Fractional Nfts：A Way Of Making High-Valued Nft Ownership More Accessible

NFTs- Non-Fungible Tokens are gradually becoming the limelight of the digital world. NFT is a general term used to denote rare digital assets representing every major aspect of the economy. NFTs are available in digital fashion, games, music, videos, and arts. Each form of collectible can bear a great monetary value. Some of these NFTs are very expensive, hence the need for NFT Fractionalization. A notable example is 'First 5000 days', an NFT collectible by Beeple worth $69 million. Individual ownership of this piece is impossible for most people, but a joint investment makes it possible to invest in this NFT.

ABOUT FRACTIONAL NFTs

NFTs have taken a massive pump in generating income for individuals, and it has proven to be a worthy form of investment in the digital market. Like buying shares of large investments from banks and private companies, fractional NFTs are smaller shares of NFT collectibles that have been made accessible to small investors. These expensive NFTs can be bought in small fractions by individuals who cannot buy the NFT as a whole.

In the recent past, only large investors could own these 'expensive' NFTs. However, to make it easy for small investors to benefit from these collectibles, NFTs have been segregated into smaller, affordable units. This division allows many investors to claim joint ownership of a particular NFT.

The process of fractional NFT is activated by a smart contract that binds all investors legally with the original owner. These smart contracts entail a certain percentage for every investor, determined by the amount invested. The higher the amount invested, the higher the fractional shares an investor is entitled to when profits or losses are shared on the NFT as a whole.

ACCESSIBILITY OF NFT OWNERSHIP

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NFTs are rare collectibles, making it expensive for a single investor to claim ownership if they lack the required liquidity. Single ownership of a highly valued NFT in the digital market is sometimes an arduous task that requires promotions and marketing on digital platforms. These challenges make fractional NFTs a practical solution in the NFT market.

Fractional NFTs are sold at a fixed price for a particular collectible percentage, allowing various investors to claim ownershipof an NFT collectible.

There is no need for large capital to claim an NFT ownership as this can be achieved easily by buying a fractional quota which represents a small market value of the collectible. With this advantage, an investor can own multiple NFTs instead of one single NFT. This diversification of resources also avoids the risk associated with investing in only one NFT.

For as low as $10, anyone can own an NFT with other investors. For instance, a private investor can mint a single NFT and divide it into several shares at a fixed price. These fractions are sold on the secondary market without changing the actual market worth of the NFT.

HOW FRACTIONAL NFTs WORK

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The primary goal of every NFT investor is to make profits off every collectible. Fractionalization of NFTs has allowed investors to have joint ownership of different NFTs and earn profits together. For every NFT divided into several fractions, each joint owner possesses a certain percentage of the NFT and incurs a corresponding fraction of gains and losses associated with the NFT. Every investor of fractional NFTs bears the same rights and responsibilities.

Smart contracts are used to enable every fractional NFT process. The standard address of every NFT collectible is- ERC-721, which is used during every transaction. Once an NFT is minted, it is encoded in a smart contract that automatically controls every action performed on it as soon as its terms and conditions are met.

The smart contract further divides the ERC-721 NFT into a series of fractions coded as ERC-20 tokens and follows every requirement requested by the original owner. These fractions are introduced to the public at a fixed price for a particular duration. The original owner dictates the number of fractions, price, and metadata regarding the collectible.

Fractional NFTs are enabled in the Ethereum blockchain- a general decentralized platform for exchange. They activate the creation and transfer of NFTs. Also, fractional NFTs are available on platforms that support smart contracts like- Solana, Cardano, and Polygon.

APPLICATION OF FRACTIONAL NFTs

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The concept of fractional NFTs has aided investments in some major parts of NFT as a whole, like;

Fractional NFT in Metaverse

With more investors having a keen interest in Metaverse daily, Fractional NFTs have paved the way for several investors to combine investment towards purchasing digital assets in the Metaverse. Companies like Decentraland have extended their resources to investors, making it possible for multiple minds to own a collectible.

Fractional NFT and Game

sIn the gaming industry, metaverse P2E games are now available for investors to buy, own and sell for profits. The P2E game has in-game assets and collections which users can purchase and later resell to others. These game assets play a vital role in multiplayer games and P2E, making them worthy of investment. A notable example is the Axie infinity game that has fractionalized their super-rare axie, a rare NFT game asset.

Fractional NFT and Real Estate

Real estate properties minted to NFTs come at a great cost, combined with smart contracts. However, with fractional NFTs in place, these properties have been divided into a series of fractions. Investors purchase certain fractions and are all bonded by smart contracts. This action proves their ownership and makes it possible for real estate to get enough investment in the NFT market.

