with innovative enhancements.

The ERC-404 Protocol Standard

Looking back over the past six months, ERC-404 has been one of the most exciting innovations in the Ethereum ecosystem for asset issuance. Introduced by the Pandora team in early February as an experimental token standard for creators and developers, ERC-404 blends ERC-20 and ERC-721 implementations, featuring native liquidity and fragmentation.

This is achieved through the minting and burning mechanism between FT and NFT, where the number of NFTs corresponds to the number of tokens.

In simpler terms, some blue-chip NFT projects, especially those with rare attributes, are priced so high that they become illiquid and hard to trade. ERC-404 addresses this issue by enabling these high-priced NFTs to be fragmented and traded on mainstream exchanges, making it as easy and convenient as buying BTC, ETH, or other token assets.

The BC-404 Token Standard

Initially, the Color Protocol launched a platform for converting Memecoins to ERC-404, allowing Meme artists and communities to create their Meme NFT collections within ERC-404. Holders can convert their Memecoins into NFTs.

Combining the Bonding Curve model, COLOR introduced the BC-404 standard based on ERC-404. The number of tokens required to generate NFTs under this standard will continuously increase until a preset limit is reached, giving early participants a cost advantage.

In the ERC-404 contract, tokens and NFTs are in fixed proportions. The contract deployer can initially define how many ERC-404 tokens an address must hold to generate an ERC-404 NFT, such as one Pandora Token generating one Pandora NFT. If an address holds only 0.9 Pandora Tokens, it cannot generate a Pandora NFT.

BC-404 integrates the Bonding Curve model, changing the fixed number of tokens required to generate BC-404 NFTs to an increasing number. With each new BC-404 NFT generated, this value rises, making each subsequent NFT more difficult to create. When deploying a 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 must hold) and the incremental difficulty for each subsequent BC-404 NFT.

1. Bonding Curve Model of the BC-404 Standard:

Overall, BC-404 can be designed using three different difficulty models, with Color defining the NFT generation difficulty as “BC Count”: linear increase, accelerating slope curve increase, and curved increase with gradually decreasing slope.

2. Token Content of BC-404 NFTs:

Since the number of BC-404 tokens required to generate each BC-404 NFT varies, the token content of different NFTs also differs. This is in contrast to ERC-404 NFTs, which carry the same fixed number of tokens.

3. BC-404 NFT Numbering:

Due to the token content differences among BC-404 NFTs, their values also differ. To reflect this in the NFT market, the BC-404 contract links NFT IDs with their token content (BC count at the time of generation):

• For example, when a user purchases a BC-404 NFT with ID #1868, they receive 1868 BC-404 tokens with the NFT.
• Holders and traders can clearly determine the token content of each NFT by its ID in their wallet or on the NFT marketplace.
• NFT IDs do not have to start from #1 and can depend on the initial BC count set by the BC-404 contract deployer.
• NFT IDs do not need to be consecutive and can rely on the BC count increment mode set by the deployer.
• Each NFT ID is unique, with each new NFT facing a higher BC count than any previous one, giving each BC-404 NFT a unique history.

4. NFT Destruction Mechanism and Deflation:

BC-404 NFT Trading and Transfer: Similar to ERC-404, NFTs remain unchanged upon transfer, and an equal number of tokens transfer with the NFT.

BC-404 Token Trading and Transfer: This can potentially trigger the destruction of BC-404 NFTs, depending on whether the remaining tokens are sufficient to support the NFTs held post-transfer, similar to ERC-404 V1.

Any BC-404 NFT ID will appear only once. Once destroyed, the ID cannot be regenerated, meaning the destruction of BC-404 NFTs results in the 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 cryptocurrency.

Colorpepe

$colorpepe is the first BC-404 asset and generates 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. The conversion pool allows users to convert $PEPE to the BC-404 standard (with cross-chain bridging if necessary), endowing local Memecoin assets with NFT attributes.

Conversion Details:

• Free Conversion: Only gas fees apply, with no additional cost.
• Reversible Conversion: Users can convert $colorpepe back to $PEPE at any time, destroying the corresponding number of $colorpepe tokens.
• Limited Supply: The total supply of $colorpepe tokens is limited, with a conversion time window.
• Whitelist Priority: Conversion occurs in two phases, the first limited to whitelist addresses and the second open to the public.

Note: Ensure you have some $PEPE (ETH mainnet) and enough $ETH to pay gas fees.

Features of BC-404

1. Decentralized Value Consensus:

BC-404 endows NFTs with inherent unique value through various token contents. Unlike traditional methods, BC-404 does not preset NFT rarity rules but lets the market and community members decide the aesthetic value of NFTs. BC-404 only designs the numerical uniqueness of NFTs (ID equals token content, determined by code and generation history). This approach aligns with the decentralized spirit of blockchain and provides more valuation possibilities for NFTs. For the BC-404 NFT series, issuance is just the beginning, with its final form shaped by the market and community.

2. Increased NFT Scarcity:

Under the new minting and burning mechanism, the scarcity of BC-404 NFT collections will increase in sync with token trading volume. The deflationary mechanism of NFTs counteracts the liquidity issue in Dex (AMM) where token liquidity surpasses NFT liquidity in peer-to-peer order markets, maintaining the trading activity and profitability of the NFT market (NFT circulation will decrease, making it harder to obtain NFTs through token purchases).

3. Improved Reset Mechanism:

Unlike the ERC-404 standard, where transferring tokens to reset NFTs incurs only gas fees (negligible in low-fee networks), BC-404 increases the difficulty count for generating new NFTs when transferring tokens. This design effectively raises the reset cost, reducing low-cost arbitrage possibilities and contributing to the long-term health of the NFT market.

4. Rich Trading Strategies:

BC-404 offers market participants more strategic choices, enhancing the complexity and depth of trading. Investors seeking to acquire more NFTs need to weigh multiple factors:

• The market premium of existing NFTs and their token content.
• The token cost of generating new NFTs (which will continually increase).
• The randomness of generating new NFTs.

This complex decision-making process not only adds to market interest but also encourages participants to deeply analyze market dynamics, making informed investment decisions.

Potential Challenges and Prospects

Despite the numerous innovations BC-404 brings, its complex mechanism may take 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 during the initial promotion phase.

Additionally, while BC-404 balances the liquidity of tokens and NFTs through its unique mechanism, maintaining this balance in practice to avoid extreme situations will require ongoing attention.

Conclusion

BC-404 introduces a new value dimension to the NFT market—token content, which will become a crucial metric for individual NFT value. Looking ahead, BC-404 not only brings new possibilities to the NFT market but also provides a new dimension for evaluating digital assets.

Its emergence signifies NFTs are evolving towards greater complexity and diversity, integrating token economics, deflationary mechanisms, and dynamic pricing models. As the technology matures and the market embraces it, we can expect to see more innovative applications based on BC-404, truly expanding the 404 ecosystem and leading it to prosperity.