BC-404 experiment
BC-404 (Bonding Curve 404) —— The First Deflationary NFT Standard in Crypto, based on improvements to ERC-404.
Last updated
BC-404 (Bonding Curve 404) —— The First Deflationary NFT Standard in Crypto, based on improvements to ERC-404.
Last updated
Reflecting on the past six months, ERC-404 has been one of the most exciting innovations in the Ethereum ecosystem's assset issuance field. If you're not yet familiar with ERC-404, in short: ERC-404 combines the fungible token standard ERC-20 and the non-fungible token standard ERC-721, creating a semi-fungible token standard that incorporates features of both. This is achieved through the quantity correspondence logic between FT and NFT, realized via the NFT "mint and burn" mechanism.
In the ERC-404 contract, Tokens and NFTs are in a fixed ratio. The contract deployer can initially define "how many ERC-404 tokens an address must hold to generate one ERC-404 NFT." For example, 1 $Pandora token generates 1 Pandora NFT, but if your address holds only 0.9 $Pandora, you will not be able to generate a Pandora NFT.
BC-404 integrated the Bonding Curve model, changing the amount of BC-404 Tokens required to generate a BC-404 NFT from a fixed amount to an increasing amount. This value will continuously rise with each new BC-404 NFT generated, 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 the difficulty of generating each subsequent BC-404 NFT.
Overall, BC-404 can be designed with three different difficulty models:
Color defines the NFT generation difficulty as "BC Count":
Linear Increase
Curved Increase with Accelerating Slope
Curved Increase with Decelerating Slope
Due to varying amounts of BC-404 tokens required for generating each BC-404 NFT, the token content differs among different NFTs. In contrast, each ERC-404 NFT has the same fixed token content.
| Token&NFT Ratio | Trade & Transfer | |
|---|---|---|
ERC404 NFT | Identical and fixed | Carry a fixed amount of tokens |
BC-404 NFT | Each one varies | Carry varies amounts of tokens, corresponding to the amount of NFT generation |
Due to the variance in token content among BC-404 NFTs, their value also varies. To reflect this feature in the NFT marketplace, the BC-404 contract links the NFT ID with the NFT's token content (the BC Count at the time of generation):
For example, when a user buys a BC-404 NFT with ID #1868, they receive 1868 BC-404 Tokens along with the NFT.
Holders and traders can clearly ascertain each NFT's token content through its ID in wallets or NFT marketplaces.
The NFT IDs do not have to start from #1 and can depend on the initial BC count value set by the BC-404 contract deployer.
The NFT IDs do not need to be sequential and can depend on the BC count increment pattern set by the deployer.
Each NFT ID is unique, and generating an NFT will always face a higher BC Count than any previous one, thereby giving each BC-404 NFT its unique history.
BC-404 NFT Trading and Transfer: Similar to ERC-404, NFTs will remain the same upon transfer, and an equivalent amount of tokens will be transferred with the NFTs.
BC-404 Token Trading and Transfer: This is likely to trigger the destruction of BC-404 NFTs, depending on whether the remaining tokens are sufficient to support the held NFTs post-transfer, similar to ERC-404 V1.
Any BC-404 NFT ID will appear only once. Upon destruction, the ID is not renewable; hence, the destruction of a BC-404 NFT implies deflation of the BC-404 NFT collection, assuming a fixed total token supply set by the contract.
This makes BC-404 the first deflationary NFT standard in crypto.
BC-404 endows NFTs with inherent unique value through their varying token contents. Instead of officially setting the rules of NFT's rarity (artists/designers of game items or equity certificates have the right to do so), BC-404 aims to explore a different approach —— leaving the market and community members decide the NFT's aesthetic value whlie BC-404 just designs the numerical uniqueness of NFTs (ID equals token content, determined by code and generation history). For a BC-404 NFT Collection, issuance is just the beginning. The ultimate form will be co-created by the market and community. This echoes the spirit of decentralization in crypto.
Under the new mint & burn mechanism, the scarcity of the BC-404 NFT Collection will rise in synchronization with the token trading volume. The deflationary mechanism of NFTs counters the problem that the liquidity of tokens in Dex (AMM) overpowers the liquidity of NFTs in peer-to-peer order markets, maintaining the trading vitality and profitability in the NFT market (the circulating supply of NFTs will decrease, and acquiring NFTs via token purchase will become harder).
Unlike the ERC-404 standard, where transferring tokens to reset NFTs only incurs gas fees (negligible in low-fee networks), you will face a higher BC Count to generate a new NFT when transferring tokens under BC-404. This helps maintain trading vitality of the NFT market.
Participants will face an interesting scenario when seeking more NFTs: buy NFTs directly or purchase tokens to generate new ones? They need to weigh (i)the market premium on existing NFTs against their token content, (ii)the increasing cost of tokens needed to generate new NFTs, (iii)the randomness in generating new NFTs. Use your brain and make smart moves！
BC-404 introduces a new value dimension to the NFT market——token content, which will be an important metric for individual NFT values.
BC-404 represents a deflationary model for NFT Collections, redefining the uniqueness and scarcity of hybrid NFTs. While ERC-404 made it possible for NFT collectors and enthusiasts to engage with tokens, BC-404 ensures that the NFT investment remains meaningful and profitable, which truly broadens the audience of the 404 ecosystem and leads it to prosperity.
