Fungible PFPs: Deploying Hybrid Generative Media Collections on Token Rails

The first era of Non-Fungible Tokens (NFTs) established digital ownership, but it also exposed a mechanical flaw: illiquidity. For years, digital art collectors operated inside a binary system — you either own a 1-of-1 asset outright, or you own nothing. If you hold a Profile Picture (PFP) NFT during a market downturn, exiting your position requires finding a direct buyer willing to pay close to your listing price. That friction produces wide bid-ask spreads, thin order books, and floor-price crashes that feed on themselves.

A newer wave of hybrid token standards is trying to fix that by letting fungibility and non-fungibility coexist in the same asset. This piece walks through how that actually works today, what's real versus marketed, and how a Base-network launchpad like frfr.fun could theoretically apply the mechanic to generative PFP drops.

A note on sourcing: frfr.fun is Arin's own launchpad, and several claims about it below (its fee structure, its bonding-curve settlement currency, its creator-studio workflow) come from the platform's own materials rather than independent, third-party confirmation. frfr.fun does not currently appear in outside roundups of Base-network launchpads, which tend to name Clanker, Zora, and Flaunch as the established players (WuBlockchain, Mar. 2025; CryptoSlate, May 2026). Those frfr.fun-specific claims are flagged inline as self-description, not verified fact.

1. The Illiquidity Trap of Legacy NFTs

When an artist launches a standard 10,000-item PFP collection under ERC-721 or ERC-1155, every token is isolated:

Fractured liquidity. If a collection's floor is 1 ETH, a collector with 0.2 ETH is priced out entirely — there's no way to buy a fifth of an NFT.
Royalty erosion. Trading depends on order-book marketplaces, and over 2023 several of the largest of them stopped enforcing creator royalties. OpenSea sunset its on-chain royalty enforcement tool (the "Operator Filter") starting August 31, 2023, moving new collections to optional creator fees after competitive pressure from Blur, which had made royalties conditional on creators blocking OpenSea trading (Cointelegraph, Aug. 2023; Decrypt, Aug. 2023). It's worth being precise here: this wasn't a move to a flat 0% — Blur maintained (and still maintains) a 0.5% minimum royalty on most collections (The Art Newspaper, Aug. 2023) — but the shift from mandatory 5–10% royalties to optional, often-skipped ones was real and significant, and creator royalty payments across the sector fell sharply from their April 2022 peak (The Art Newspaper, Aug. 2023).
The exit bottleneck. During a sell-off, sellers undercut each other's floor listings one by one because buyers must select and purchase individual token IDs. Liquidity dries up exactly when holders need it most.

2. The Hybrid Paradigm: Liquid Art Rails

Hybrid token designs merge the continuous liquidity of an automated market maker with the verifiable uniqueness of an NFT. Instead of minting 10,000 discrete NFTs directly, a creator deploys a fixed supply of fungible tokens with 18 decimals — 10,000 tokens for a 10,000-piece collection. Those tokens trade freely on a bonding curve or DEX. A collector can buy 0.05 of a token as a pure speculative position. When any single wallet's cumulative balance crosses a whole-unit threshold (1.0 token), a paired contract automatically mints a unique, randomized artwork into that wallet.

[ Fractional Traders ] <--- Trades fungible fractions (0.1, 0.5) ---> [ Bonding Curve / DEX ]
                                                                             |
[ Full-Unit Holder ]   <--- Balance crosses 1.0, triggers auto-mint ----> [ Generative NFT ]

This turns generative art from an illiquid collectible into something closer to a continuously tradable financial instrument — with the tradeoffs that implies, which the risk section below covers.

3. Unpacking the Architecture: DN404

The idea of a single token that behaves as both ERC-20 and ERC-721 first appeared as ERC-404, an unofficial (non-EIP) standard that surfaced in early February 2024 and was popularized by a project called Pandora (CryptoSlate, May 2024). It jammed fungible and non-fungible logic into one contract, and paid for that simplicity in gas: every fractional transfer forced the contract to loop through checks to mint or burn NFTs, which made transactions expensive and, in some configurations, exploitable.

