Ethereum Gas Fees Surge Amid ERC-404 Frenzy

On February 9, Ethereum’s gas fees soared to an eight-month high, driven by interest in the experimental ERC-404 token standard.

That day, the average gas price reached 70 Gwei (~$60 for a standard transaction), with a peak of 377 Gwei. The last time such levels were recorded was on May 12, 2023.

The ERC-404 frenzy began on February 5 with the launch of the Pandora coin. In less than a week, the asset surged by 753% to $16,260, according to CoinGecko. At the time of writing, its daily trading volume is $50 million.

The experimental standard is a hybrid implementation of ERC-20/ERC-721, where purchasing a coin also automatically generates an NFT in the wallet. It allows ownership of a fractional part of a so-called “fractional” non-fungible token.

According to PopPunk, co-founder of the gas auditing firm Gaslite, transferring ERC-404 requires about 125,000 Gwei—three times more than a regular NFT transaction.

An average ERC404 transfer is 125,000 gas units.

More than 3x the gas of an average ERC721A transfer.

This is nightmare fuel.

Gaslite could either:
1) build a more optimized (and more compliant version of this standard)
2) ignore it and let it fade into the ether

— Pop Punk (@PopPunkOnChain) February 6, 2024

“This is nightmare fuel. Gaslite could either create a more optimized (and more compliant) version of the standard or ignore it and let it fade into the ether,” he wrote.

On February 9, significant trading volumes were associated with Pandora, DeFrogs, and several other ERC-404 projects on decentralized exchanges. At the time of writing, the total value of such tokens exceeds $60 million.

However, following the sharp rise of ERC-404, a correction ensued. Over the past day, nearly all tokens of the new standard have fallen by 10-50%.

Earlier, the community expressed concerns about the security risks of ERC-404. A developer and Solidity auditor known as Quit pointed out that there is an exploit threat in the code itself. Moreover, the standard has not yet been approved by the Ethereum Foundation and the community.

Back in February, the significant rise of the Pandora token brought a trader about $1.2 million in two days.