Gas prices on the Ethereum network reached an eight-month peak. The main driver is the growing hype around a new, unofficial experimental token standard called ERC-404.
According to Etherscan data, an average fee on the Ethereum network hit 70 gwei (~$60) on February 9, with peak fees recorded at 377 gwei — the May 2023 level.
It’s difficult to clearly identify the reasons behind gas prices, as commission values are influenced by a combination of different factors. However, the current spike arrived during traders’ active interest in the new ERC-404 standard.
ERC-404 combines the capabilities of ERC-20 and ERC-721 and is designed to address the liquidity issues of NFT collections and expand their use in the DeFi ecosystem. Technically, ERC-404 is a smart contract template that brings together transactions with different types of tokens within a single contract.
The ERC-404 tokens gained popularity after the launch of Pandora. The project grew by 1,950% in the first four days, with a trading volume of $80 million. Another project, DeFrogs, based on the ERC-404 standard, soon experienced a 240% price increase in just two days. According to CoinGecko data, as of 11:00 (GMT+2), February 12, the market cap of 13 ERC-404 projects is $182 million.
Despite the new standard’s growing popularity, the Ethereum Foundation team didn’t officially recognize it. The ERC prefix is merely nominal. The developers of ERC-404 claim that the standard is experimental and is yet to pass a security audit. Its primary goal is to combine the functionality of fungible and non-fungible tokens and potentially reduce gas fees by about 300-400%. However, the anonymous analyst noted that transactions with ERC-404 tokens currently use about three times more gas than an average NFT transaction requires.
Vitalik Buterin, Co-Founder of Ethereum, recently proposed to increase the gas limit by 33% and reduce the maximum block size for better network scalability in the future.
