Fractional NFTs are Changing The NFT Space. Here’s Why!
In today’s world, non-fungible tokens (NFTs) are almost as famous as cryptocurrencies! And this is understandable as they have been making waves online since their debut. NFT owners can now easily monetise their in-game assets without transferring them through centralised Cryptocurrency Exchange platforms that take a hefty commission fee for the transaction. It allows individuals to expand their horizons beyond well-known and already existing apps or games and helps them turn hobbies into profitable business ventures.
Let’s explore what Fractionalized NFTs are, how exactly they work, their advantages, and more!
What are The Fractional NFTs?
A fractional NFT is a full non-fungible token that you can divide into multiple pieces, allowing various people to claim limited ownership of the entire thing. Think of it as a cake: cutting your cake causes all other cakes to become whole cakes again – but if you take any piece of it and give it to someone else, the rest becomes an incomplete cake. Furthermore, because non-fungible tokens are so unique — there’s no way to duplicate them – fractional NFTs will push boundaries by making it possible for each person who receives a piece of your NFT to trade away that “piece” as though they owned the whole thing in nft space!
Why Does The World Need Fractionalised NFTs?
Currently, the hype around NFTs has been steadily increasing, and this has resulted in a demand for them. As time goes on, the prices of NFTs keep rising as supply falls short. Because of this, many people may not be able to purchase them. With fractionalisation, investors with limited funds can invest in owning a part of the NFT but only if they have excess and available ETH in their eWallet. It adds liquidity and, more importantly, accessibility for investors who can’t afford to empty their pockets immediately or are just starting up.
How Does NFT Fractionalisation Work?
The standard ERC-721 token is a very common standard in making non-fungible tokens (or NFT) in a blockchain. However, the ERC-1155 standard is also gaining popularity due to its utility in trading cards and “crypto assets.” An ERC20 token, such as an altcoin or other fungible token, cannot be divided into unique units, so they are not technically NFTs. An ERC-20 standard can be linked to an indivisible NFT by having the smart contract generate multiple fungible tokens that are then interchangeable. This allows anyone who holds any of those fungible tokens to be a part-owner of linked NFTs.
Fractionalized non-fungible tokens (F-NFTs) significantly change a project’s NFTs. The ownership history will be divided among the masses, resulting in varying utility values for each token. This also results in high liquidity since you’ll have an asset broken into pieces of various sizes instead of one single item sitting around. How valuable the F-NFT will depend on the other three fundamental attributes like its rarity.
In technical terms, the original NFT was minted as an indivisible ether token whose supply could not be divided. However, the fractionalised version of this NFT — made disbursal in the form of ERC20 tokens — are each divisible and exchangeable for one another since all 17 billion tokens are a part of one indivisible and fungible network.
What is The Current Size Of The Fractional NFT Market?
The number of non-fungible tokens (or F-NFTs) on the market has grown rapidly. As of April 26, 2022, the total value of NFTs has increased significantly, but that’s not all! This is a big deal because F-NFTs have been around since late 2016, and they are a new type of technology that enables very different uses than what we’ve seen on the platform thus far. Thankfully you don’t have to know anything about blockchain technology or be a tech guru to take advantage of these tokens, but it does help to understand how these NFTs function, so let’s dive into an example.
An NFT that’s an image of a confused dog named Kabosu was originally sold for 4 million dollars. It was fractionalised, and its token offers access to a secure mining prison where its owner once needed to hide from an angry wolf. A few weeks later, the owner decided that people shouldn’t be imprisoned for stealing 4m dollars in crypto and made some changes to the smart contract. As you can probably imagine, he wants nothing more than for the world to have this token despite the fact that it was his mistake in the first place.
Can You Reverse Fractional NFTs?
Fractionalized Non-Fungible Tokens can be turned into whole Non-Fungible Tokens depending on the rules set out in their smart contract. This typically means that a network of tokens needs to be able to purchase the fractions of one token and fund it back up during a buyout option in their smart contract.
Fractional Non-Fungible Tokens (FRNFTs) are a new, innovative digital asset invented by Albe Lauren. As their name suggests, these unique, supplemental assets operate as fractions of NFTs – in other words, FRNFTs share a link to one or more ERC-20 tokens by being linked to one of that token’s NFTs. For example, if you were trying to collect 10 ‘wise owl holo winter’ NFTs from the CryptoCarz trading card game, buy 5 FRWON (fractional wisdom owls of winter objects) instead of contributing the same fraction toward your goal of owning those 10 NFT Wise Owl Holo Winters. With enough FRWONers playing CryptoCarz, you’ll be able to play against all sorts of owners – whether they hold 2 or 200 or even 2000 individual Wise Owl Holo Winter tokens.
How Fractional NFT Holders Can Get Benefits?
Fractional NFT allows people to own a fraction of a large and more expensive whole. Some platforms, including the New York-based TokenSoft, let parties buy Fractions on a platform or protocol similar to what it takes to purchase stocks on an exchange. Others offer to stake – locking up your Fractions by using a specific platform or protocol so you can receive more rewards in the future for doing so, as any cryptocurrency token does. Projects from different companies may include additional hassle benefits such as the exclusive access to groups within social media or governance rights paid pro-rata to how many fractions an owner owns for that given project.
Non-fungible tokens may be the next thing you’ll want to watch out for as it continues to make their mark on the NFT space. Suppose a particular non-fungible token (NFT) has caught your fancy, but you don’t want to take out that big wad of fiat because of the high price. In that case, you can explore trending nfts! Remember what they say about walking in another man’s shoes – do your homework before investing in digital assets!