A fractionalized NFT is a type of non-fungible token that allows multiple individuals or entities to own a fraction of a single NFT. As a result, the NFT’s ownership is split up into smaller units or shares, which investors can buy and sell on a secondary market. In this post, we will explain the notion of fractions, along with an overview of the Fractional.art platform and an introduction to some well-known fraction NFTs.
Fractional NFTs have become increasingly popular in the art and collectibles market, where high-value assets are often sold for millions of dollars. By fractionalizing an NFT, collectors and investors can own a piece of a valuable asset that they may not be able to afford in its entirety.
Benefits
One of the advantages of fractional NFTs is that they democratize access to valuable assets, opening the market to investors of all sizes. An individual investor might not have the means to pay the entire $10 million asking price for an NFT of a priceless piece of art, for instance. However, by fractionalizing the NFT, several investors can purchase a portion of the artwork for less money, increasing its accessibility to more potential customers.
Fractional NFTs also give the market more liquidity, which is another advantage. High-value goods, such as artwork or collectibles, are typically illiquid, or difficult to buy or sell.
Drawbacks
Fractional NFTs may also have drawbacks. One worry is that fractionalization would make the NFT less valuable. Each share of an NFT that is divided into numerous small ones could have a lower value than the NFT as a whole. Due to this, it could be more challenging to realize a profit or sell the shares on a secondary market.
Another issue is that fractional NFTs can make it harder to show ownership or the origin of the underlying item. It could be tricky to decide who has the authority to show or sell an asset if numerous investors possess shares of an NFT. Conflicts or legal concerns could result from this.
Fractional.art is an NFT marketplace that allows users to buy, sell and trade fractional ownership of high-value digital assets, such as artwork, music, and other collectibles. The platform uses blockchain technology to create unique digital assets that can be traded and owned by multiple individuals, with each owner holding a fraction of the asset.
How it Works
The process of buying and selling fractional ownership of digital assets on Fractional.art is relatively simple. Here’s a breakdown of how it works:
Asset Creation: An owner of a valuable digital asset, such as a piece of artwork, can create a fractionalized version of it on the Fractional.art platform. This involves creating a smart contract that will tokenize the asset and split it into fractional shares.
Minting of Shares: Once the smart contract is created, the asset owner can mint as many shares as they want, each representing a fraction of the asset. For example, if the asset is worth $1 million, and the owner wants to sell 50% of the asset, they can mint 500,000 shares, with each share representing $2.
Trading: Once the shares are minted, they can be traded on the Fractional.art platform. Anyone can buy and sell shares, with the price of each share determined by supply and demand. As the value of the underlying asset increases, so too does the value of the shares. In addition to the Fractional.art platform, web3 users can trade fractionated assets from secondary markets like Uniswap and Matcha.xyz directly.
Beeple Artworks
In March 2021, a digital artwork by artist Beeple sold for a record-breaking $69 million at auction, with the winning bidder receiving an NFT representing ownership of the artwork. Following the sale, a platform called Fractional offered investors the opportunity to buy shares of the Beeple NFT, with each share representing 1/100th of the ownership of the artwork. The shares quickly sold out, demonstrating the demand for fractional NFTs in the market.
CryptoPunks
Crypto Punks are famous and the first trending NFT collection in the crypto space. Many CryptoPunk owners have placed their items on platforms like Fraction.art in order to more gains and interest.
Doge NFT
The Doge NFT by ZORA collection is one of the most reputable, most valuable, and earliest NFTs of this platform. In its description, it is introduced as “The most iconic meme in internet history.”
Fractional NFTs represent a new and innovative way to invest in high-value assets like artwork and collectibles. By allowing multiple individuals to own a fraction of an NFT, fractionalization provides greater access and liquidity to the market.
While there are potential concerns about the impact of fractionalization on the value and ownership of NFTs, the popularity of fractional NFTs suggests that they are likely to play an important role in the future of digital asset ownership and investment.
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