How DN404 actually works

A week after ERC-404 launched, a group of pseudonymous developers — credited in the open-source repository as vectorized.eth (optimizoor), 0xCygaar, 0xQuit, 0xjustadev, PopPunkOnChain, and Michael Amadi — released DN404 ("Divisible NFT 404") as an alternative (Cointelegraph, Feb. 2024; GitHub: Vectorized/dn404). It splits the logic into two contracts instead of one:

DN404.sol (base contract): a fully ERC-20-compliant token that tracks balances and handles the minting/burning logic. Most trading happens here, and it's compatible with DEXs out of the box.
DN404Mirror.sol (mirror contract): a fully ERC-721-compliant contract that NFT marketplaces and wallets interact with normally.

                       +-------------------------------+
                       |      User Wallet Balance      |
                       +---------------+---------------+
                                       |
                   +-------------------+-------------------+
                   |                                       |
                   v                                       v
        +---------------------+                 +---------------------+
        |     DN404.sol       |                 |   DN404Mirror.sol   |
        | (ERC-20 Interface)  |<== Synchronize ==>| (ERC-721 Interface) |
        +---------------------+                 +---------------------+

When a wallet's balance crosses a whole-unit boundary upward, the base contract calls the mirror contract to mint a new NFT. When it drops back below that boundary, the mirror contract burns an NFT — specifically, per the project's own code comments, the most recently acquired NFT is the one burned first (GitHub: Vectorized/dn404, DN404.sol). Because the logic runs through structured pointers rather than brute-force iteration, the team's original announcement cited roughly a 20% gas reduction on typical transfers versus ERC-404, and up to 99% cheaper in specific edge cases (Cointelegraph, Feb. 2024). A handful of secondary write-ups cite a flatter "~50% cheaper" figure; that number doesn't appear to trace back to a primary benchmark, so treat it as an approximation rather than a verified figure either way.

Important caveats the original hype cycle didn't emphasize

A few things are worth stating plainly, because they change how you should read any pitch built around DN404:

It is explicitly not an Ethereum standard. Its own creators state DN404 has not gone through the EIP process and describe it as open-source code, not a project or a finalized standard (Cointelegraph, Feb. 2024; NFTPlazas, Feb. 2024).
The team did not launch any collections themselves and has publicly disclaimed any project using the DN404 name as unaffiliated (CryptoNews, Feb. 2024).
It has not undergone a formal third-party security audit, by the developers' own admission at launch (Coinspeaker, Feb. 2024).
Real deployments exist, but they're modest and none are confirmed on Base. The clearest example is BONSAI, a DN404-pattern token built for the Lens Protocol social ecosystem, where 100,000 BONSAI convert into one collectible NFT (CryptoSlate, May 2024). Other cited examples (Yuliverse's OG404, DeFrogs) are niche. In the course of researching this piece, no independently verifiable DN404 collection on Base specifically turned up — so the framing of DN404 as an established "Base network" pattern should be read as forward-looking, not descriptive of current adoption.

4. The "ERC-7660" Question

The earlier draft of this piece described ERC-7660 as an emerging, Ethereum Foundation–backed standard for structured, vested token releases. That framing needs a significant correction.

ERC-7660 is not a recognized Ethereum standard. It doesn't appear in the Ethereum Foundation's official EIP/ERC registry at eips.ethereum.org. It originates from a single company, Benchmark Labs, and by that company's own documentation it has only reached the Ethereum Foundation's informal "pre-examination" stage — meaning a number was referenced, not that the proposal was reviewed, merged, or adopted (Benchmark Labs documentation, 2024; Gate.io, Dec. 2024). Independent secondary sources describe it as being used primarily to structure the linear-release mechanics of Benchmark Labs' own meme-token fair-launch product, not as general-purpose infrastructure other teams have adopted (Bybit Learn, Jun. 2024).

None of that means linear vesting for token launches is a bad idea — plenty of real, audited vesting-contract patterns exist and are widely used to prevent early-holder dumps. It does mean "ERC-7660" specifically shouldn't be cited to readers as an Ethereum-wide, EF-endorsed standard, because that claim isn't supported. If a hybrid PFP project wants controlled, linear token release, the honest framing is: build or license a standard vesting/streaming contract (the kind of pattern used across many DeFi vesting tools), rather than pointing to ERC-7660 as an authoritative reference.

