A fractional NFT – aka, fractionalized NFTs or F-NFT – might just be the answer to your crypto finances! The answer to your non-fungible token dreams! There are many different types of NFTs out there, however, this does not exactly count as a type. But, it is more of an NFT concept instead!
The non-fungible token scene has changed, developed, and adapted in the past, especially the last year. And, despite the market crash, it still powered on with new collections and technologies. However, the truth remains that the main edge for NFTs has to be exclusive ownership of the artwork. But, exclusive ownership does not come cheap. And so, the most innovative minds of the industry have found a way around that:
A fractional NFT.
Obviously, owning a piece of the cake is not as fun as owning an ENTIRE cake to yourself. But, on the other hand, a piece of cake is better than no cake at all. Basically, what we’re trying to say is that fractionalized NFT or not, it’s all good. We’ll explain!
THE NFT HUB
Before we begin with the concept of a fractional NFT, we have to talk about the NFT hub first. So, since you’re looking into fractionalized NFTs, this could mean one of two things:
- Your crypto wallet is a bit on the thin side – aka, you’re broke
- You want to invest in a crazy expensive NFT
Either way, both options require that you become more informed on non-fungible tokens – especially if you’re a beginner. And, luckily for you, we actually have the BEST hub for NFT knowledge. And, it’s FREE for all to join. All you have to do is click on the button below to check it out!
WHAT IS A FRACTIONAL NFT?
A fractional NFT is a new concept of NFTs that use smart contracts to fractionalize the token into parts. The owner or organization predetermines the number of parts and also sets a minimum price per part. So, in other words, the cost of asset ownership for a fractional NFT becomes fractionalized over a range of users.
This way, a group of investors can all collectively own a piece of a larger NFT!
Fractionalizing NFTs is the next step towards a very groundbreaking type of virtual technology in the metaverse. The entire concept of a fractional NFT works on dividing ownership of an NFT into smaller fractions – parts of a whole. Therefore, this makes it possible for several people to own a single NFT. that’s something you can NOT do with cryptocurrency. So, this is definitely a way to push the boundaries of non-fungible tokens to a wider audience.
How do Fractional NFTs Work?
Since a fractional NFT refers to parts of a whole non-fungible token, it is proportionally shared. So, the ownership of the NFT is not exclusive to one user. So, here’s how it works!
When you fractionalize NFTs, the original NFT gets locked up in a vault. Then, someone issues a limited supply of fungible tokens that REPRESENT ownership over that fractional NFT. So, you can buy these fungible tokens on fractional NFT platforms or secondary NFT marketplaces. Some platforms for fractionalized NFTs include:
Here’s a breakdown of the process leading to a fractional NFT in a nutshell:
A user mints an NFT with the ERC-721 standard ➜ locks the NFT in a vault ➜ fractionalizes the ERC-721 NFT into programmed ERC-20 tokens ➜ sends fractional NFT to fractional owner
Risk of Fractionalized NFTs
So, there are a lot of projects out there that take the fractional NFT approach. You can use fractionalized NFTs to join projects at a lesser cost. Buying NFTs can be very expensive! Therefore, buying part of the NFT is a better and more feasible option. Some projects fractionalized projects include two of the most popular collections: CryptoPunks and Bored Ape Yacht Club.
But, of course, you may be wondering about the risks involved in F-NFTs. When it comes to F-NFTs, their purpose is to increase inclusion in the industry and allow more people to participate. However, when you fractionalize ownership, there can always be legal issues like contracts, intellectual property, and more.
Make sure you keep that all in mind before you go for a fractional NFT!