Introduction
NFTs, also known as non-fungible tokens, are unique digital assets built on a blockchain like Ethereum. You can turn anything you like into an NFT, with a few examples being art, in-game items, physical items, and domain names.
Some of the most popular NFTs like CryptoPunks are selling for millions of dollars. And for most people, this makes them inaccessible to own.
Credit: Larvalabs
This is what fractionalized NFTs attempt to solve.
What are fractionalized NFTs?
Fractionalized NFTs are NFTs split into smaller pieces by their original owner. They can be split into as little as 2 pieces or even billions!
This makes it possible for anyone to partially own iconic NFTs like CryptoPunks.
When an NFT gets fractionalized, the pieces get locked into a smart contract. These pieces then get represented as ERC-20 tokens for anyone to buy or sell.
But this isn’t the only benefit of fractionalizing NFTs. Other benefits are:
- Greater price discovery: NFTs trade in illiquid markets as there’s a limited amount available. But by fractionalizing NFTs into ERC-20 tokens, it creates greater liquidity for them. This opens the markets for wider participation, letting traders discover the fair price.
- Blends NFTs with DeFi: If an NFT can be fractionalized in a liquid market, then they can also be used as collateral for a loan.
One of the early successes of fractionalization was that of the ‘Feisty Doge’ NFT. This is an image of the famous Shiba Inu that’s the face of the Doge meme and Dogecoin. Initially, the NFT was bought in June 2021 for 13 ETH or around $35,000 at the time. Two months later, the NFT was fractionalized, skyrocketing in value to over $80m in just a couple of days.
If you want to learn more about this, then you should watch The Defiant’s video on this:
What NFTs are being fractionalized?
Any NFT can be functionalized on the Fractional website.
Here are a few examples:
- Cryptopunks: 10,000 unique 8-bit characters with randomly generated features
- Meebits: The 3D avatar successor to Cryptopunks designed for the metaverse
- Fidenzas: 999 unique generative art pieces
Credit: Fractional
And if you own an NFT and want to fractionalize it, then you should read Bankless’s guide.
How to own fractionalized NFTs
If you’ve found an NFT that you want to own a fraction in, then the process of buying tokens for it is easy. Just follow these steps:
- Connect your wallet (e.g. Argent) to the Fractional website
- Click on the NFT you want to partially own
- Choose the number of tokens you want and pay using Fractional's exchange. You can pay in ETH or most ERC-20 tokens
You're done. You now own a fraction of that NFT.
Further resources
Fractional | AMA with Andy8052
An Overview of the NFT Fractionalization Landscape | by Bridget Harris | Sep, 2021
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