FRACTIONAL NFTs FOR INVESTMENT

There is no limit to NFT assets that can be fractionalized. In 2021, Addidas partnered with the bored ape yacht club and disclosed their move into the NFT community. Their major interest was solely in fashion NFTs which they mostly use to promote their wearables and other accessories. Recent statistic by OpenSea has shown a great pump in NFT fashion, games, metaverse, and land assets.

There is a long list of NFT assets that have been fractionalized. However, some assets have been shortlisted based on their current market value and pump. Here are some investment-worthy fractional NFTs;

MUTANT CATS NFTs

The mutant cats' collectibles total about 9,000 in varieties of designs suitable for mutant apes are available for sale on any marketplace. According to Unicly, each owner earns even ownership rights and benefits as others; shares bought can be re-sold for tokens.

DOGECOIN MEME TOKEN

Dogecoin came into the limelight in 2013 and has now taken an interest in the NFT community with its doge meme token. This token has been divided into about 17 billion collectibles; the first sale of 20% of the collectibles to about 1,700 investors generated about $45 million on the MISO marketplace. The remaining collectibles are available on other marketplaces like Opensea and Sushiswap. According to their official report, Doge meme tokens have facilitated a series of exchanges off and on the NFT marketplace.

CRYPTOPUNKS NFTs

This particular collection has up to 250million fractions on the Unicly marketplace. Early investors in these collectibles bought each fraction at a $0.05 rate, worth $0.07, although at a fluctuating price.

GRIMES NFT

If you are looking for fractionalized NFT arts to invest in, Grimes NFT arts are your best choice. The artist Grimes created these arts at the early stage of the NFT community. Grimes created two art pieces, labeled- Newborn 1& 3, fractionalized on different marketplaces to worth over $6 million. Shares are now sold at affordable rates on common=on marketplaces.

DIFFERENCES BETWEEN NFTs AND FRACTIONAL NFTs

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An essential difference between NFT and Fractional NFT is that- fractional NFT represents a certain fraction of a whole NFT. Below are some notable differences between an entire NFT and a fractional NFT;

• NFT fractionalization can be easily reversed where the fractionalized NFT is remade into a whole NFT. That is, a normal NFT just like it was before fractionalization.
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• The smart contract binds a fractional NFT as an option that allows a single investor to possess the full NFT. However, the value of the whole NFT is still expensive and not easily affordable by a single investor.

These major differences clearly distinguish the entire process between a whole NFT and a fractional NFT.

MERITS OF FRACTIONAL NFTs

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It is safe to say that fractional NFTs are a key to financial freedom in the NFT market. They are very important as they serve the following roles in the economy;

• Allows More Investors: The idea of fractional NFTs makes it possible for several investors to own a particular NFT.These investors share in the rise and fall of NFT value. With this concept, an expensive NFT can be divided into several fractions, which allows a larger number of investors.
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• Increase In Value: Due to many investors contributing to a single NFT, there is a high chance for an increase in the market value of the collectible. Each investor contributes to the marketing and promotion of the NFT, which drives the likelihood of other people investing in the NFT. This idea raises the market value of the NFT and promises to return a huge profit for all investors.
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• Increases Liquidity: NFTs are rare, expensive collections in different economic niches. The introduction of fractional NFTs has made it possible for other investors to buy fractions of a whole NFT, adding more balance and liquidity to the economy.

Fractional NFTs enable investors to stake and earn passively with equal rights on a single NFT.

WHERE TO BUY FRACTIONAL NFTs

The buying of fractional NFTs is a process that must be done carefully to avoid falling prey to fraud. The best way to invest in fractional NFT is by buying from a trusted platform. They are;

• Fractional art: This platform supports buying, selling, and minting of fractional NFTs. NFT private owners can create and personalize NFT fractions using this platform.
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• Unicly- This platform allows investors to convert their NFT collectible into an exchangeable asset with high liquidity. NFT tokens and collections can be created on the Unicly site. Otis- This is the right choice when going for NFT investments regarding arts and other collectibles.
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• Otis platform enables individuals to manage their NFT collectibles and trade them in for profit.These platforms enable smart contracts and guarantee the privacy and security needed to keep an account safe from hacks and phishing.

SUMMARY

The population of investors in the NFT market increases daily, with more rare and unique collections being minted and introduced. As blockchain technology expands, fractional NFTs seem like a preferable solution to NFT liquidity, increased market size, and a high wave of monetizing the digital market. Look out for trending profitable fractional NFTs and invest now.



Author: Gate.io Observer: M. Olatunji
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