What Are Fractional NFTs?

How Does NFT Fractionalization Work?

To fractionalise an NFT it must be locked into a smart contract. The smart contract splits the NFT token into multiple fragments and includes preset conditions. Including; metadata, attributes, base price, number of tokens to be produced, and other information.

Typically, fractional NFTs are listed for sale for a fixed price, or investors are already lined up before the contract is created.

A simple example to help you understand how this works is to imagine a famous traditional painting (in the real world) that is worth a million dollars.

There are a limited number of buyers that can afford to spend a million dollars on an art painting.

A simple smart contract on a blockchain can split this paintings ownership into five parts. Now, it is possible for five investors to share the ownership of the art piece at $200,000 each.

The reason this is done is because there are far more investors that can afford $200,000 than there are investors who have a million dollars.

The difference between a traditional NFT and a fractional one is a traditional NFT consists of one token, and a fractional NFT has been split into multiple tokens.

Interestingly, if an investor buys up the other fractional tokens over time and ends up controlling the entire token supply of the NFT, they can, if they so wish, convert the fractional NFT back into a whole one. Fractional NFTs can be converted back into a whole NFT.

What Are The Benefits Of Fractional NFTs?

By now, you will understand the main benefits of fractional NFTs. It allows the little guy a chance to own something only the big guys can afford. This means the little guy can gain exposure to the upside of a top-tier NFT that was previously out of reach.

Fractionalisation also brings more liquidity into top tier NFTs as more investors can get involved.

There is a possibility that an expensive NFT collection increases in value as fractionalisation increases demand for top-tier NFTs.

Simply put, fractional NFTs reduce the barrier to entry and bring more investors into the NFT space. It allows a group of investors to own assets across a spectrum of NFT niches.

Sports enthusiasts can club together to own a rare digital NFT collectible from the official NBA or NFL collection.

The most exciting part of fractional NFT ownership has yet to come!

Real-world fractional ownership utilising NFT and smart contract technology.

Because an NFT can represent literally anything, the possibilities are endless.

A real estate commercial building (shopping mall) ownership can now be wrapped in an NFT and fractionalized.

We are already seeing the legal framework for NFT deed ownership being worked on in El Salvador’s Bitcoin city!

Polkacity metaverse is looking at using NFTs as a form of fundraising to start a real-world chain of ice cream shops. Hundreds of ice cream NFTs will be created (1000 NFTs, for example) and sold to multiple investors. Each owner of an NFT will receive a profit share.

Where Can You Purchase A Fractional NFT?

We have created an NFT resource directory and included a list of platforms that allow fractional NFT minting and purchasing. Visit our NFT fractional directory now!