What is Fractional NFTs? The future of NFT usecase
--
The goal of fractionalized NFTs is to address the age-old issue of affordability. Most people cannot afford to purchase the more expensive NFTs, such as Bored Apes and CrytpoPunks, but they could certainly investigate the opportunities presented by fractionalized NFTs. Fractionalization works similarly to owning stock in a business. It makes it possible for numerous collectors to own NFTs, making them available to everyone rather than just NFT whales.
What Are Fractional NFTs?
Simple division of a full NFT into smaller portions creates a fractional NFT that enables many parties to claim a portion of ownership of the same NFT. Consider how a complete cake can be divided into portions for many individuals. Given that an NFT is singular and cannot be copied, fractional NFTs push the envelope by enabling ownership to be divided.
How Does NFT Fractionalization Work?
One of the most popular standards for developing NFTs on the Ethereum blockchain is the ERC-721 token standard (along with the ERC-1155). The ERC-20 standard is used to create altcoins and other fungible tokens, whereas these two standards can create one-of-a-kind non-fungible tokens. Since fungible tokens are interchangeable, each one has the same fundamental value and utility. As a result, you can use a smart contract to create a number of ERC-20 tokens connected to an ERC-721 NFT that cannot be divided. In this manner, each holder of an ERC-20 token can possess a portion of the linked NFT.
What Are The Benefits Of Fractional NFTs?
By making the NFT more accessible and allowing more people to trade it, fractionalizing it makes it simpler for purchasers to determine the NFT’s true value.
Democratization
Many people cannot afford the rising costs of some of the most well-known NFTs, which prevents smaller investors or collectors from taking part in the NFT market. An costly NFT can be fractionalized to reduce costs and increase accessibility.
More liquidity
Popular collections often see a significant price hike as NFTs gain popularity. Due to this, only a few group of wealthy investors can access some NFTs. Fractional NFTs allow you to split up the ownership of ERC-721 or ERC-1155 tokens into a number of ERC-20 tokens, lowering their cost.
Price Finding
Choosing the appropriate price for a more expensive NFT with little or no transaction history might be challenging.
Greater exposure for creators
Because fractionalization enables digital creators to reach a bigger audience in a more liquid market, they can gain even more visibility online.
The difference between NFTs vs F-NFTs
At this point, you should be able to answer the “what are fractional NFTs? “ asks with assurance. So let’s contrast NFTs and F-NFTs. The distinction between conventional NFTs and F-NFTs is clear from the explanation from one of the earlier parts. While fractional NFTs are portions of the same totality, an NFT is a whole. The proportion of the original NFT that each represents is the main distinction between the two. However, this also implies a close relationship between NFTs and F-NFTs because the latter arises from the fractionalization of a regular token.
It is feasible to reverse the fractionalization of an NFT once it has occurred. As a result, fractional NFTs can be changed back into what they were originally. Typically, the smart contract that divided the NFT in the first place provides a buyout option. This enables a holder of an F-NFT to buy all fractions and finally liberate the base token.
Transferring a certain number of tokens from a collection to the smart contract would usually start the buyout process and activate the buyback option. Holders of F-NFT would have the option to sell their shares if this happened. If the buyout is approved, the original NFT belongs to the buyer and all fractions automatically return to the smart contract.
Top fractionalized NFT assets
Any asset can be fractionalized, so it isn’t possible to compile any kind of definitive list; rather, here is a small sample of some of the most popular F-NFTS on the market.
CryptoPunks
With some going for millions of dollars at a time, CryptoPunks are the perfect candidate for fractionalization. 50 CryptoPunks have been fractionalized into 250,000 million uPunk tokens on the Unicly NFT platform. The fractionalized shares were initially purchased at $0.05 each, and are currently trading at $0.07779 (with prices fluctuating quite rapidly).
What are the top fractionalized NFT marketplaces?
As the NFT marketplace list grows longer by the day, we see spaces for everyone. While many of the big NFT marketplaces bring together assets from different sectors, there are smaller marketplaces that focus on music, memes, or the tokenization of physical objects, such as real estate. Alongside the NFT art marketplace and NFT music marketplace, there are now platforms dedicated to fractionalized NFTs.
Fractional.art
With a user-friendly interface, you can easily buy fractionalized tokens in some of the most expensive NFTs on the market, such as Art Blocks and Bored Ape Yacht Club. The statistic showing collectible supply gives an indication of the demand and how many shares of an NFT are yet to be bought up.
Dibbs
Dibbs brings sportscard collecting into the 21st century, with fractionalized NFTs representing players from the NBA, NFL, PGA, and more. With card rankings, you can see which players are currently trending, as well as the biggest winners and losers in terms of market cap over a set period.
Future prospects for fractional NFTs
The fractional NFT space is just starting to get traction. As the worlds of non-fungible tokens and decentralized finance collide, there is something for everyone, whether you are a collector, investor, or someone who wants to use NFTs for staking or as collateral for loans.
