Many people are frightened when they hear the values that some NFTs have, such as CryptoPunks or Bored Ape, but the industry is innovating frequently and owning a part of these NFTs is possible.
People who are just entering the crypto ecosystem and the NFTs industry are often frightened when they see and hear the prices that are handled in some collections of non-fungible tokens such as the recognized CryptoPunks or even the Bored Ape. However, from NFTexpress we tell you how you can own a part of these NFTs thanks to the function of splitting them.
In the NFTs market the word fractionation represents a new concept in the industry and is clearly an innovative proposal that aims to revolutionize the main architecture of non-fungible tokens. Moreover, it undoubtedly breaks new ground in the crypto economy and the investment world.
As we can visualize in the main picture, when an NFT undergoes the splitting process, it is locked into a smart contract. Subsequently, the smart contract divides this ERC – 721 into several parts and transforms them into an ERC – 20 token (the main token standard in the Ethereum network). These fractions represent a partial ownership of the NFT.
This function has been in the market for several months, but it is gaining more and more strength, since many users or small investors want to join the NFTs boom and cannot obtain a single non-fungible token due to the high values they handle.
The objective of this new industry is to democratize access to the NFT space and provide a solution to those users who want to own NFTs from the world’s most recognized collections.
In the future we will see how this new system is coupled to the users, since, fractional NFTs will also generate different values of their parts of the NFT. For example, it is not going to be the same to be the owner of an eye or a mouth part of a CryptoPunks, than to be the owner of the fraction of the hat or accessory worn by the NFT. If the most important parts of the non-fungible token increase in price, it will automatically increase the value of the main NFT.
It will clearly be a new economy in the non-fungible token ecosystem where new collectors, speculators and investors from the crypto world will step in.
The benefits that this new way of buying and selling NFTs will bring are:
Allow multiple investors to co-own a digital asset, real estate or any other digital or physical target that is tokenized as NFT. This will undoubtedly bring more liquidity to the market, as, lack of liquidity would be a hindrance for this to thrive.
Artists and creators of NFTs can monetize their work in more efficient ways and with greater simplicity.
Investors will be able to buy only a fraction of the most expensive non-fungible tokens on the market, breaking through barriers that were previously impossible due to high values.
With fractional NFTs, retail investors will be able to find opportunities to generate profits or preserve the value of the tokens.
Non fungible tokens have arrived to assert themselves in the digital asset market, as we have been reviewing in NFTexpress, every day we see implementations, news and brands that contribute their bit to use them in their businesses. They are accompanied by an attractive ecosystem that uses NFTs in different spaces such as art, play to earn games, DeFi, rewards, music and many, many more industries.NFTs are distinguished by the fact that they possess unique and singular characteristics and their non-fungibility and scarcity have been the main target of collections launched in secondary markets. However, one of the most frequent problems is their exchange in the markets, as many of them maintain an extremely high value.
Fractional NFTs, will allow artists and investors to access greater liquidity, as, the NFT is divided into multiple fractions in the form of ERC – 20 tokens which in turn can be sold or distributed in other DeFi protocols. Consequently, the holder of the NFT by splitting it can secure advantages, including the democratization of investment and the increase in value of their primary NFT by injecting more liquidity into the market.
Another use case beyond those already known as digital art, augmented reality, play to earn games, fantasy sports appears a new use which is “pre-IDO liquidity”.
Fractional NFTs can be leveraged to create a liquidity-rich pre-IDO market in the DeFi (Decentralized Finance) market. Non-fungible tokens can become one such option for use as financial vehicles to address illiquidity in a pre-IPO.
The NFT industry will have to continue innovating and assimilating the idea of NFTs. Fractional non-fungible tokens are still very green and will have to be given their due time to be used, but they will undoubtedly be one more feature of the large ecosystem that is being created around NFTs and will even embrace other industries such as gaming, digital arts, real estate and decentralized finance as a whole.
Written by Rodrigo Catalan (TW: @RodrigoCatalanB) for NFT Express.