5. Why Base Gets Pitched for This

Every time a trader crosses a whole-token boundary, the chain has to write new NFT ownership data. On Ethereum mainnet, that write could cost $30–80 in gas at points during 2021–2023 congestion — enough to kill the mechanic for retail users. Base changes that math, and this part is independently verifiable:

Gas is genuinely sub-cent. Base's own documentation sets a minimum L2 base fee of 0.005 gwei, which it estimates works out to roughly $0.002 for a typical 200,000-gas transaction at $2,000 ETH (Base documentation, 2026). Third-party trackers report Base staying in a similar low range through Q1 2026 outside of mint-rush congestion (OpenLiquid, Apr. 2026). A DN404-style mint/burn triggered by a fractional trade would fall well inside that range.
Base doesn't have its own gas token, which simplifies the mechanic somewhat — gas is paid in ETH regardless of what token is being traded (OpenLiquid, Apr. 2026).

Beyond gas, the pitch for stablecoin-denominated settlement is a real industry pattern (several Base launchpads price trades in ETH or a bonding-curve-native token, and USDC-settled bonding curves are not unusual), but the specific claim that frfr.fun's bonding curves and pools settle exclusively in USDC, and that frfr.fun charges a flat 6% creator royalty on all bonding-curve and pool volume, comes from frfr.fun's own platform description. Neither figure was independently confirmed in the course of this research, and frfr.fun was not found in third-party lists of active Base launchpads (WuBlockchain, Mar. 2025; DappRadar, Apr. 2026; CryptoSlate, May 2026). Treat both numbers as the platform's stated design, not an audited or externally reported fact.

6. Illustrative Walkthrough: Fractional Accumulation and Trait Re-Rolling

The following is a hypothetical scenario, not a real case study or an existing collection. It's meant to illustrate the mechanic, not describe an actual project.

Imagine a fictional 5,000-piece collection, "CyberMechs," using the DN404 pattern on a hypothetical launchpad.

Micro-fractional entry. A collector wants exposure but can't afford a full unit at $400. They spend $100 and receive 0.25 of the token — pure price exposure, no NFT, and no liquidity friction if they want to exit.

Crossing the threshold. Two weeks later they spend another $300, pushing their balance to 1.00. In that same block, the mirror contract mints a new NFT into their wallet with algorithmically generated traits.

Trait re-rolling. They don't love the traits they got. They sell 0.1 of the token back into the pool — per DN404's actual burn-order logic, this burns their most recently acquired NFT — then buy 0.1 back a few seconds later, which mints a fresh NFT with a new set of traits. This is a real mechanical consequence of how DN404 orders its burns, not a hypothetical feature; whether any deployed collection has marketed it as "re-rolling" the way described here is a separate question this research didn't confirm.

Each of those fractional trades would generate trading volume and, on a platform that charges a percentage fee on bonding-curve volume, would generate fee revenue for the creator — proportional to however that specific platform's fee is structured.

7. Generative Art Architecture: Linking Thresholds to Metadata

Two dominant patterns exist for assigning visual traits when a fraction crosses into a full NFT:

Decentralized storage anchoring (IPFS/Arweave). The artist pre-renders the full set of possible trait combinations and uploads images plus metadata to permanent storage before launch. The mirror contract's tokenURI function then points each minted ID to its corresponding file.

Fully on-chain SVG rendering. For projects that want the artwork itself to live on-chain, the mirror contract can generate raw SVG from deterministic inputs — a transaction hash, block timestamp, and the recipient's address — computed at mint time. A simplified, illustrative version of that pattern looks like this:

// Simplified conceptual logic inside a Hybrid Mirror Contract
function tokenURI(uint256 tokenId) public view override returns (string memory) {
    uint256 seed = uint256(keccak256(abi.encodePacked(tokenId, block.timestamp, msg.sender)));

    string memory traitColor = getTraitColor(seed);
    string memory svgOutput = string(abi.encodePacked(
        '<svg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 500 500">',
        '<rect width="500" height="500" fill="', traitColor, '" />',
        '</svg>'
    ));

    string memory json = Base64.encode(bytes(string(abi.encodePacked(
        '{"name": "Hybrid Art #', toString(tokenId), '", "image": "data:image/svg+xml;base64,', Base64.encode(bytes(svgOutput)), '"}'
    ))));

    return string(abi.encodePacked("data:application/json;base64,", json));
}

Using block.timestamp and msg.sender as entropy sources is a reasonable illustration but is not the strongest randomness source available on-chain — both are influenceable to a limited degree by whoever controls transaction ordering. Projects that care about trait fairness typically layer in a verifiable randomness source (e.g., Chainlink VRF) rather than relying on block variables alone; this is a real, well-documented limitation of naive on-chain "randomness," not specific to DN404.

