A new hybrid NFT standard, DN404, has recently emerged, aiming to merge the functionalities of fungible and non-fungible tokens, similar to the previous standard, ERC-404. Developed by a team led by a developer known as "cygaar," DN404 offers the ability to trade fractional parts of NFTs, with the goal of creating a standard that allows NFTs to function with built-in fractionalization capability.

Unlike ERC-404, which has faced criticism for not meeting standards and inefficiency in some cases, DN404 utilizes a combination of a base ERC-20 contract and a "mirror" ERC-721 contract, ensuring full compatibility with existing protocols "out of the box." This allows for trading through the ERC-20 contract, called "NFT fragmentation," where the transfer of base ERC-20 tokens leads to the automatic burning and minting of mirror NFTs.

The goal of DN404 is to enable the trading of NFT parts without intermediaries and integrate NFTs on both NFT exchanges and decentralized exchanges. However, developers warn that the code has not yet undergone official verification, and its use is associated with risks.

Concerns have also been raised about the security of ERC-404 after a developer of DN404, known as "quit," pointed out a potential vulnerability that allows holders of ERC-404 tokens to steal NFTs from lending protocols not adapted for ERC-404. In response, the developer of ERC-404, known as "ctrl," stated that the vulnerability is only possible when using an initially malicious contract that misuses the standard.