Digital items called non-fungible tokens (NFTs) are becoming really popular because they can represent special things online. But there's a problem - it's not easy to turn these items into money quickly. That's where ERC-404 comes in. It mixes together the best parts of regular ERC-20 tokens with unique ERC-721 tokens to come up with a cool solution.

What's not right with the current tokens?

The standard tokens we have now, like ERC-20 and ERC-721, are good for either regular stuff like money or one-of-a-kind things like digital art. But it's hard to share ownership or trade unique digital items because of this separation.

Learn about ERC-404 with the Pandora project

The Pandora project is like a real-world test for this new ERC-404 token standard. It's all about making something called "semi-fungibility" by bringing together easy-to-swap ERC-20 tokens with special ERC-721 NFTs.

Pandora made 10,000 ERC-404 tokens connected to 10,000 colorful box NFTs known as Replicants. These NFT boxes come in five different colors to show how rare they are, with common green boxes and rare red ones. Every time someone buys an ERC-404 PANDORA token, a random box NFT gets made and linked to that token.

You can buy and sell parts of these PANDORA tokens, where each whole token gets you one NFT. Whenever you sell these tokens, the linked NFTs get destroyed and new ones are made. But if you separate the NFTs from the tokens, they continue to exist on their own.

This way of joining tokens with an NFT collection gives Pandora tokens a steady flow of money from the Uniswap pool. This money can be used by projects for development. Basically, it makes NFTs as easy to trade as the regular token and its pool.

To sum it up, ERC-404 tokens like Pandora combine regular tokens with special digital collectibles. This setup can help with persistent NFT problems like breaking them down into parts and making them easy to trade. The Pandora experiment shows what can be done with semi-fungible tokens using ERC-404.

What can you do with this?

ERC-404 brings two main things:

1. Making it easy to buy parts of the NFTs and share them with others.
2. Allowing collectors to change the rarity of their NFTs after getting them.

This new system sets a minimum value for each NFT using the regular ERC-20 token. It also allows for shared ownership of the unique asset. You can now easily buy and sell parts of the NFT on a decentralized exchange.

The next big thing with ERC-404

ERC-404 is still in the experimental stage. While the idea is groundbreaking, it hasn't gone through the official Ethereum Improvement Proposal (EIP) or final Ethereum Request for Comments (ERC) stages. Until it gets thoroughly checked like other standards such as ERC-20 and ERC-721, we can't be sure about its dependability and safety.

Ethereum's future with Layer 2 solutions

Ethereum is moving towards using Layer 2 scaling solutions to solve its congestion and high fees. These solutions sit on top of Ethereum (Layer 1 or L1) and process transactions more efficiently before completing them on the main network. However, this has led to a new problem: each Layer 2 works on its own, creating barriers that make it hard for them to work together.

What is Universal Synchronous Composability (USC)?

The main issue caused by these barriers is the loss of "universal synchronous composability” (USC), which helps different apps interact seamlessly in real time. Picture Ethereum as a busy city where roads (L2s) connect the buildings (apps). It's like having disconnected roads that make you take a longer way to get from one building to another.

The solution is shared sequencing, similar to setting up a city-wide transit system that connects all roads, allowing direct travel between any two points without detours. Picture shared sequencing as the internet of Ethereum—just like how the internet lets different computers talk directly regardless of their location, shared sequencing lets different L2s work together seamlessly, enabling quick transactions across the network.

A tech explanation of shared sequencing

Shared sequencing manages the order of transactions across all L2 solutions on Ethereum. It uses a central system to organize transactions in the same way across different L2s without needing to change much in the infrastructure. By ordering transactions uniformly everywhere, shared sequencing makes instant interactions possible between L2s across Ethereum.

Possible uses of shared sequencing

Integrating shared sequencing could transform Ethereum, making transactions faster and cheaper by allowing seamless communication between L2 solutions. This would remove the need for complicated connections between L2s. Shared sequencing can create stronger decentralized applications (dApps) and services that work across L2s, enhancing user experience and accessibility. By reestablishing interactions between L2 solutions, shared sequencing would strengthen Ethereum’s impact as a platform for blockchain applications by making them work together easily.

The future for Ethereum's ecosystem

Although Ethereum is facing issues with fragmentation, there's a chance for a better and more efficient system ahead. Shared sequencing offers a way to build Ethereum's interaction abilities and network impact, leading to a more connected and powerful platform for blockchain tech. Through cooperation and innovation within the Ethereum community, there's a chance to overcome current limits and unlock the full potential of the platform. This might set the course for the future of blockchain applications.