What Are Fractional NFTs?
A fractional NFT is a specific proportion of a whole NFT, which allows people to take over partial ownership of the same one NFT. Think about it like a pie - a whole pie could be sliced into pieces that multiple people can share. Considering each NFT is unique and cannot have a second copy, fractional NFT make ownership division possible and people can share partial ownership when they can't afford the whole "piece".
Some Examples of Fractionalized NFTs
Greater liquidity
Some NFTs are now crazily popular, which comes with a massive rise in price. In other words, these popular NFTs are only accessible to some wealthy investors. Smaller people like you and me will have difficulties to own a whole NFT in some cases. On the other hand, you can divide the ownership of ERC-721 tokens into multiple ERC-20 tokens with Fractional NFTs, to make it more affordable and accessible to people.
Increased visibility for creators
Creators will get more exposure online with fractionalization since they are now in a more liquid market with a wider audience. Creators will also benefit from additional transactions such as resale from individuals.
What Are The Disadvantages of Fractional NFTs?
Reducing the non-fungibility might lead to a decrease in NFTs valuation due to the loss of exclusivity. At the same time, this will happen to the fractionalized tokens itself as well, because each individual transaction of the token could have an impact on the overall value.
In addition, the reconstitution of NFTs is another challenge - that being said, if the original owner of an NFT wants to sell or trade the NFT as one whole digital asset again, the owner will need to buy back all the fractional NFTs. As you may be aware, some of the fractional owners might disagree to sell it back to the original owner, which can cause overhauled transaction times.
A fractional NFT is a specific proportion of a whole NFT, which allows people to take over partial ownership of the same one NFT. Think about it like a pie - a whole pie could be sliced into pieces that multiple people can share. Considering each NFT is unique and cannot have a second copy, fractional NFT make ownership division possible and people can share partial ownership when they can't afford the whole "piece".
Some Examples of Fractionalized NFTs
- Mutant Ape Yacht Club
- Bored Ape Yacht Club
- The Dodge
- CryptoPunks
- Cool Cats
Greater liquidity
Some NFTs are now crazily popular, which comes with a massive rise in price. In other words, these popular NFTs are only accessible to some wealthy investors. Smaller people like you and me will have difficulties to own a whole NFT in some cases. On the other hand, you can divide the ownership of ERC-721 tokens into multiple ERC-20 tokens with Fractional NFTs, to make it more affordable and accessible to people.
Increased visibility for creators
Creators will get more exposure online with fractionalization since they are now in a more liquid market with a wider audience. Creators will also benefit from additional transactions such as resale from individuals.
What Are The Disadvantages of Fractional NFTs?
Reducing the non-fungibility might lead to a decrease in NFTs valuation due to the loss of exclusivity. At the same time, this will happen to the fractionalized tokens itself as well, because each individual transaction of the token could have an impact on the overall value.
In addition, the reconstitution of NFTs is another challenge - that being said, if the original owner of an NFT wants to sell or trade the NFT as one whole digital asset again, the owner will need to buy back all the fractional NFTs. As you may be aware, some of the fractional owners might disagree to sell it back to the original owner, which can cause overhauled transaction times.
