Fraction tokens offer up to 69.5% arbitrage potential for traders and collectors

2023-02-01, 02:02

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On the 15th of January, Gate.io launched the 4th installment of its Fraction Token, [ITRUMP](https://www.gate.io/trade/ITRUMP_USDT/?ch=GM_blog_itrump_20230201&utm_campaign=TR_eDSLzLQy&utm_content=&utm_medium=CPM&utm_source=CH_sApqy83F&utm_term= "ITRUMP") - the First Digital Trading Card by President Trump. At the time of writing, the token offers a rough 69.5% arbitrage opportunity for users, with ITRUMP trading at💲0.0443 on the exchange, a significantly cheaper price compared to the equivalent floor price on OpenSea, which is 💲0.0751. 
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The NFT Fraction Token initiative is a creative solution proposed by Gate.io to solve the industry challenges around low liquidity and high costs for top-tier NFTs. So far, there have been several fractional tokens, each relating to a different "blue-chip" collection, the first being  IPUNKS with a USDT pairing that people can buy to hold fractional ownership of the original CryptoPunk NFT by Larva Labs in 2017. The issuance ratio is 1:10,000 or 10,000 ERC20 tokens for 1 x original NFT, with each ERC20 token representing 1/10,000 ownership of the original NFT. Following IPUNKs and mirroring the same structure was IBAYC for Bored Ape Yacht Club and IAZUKI for Azuki NFTs.

As mentioned, $ITRUMP currently offers traders and investors a unique arbitrage opportunity considering the prices for ITRUMP tokens are significantly lower than the equivalent NFT floor price on marketplaces like OpenSea. On Gate.io, the [ITRUMP tokens](https://www.gate.io/trade/ITRUMP_USDT/?ch=GM_blog_itrump_20230201&utm_campaign=TR_eDSLzLQy&utm_content=&utm_medium=CPM&utm_source=CH_sApqy83F&utm_term= "ITRUMP tokens") are trading around $0.0443 compared to the listed price on OpenSea, which would be $0.0751 comparatively - offering a profit potential of around 69.5%. While several factors can influence these price disparities, the mismatch between the token and NFT is due to the price of the ITRUMP tokens falling while the NFT itself rising higher. There is also a similar 10% arbitrage opportunity for IAZUKI tokens and 7% for IPUNKS. 
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Users can take advantage of this opportunity through the redemption feature available through Gate.io's AMM. Expected to launch in early February, if a user holds 10,000 or more fraction tokens related to an NFT like ITRUMP, they can use the Gate NFT market to redeem the tokens for an original NFT that's part of the collection.

Such a feature also allows for added incentives. For example, users can buy listed fractional ERC20 tokens from the market, swap the 10,000 tokens for the original NFT through Gate's unique AMM program, and then resell the original NFT on secondary marketplaces like OpenSea. In this case, users could buy 10,000 ITRUMP tokens at a lower price, to later redeem for an original NFT and resell on OpenSea, capturing the approximate 69.5% difference and profit in price.

Furthermore, based on the original functionality of Gate's AMM, the NFT AMM will be able to support Gate.io's full range of currencies and will also support the direct exchange of NFT fraction tokens to NFT fragments, thus enabling users to exchange original NFT assets freely.

Along with helping provide greater access to more expensive NFTs and better price discovery, users also benefit from having the fractional tokens listed on gate.io, as it helps strengthen and streamline liquidity. Furthermore, unlike the more specialised and restrictive NFT vaults on platforms such as NFTX or the restricted methods of buying NFTs through ETH or Solana through marketplaces like OpenSea, Gate.io fractional tokens are ERC-20 compliant. As such, when Gate.io purchases an NFT and issues and lists 10,000 corresponding tokens, any platform user can buy or sell the tokens for USDT.

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