Non-fungible tokens (NFTs) are one-of-a-kind digital assets that exist on a blockchain.
What Is a Fractional NFT?
These fractional tokens represent a percentage of ownership for each holder of the NFT.
The tokens can be exchanged or traded on NFT-supported exchanges.
How Does NFT Fractionalization Work?
The majority of NFTs currently exist on the Ethereum blockchain, usingEthereum’s ERC-721 standard.
Each ERC-20 token represents a partial stake in the ownership of the whole NFT.
Imagine an iconic painting that has been made into an NFT with a set price of $100 million.
Only a few investors would be able to afford it.
Using a smart contract, the same NFT can be fractionalized into 20,000 ERC-20 tokens.
Fractionalized NFTs are not limited to the Ethereum blockchain alone.
Fractionalization can be done on any blockchain that supports NFTs and smart contracts.
These networks have the added benefit of lower gas fees and faster transaction speed.
What’s the Difference Between Fractional NFTs and Traditional NFTs?
Fractionalized NFTs provide investors with ownership of a fraction of a whole NFT.
A buyout option is typically included in the smart contract that fractionalizes an NFT.
Buyouts occur via a buyback auction.
This buyback auction runs for a fixed period, allowing other fractionalized NFT holders to make a decision.
F-NFT holders will have to outbid the potential buyer to hold on to their fractions.
How to Access a Fractional NFT?
It also provides faster inclusion and active participation in the booming NFT industry.
Always conduct your own due diligence and consult a licensed financial adviser for investment advice.
