EZswap Protocol: Gamified NFT DEX model, potentially becoming ERC404...

Author: Jonas Researcher

Market Status

Whether it is a bull market or a bear market, new asset types such as inscriptions are more favored by capital in the blockchain, making narratives easier to gain market recognition. In the stock market, BTC inscription BRC20 relies on low liquidity to create a wealth effect, and with the assistance of BTC miners, it became the biggest winner in the bear market of 2023, catalyzing the development of the BTC ecosystem, such as more trading protocols and BTC Layer2, gradually attracting retail investors, Asian capital, and exchanges.

ERC404 became a hot topic of discussion in the CT in less than a week. We can see that both inscriptions and the ERC404 protocol embed the concept of NFT into new assets. ERC404 essentially consists of two token types, ERC-721 and ERC-20. When users purchase one ERC-20 token, they automatically receive an NFT, and if they do not purchase a full token, they will not receive an NFT. Similarly, when FT is sold, the corresponding NFT will also be destroyed. Users can obtain the attributes of NFT by purchasing ERC-20 tokens even if they do not own NFT. Therefore, ERC404 greatly improves the liquidity of NFT by combining NFT with FT, expanding the imagination space of asset size. It also reflects the formation of a new NFT paradigm through the packaging of new assets using capital to ferment into a new narrative in a bull market.

Why is the narrative of ERC404 still sustainable? Although there have been many inferior imitations and rug projects hindering the narrative of ERC404 after Pandora received widespread attention, if we can find some similar catalysts from the development of inscriptions.

Technically, ERC404 and inscriptions share the similarity of simple and easy-to-understand technical implementation. At the same time, they are two extremes. Inscriptions create a wealth effect by extremely low liquidity, while ERC404 expands the imagination space of NFT liquidity to the level of FT, which is a qualitative leap for NFT.

In terms of capital intervention, within 3 days of the wide attention received by Pandora_ERC404 on social media, ERC404 benefited from the team's own capital resources and the project's strong Degen attributes, leading to a faster cold start. CEX, relying on the experience of inscriptions, also quickly supported the trading of ERC404, ensuring exposure. At the same time, the ERC404 protocol has attracted the attention of North American capital through continuous improvements, and continues to drive subsequent development.

It is undeniable that the current speculative nature of ERC404 is strong, but the concept of ERC404 can easily be combined with various types of encrypted assets, indicating strong future development potential. $Shib has made a new attempt at the meme level by combining 'picture dog' and 'earth dog,' which may bring a new paradigm of memes. Fusionis has also launched ERC404 products in the gaming field, combining game NFTs and tokens embedded in the in-game economy cycle.

What is EZswap Protocol?

EZswap is a game asset trading protocol built using the AMM mechanism, and on top of the protocol, a decentralized trading platform for game assets is constructed. Its core is to help games build their own built-in NFT DEX, greatly improve the trading efficiency of game assets with the instant trading mode based on P2Pool, complemented by asset market-making, help game projects solve the problem of insufficient funds for cold start and provide higher capital utilization efficiency to break the circle. It has already connected with hundreds of games and has deep cooperation with over 20 games. In addition, EZswap Protocol is also expanding its new asset trading business represented by inscriptions and ERC404.

What is EZswap Protocol doing?

In simple terms, the business development model of EZswap Protocol is based on NFT as the underlying asset, creating a decentralized trading platform capable of accommodating various new types of assets.

• ERC-1155 assets as carriers for games

In the early stages of development, EZswap Protocol has always believed that games will be one of the most attention-grabbing tracks after the NFT bubble bursts. For any type of game, NFT based on the ERC-1155 standard will be an important form of game props presentation, such as cards, gun skins, or gems, and other consumable game props. The total quantity of such NFTs is often large, possibly exceeding the traditional setting of 10k, and at the same time, players are likely to engage in bunch trading when trading these assets in large quantities, meaning they will buy a large number of the same type of NFT at once. In such cases, using a traditional order book not only requires players to jump to a third-party trading market, disrupting the gaming experience, but also is very unfriendly in terms of gas consumption.

Therefore, EZswap Protocol provides in-game marketplace construction services using the AMM mechanism. The API of EZswap Protocol can help game projects build an internal game market at low cost in a short period of time. This service not only greatly improves the user experience in gaming but also allows games to shorten the development time in a bull market from the perspective of game issuers. They can issue assets in a market with abundant liquidity, conduct low-cost market-making using the P2Pool model, and create a wealth effect.

Take the recent inscription Echo launched by EZswap Protocol as an example. Since its launch, the total trading volume is 92k $EOS, which is equivalent to trading 1.5mm NFTs at the time, making it clear that in such a scenario, a traditional order book marketplace would find it difficult to meet such high demand. In a relatively scarce EOS ecosystem, Echo successfully completed a launch relying purely on community power.

When we apply this model to games, a game with high playability often has a large number of low-priced homogeneous in-game items. Currently, ERC-1155 is the most suitable token type for such assets. Therefore, similar to inscriptions, the trading model of these relatively homogeneous NFT assets using DEX can not only meet the high demand of retail investors but also, with the introduction of market makers, significantly improve the liquidity and wealth effect of these assets.

• New types of assets represented by ERC404

ERC404 is still in the stage of technical improvement. The founding team of ERC404 has proposed the V2 version, and there is also a variant type of ERC404 called DN404 introduced by the foreign NFT developer cygaar. From a non-technical perspective, the current improvements to ERC404 focus more on the functional implementation logic, such as the various solutions already existing for the minting and burning process of NFTs. The V2 version of ERC404 directly transforms the process of minting->burning->minting into the transfer of NFTs.

Obtaining NFTs by 'fragmenting' through trading ERC-20 tokens may temporarily reduce the demand for NFT trading itself, but in the long run, our goal is still to capture the value of NFTs. Therefore, the demand for NFT trading will not disappear as ERC404 continues to be embedded in various protocols, leading to value discovery.

Therefore, the potential future demand lies in how to price NFTs in the early stages of a project, thereby distributing value through the liquidity of ERC20 AMM. By using EZswap Protocol, project teams can adopt a dual AMM pool model, establishing liquidity in both traditional DEX and NFT DEX simultaneously. This allows project teams to distribute chips at their envisioned prices early on and accelerate the circulation of NFTs through dual trading markets, thus completing a successful market-making operation.

We can see that traditional DEXs like Trader Joe, combined with their own NFT markets, enable ERC404 trading to take place in the same location, making it more convenient for traders and attracting more ERC404 issuers to use this aggregated market as a launchpad. There are not many DEXs with dual markets for ERC20+NFT, so to accommodate the flow of ERC404, a new NFT market must be rebuilt. Therefore, the API of EZswap Protocol can provide an efficient solution. Similar to the logic of in-game built-in markets, project teams can quickly build an NFT DEX that meets the demands of ERC404 using the API. Traditional DEXs become the entry point for traffic, and EZswap Protocol is aggregated as the underlying protocol, achieving a win-win situation.