8. The Economic Case for Bonding-Curve-Native Art

A fixed-price mint is an all-or-nothing bet: if a 5,000-item collection at 0.05 ETH each only sells 2,000 units, it's perceived as a failed drop, and the floor collapses immediately. A continuous bonding curve avoids the binary "mint out" outcome — there's no deadline, and price is a function of cumulative supply purchased rather than a single clearing event.

The dual-market arbitrage this creates is a real, well-understood pattern from the ERC-404/DN404 ecosystem more broadly: if a token's fractional price on a bonding curve implies a cheaper full unit than the equivalent NFT's floor on a secondary marketplace, an arbitrageur can buy the fraction, let it auto-mint, and relist on the NFT marketplace, pocketing the spread and pulling the two prices back toward parity. This dynamic has been observed and discussed for existing DN404/ERC-404-pattern tokens generally; whether it plays out identically inside a frfr.fun-style bonding curve depends on that platform's specific liquidity depth and fee structure, which weren't independently verifiable here.

9. Deployment Blueprint

This is a generic pattern for standing up a DN404-style collection; steps described as specific to any one launchpad's UI are noted as such.

Define supply and metadata. Decide total ERC-20 supply (e.g., 10,000 × 10^18 for a 10,000-piece drop) and pre-generate or design your trait-generation logic.
Implement and get the contracts audited. Pull the open-source DN404 repository, configure the constructor, and — given the developers' own disclosure that the code is unaudited — commission an independent audit before mainnet deployment. This step is not optional in practice; deploying unaudited hybrid contracts that control both a tradable fungible asset and NFT ownership is a meaningfully higher-risk surface than a standard ERC-20 or ERC-721 alone.
Deploy to Base mainnet. Standard contract deployment, funded with a small amount of Base ETH for gas.
Initialize on a launchpad. The following describes frfr.fun's own stated workflow and has not been independently verified: connecting a deployment wallet, selecting a "custom token/hybrid launch" option, and configuring bonding-curve and liquidity-lock parameters through a creator studio interface.
Build token-gated utilities. Standard tooling (Guild.xyz, Collab.Land) can gate Discord or website access based on the ERC-20 balance tracked by the base contract — this part is genuinely platform-agnostic and well-established.

10. Regulatory and Risk Considerations

This section didn't exist in the original draft, and it should have, because a hybrid fungible/NFT instrument is precisely the kind of asset that's hard to slot into existing legal categories.

The token-classification question just got more concrete. On March 17, 2026, the SEC and CFTC jointly issued a formal interpretive release establishing a five-category taxonomy for crypto assets: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities — with the first four generally falling outside securities regulation and digital securities remaining fully within it (Release Nos. 33-11412, 34-105020; Sullivan & Cromwell, Mar. 2026; Jenner & Block, Mar. 2026). Notably, the agencies explicitly acknowledged that some crypto assets have hybrid characteristics spanning multiple categories (Lowenstein Sandler, Mar. 2026) — which describes a DN404-style token almost exactly. A fractional balance that behaves like a fungible trading instrument, paired with a threshold-triggered collectible, sits across the "digital commodity" and "digital collectible" lines by design. Whether a specific hybrid PFP token counts as a security still comes down to the facts-and-circumstances Howey analysis the taxonomy layers on top — how it's marketed, what promises are made about creator effort driving value, and so on — not the token's technical architecture. Projects considering this structure should treat that classification question as unresolved rather than assumed-safe, and get counsel involved before launch, not after.

Unaudited contracts controlling real value. As noted above, DN404's own developers have not represented the code as audited. Any project building on it inherits that risk until an independent audit says otherwise.

Marketplace and wallet compatibility isn't guaranteed. Because DN404-pattern tokens rely on two synchronized contracts, not every wallet, marketplace, or lending protocol handles the edge cases correctly — this was the exact class of bug 0xQuit originally flagged in ERC-404's design (Cointelegraph, Feb. 2024; NFTPlazas, Feb. 2024). Integrating with a DN404-based collection means testing against the actual wallets and marketplaces your community uses, not assuming ERC-20/ERC-721 compliance is sufficient.

