What Are Fractional NFTs?
However, over the past year with the increase in popularity of the NFT space, prices of blue-chip NFTs have skyrocketed which in turn, has increased the popular method of fractionalized ownership of NFTs.
By offering fractional ownership of more expensive collections, this levels the playing field, making ownership of these NFTs more financially viable for smaller investors.
One of the most promising marketplaces to do this is The Piece. So, let’s dive into what Fractional NFTs are and how they work.
What Is a Fractional NFT?
To keep it simple, a fractional NFT is just an NFT that’s split into small pieces which then allow several investors to own small portions of that NFT.
Essentially, you could buy a fraction of a Bored Ape NFT for $100 rather than spending several thousand dollars a full Bored Ape NFT would typically cost.
These fractions of NFTs can be bought and sold on a number of fractional NFT marketplaces such as The Piece.
What is an NFT?
NFTs can be minted on several different networks, the most popular being Ethereum and Solana. The NFT boom happened when most collections were minted on the Ethereum network, which is why most popular collections are on this network.
However, as time progressed, and more people started investing in NFTs, high gas fees started moving creators, artists and investors over to minting on the Solana network, as gas fees are incredibly low.
NFTs aren’t just digital art, they can be used as a way to verify and authenticate ownership of a physical asset. Real estate is a great example of this, the process of buying a home can be tedious due to the human element and reliance on paper/physical documentation.
By storing all the necessary information such as title deeds, mortgage information and any other required home buying documents in an NFT, you can significantly reduce the time it takes to verify mortgage applications, authenticate and transfer ownership.
NFTs can also come as in-game items such as armor, weapons, clothes, land and much more.
The most expensive NFT ever sold was digital artist Beeple’s work, Everydays: The First 5000 Days, which sold for $69 million at a Christie’s auction house back in February 2021.
Some of the most popular collections include CryptoPunks, and Bored Ape Yacht Club. Both of which have NFTs sell for millions on marketplaces such as OpenSea and Rarible.
But, this is where fractional art marketplaces such as The Piece come in, it allows smaller investors to own a chunk of those historic and widely popular collections.
What Other Assets Can You Fractionalize?
You can fractionalise pretty much anything, and it’s not a new concept either. They’ve been fractionalizing assets for many years and it’s a great way for people to gain exposure to assets they would’ve been priced out of previously. The list below is just the beginning of what you can fractionalize, Web3 technology just makes the process easier, cheaper and better when verifying ownership.
- Real Estate
- Gold
- Stocks
- Collectible Goods
- Cars
- Boats
- Planes
How Does NFT Fractionalization Work?
If we look at NFTs minted on the Ethereum network as an example. An NFT uses Ethereum’s ERC-721 standard, which is just a type of token.
Before it can be fractionalized, it’s set into a smart contract, which is a type of advanced code stored on the blockchain that’ll execute when predetermined conditions are met.
So, this smart contract splits the ERC-721 token into small fractions, which are now called ERC-20 or ERC-1155 tokens. The owner of the NFT can set the price, the amount of tokens, metadata and other properties, and each fraction represents a piece of ownership in that larger NFT.
Like we mentioned earlier, this can be done on several other networks such as Solana, Polygon, and Cardano as they all support smart contracts and NFTs.
Where Can I Buy A Fractional NFT?
Thankfully, there are quite a few options when looking for a fractional art marketplace. Larger cryptocurrency exchanges have started moving into building their own NFT marketplaces and slowly starting to implement fractional ownership features.
- Otis
- Unicly
- Fractional.art
- The Piece