Volatility cuts both ways for holders. A collector who "owns" a PFP under this model can have it burned out from under them by someone else's sell pressure pushing the collective balance dynamics in ways a traditional 1-of-1 NFT holder never has to think about. That's a genuinely different risk profile than legacy NFT ownership, and it should be disclosed plainly to collectors, not glossed over as a pure liquidity upgrade.

11. The Road Ahead

The direction of travel — merging continuous liquidity with verifiable digital uniqueness — is a real and interesting design space, and DN404's dual-contract architecture is a genuine technical improvement over the original ERC-404's single-contract approach. But the honest version of this story has fewer confirmed facts than the hype cycle around it suggested in early 2024: DN404 is unaudited open-source code without EIP status, real-world adoption is thin and not yet confirmed on Base specifically, and "ERC-7660" is one company's marketing term for its own proprietary product, not an Ethereum Foundation standard. None of that makes the underlying idea wrong. It does mean anyone launching on this pattern — including on frfr.fun — should treat vendor claims, audit status, and regulatory classification as open questions to verify, not settled infrastructure to build on blindly.

Corrections and Transparency Log

ERC-7660 reframed. The original draft described ERC-7660 as an emerging, Ethereum Foundation–backed standard for structured token releases. Research found it is a single company's (Benchmark Labs) proprietary proposal that has only reached the EF's informal pre-examination stage, is not a recognized EIP/ERC, and is primarily associated with that company's own meme-token product. The relevant section was rewritten to reflect this accurately rather than removed, since the underlying vesting concept is legitimate even though the specific standard-name is not.
DN404 team credit corrected. The original text credited "cygaar and quit" as the developers. The actual credited team per the open-source repository includes vectorized.eth (optimizoor), 0xCygaar, 0xQuit, 0xjustadev, PopPunkOnChain, and Michael Amadi.
DN404's standard-vs-code status clarified. Added the developers' own disclosures that DN404 has not gone through Ethereum's EIP process, is described by its creators as open-source code rather than a project or finalized standard, and has not undergone a formal audit by the developers' own admission at launch.
Gas-savings figure hedged. The original claimed "over 50%" gas savings without sourcing. The primary source (the developers' own launch thread, as reported by Cointelegraph) cites ~20% typical savings and up to 99% in edge cases; a ~50% figure appears in some secondary write-ups without a clear primary source. Both are now presented with attribution and the discrepancy is flagged.
No confirmed Base-network DN404 deployment found. The original implied established "DN404 Base network implementations." Research turned up real DN404-pattern deployments (e.g., BONSAI on Lens Protocol) but none independently confirmed on Base specifically. This is now stated as a gap rather than an established fact.
NFT marketplace royalty history corrected. The original said marketplaces slashed royalties "to 0%." OpenSea moved to optional royalties starting August 2023; Blur enforces a 0.5% minimum, not a literal 0%. Both are now cited with dates and sources.
Base gas-cost claim sourced. The original stated "$0.001 to $0.005" per transaction without a source. This is now grounded in Base's own documentation (minimum base fee yielding ~$0.002 for a typical transaction) and a third-party Q1 2026 tracker.
frfr.fun-specific claims flagged as self-description. The 6% creator royalty figure, USDC-only bonding-curve settlement, and the specific creator-studio deployment flow are frfr.fun's own stated design and were not independently verified. frfr.fun does not appear in third-party roundups of active Base launchpads as of this writing.
Marcus/CyberMechs walkthrough labeled explicitly hypothetical. The original presented this as a plausible user journey without flagging it as fictional. It is now explicitly marked as an illustrative scenario, not a real case study.
New Regulatory and Risk Considerations section added. The original had no risk or regulatory discussion. Added coverage of the March 17, 2026 SEC/CFTC joint token taxonomy (five categories, hybrid-asset acknowledgment), unaudited-contract risk, wallet/marketplace compatibility risk, and the asymmetric risk hybrid ownership creates for collectors.
On-chain randomness caveat added. Noted that using block.timestamp/msg.sender as a trait-generation seed is a real, known weakness (miner/sequencer-influenceable) rather than presenting the sample code as production-grade.
Metadata and formatting. Removed the run-on title/metadata string from the top of the original document and restructured the piece into clean Markdown with proper headers.