If you're new to the space or heard of NFTs recently, you've might have considered investing or simply collecting some of them. Back in 2021, during the “peak" of NFTs, you'd have to spend thousands of dollars to get your hands on the most popular NFTs, such as Bored Ape Yacht Club. This was a pain point for people that could not afford to buy an entire (expensive) NFT.
This isn't a problem unique to the NFT market. In the capital and securities market, for instance, stocks have a minimum price required for purchase, which a lot of new investors can't afford. There are some alternatives that double as solutions to this problem such as mutual and money market funds which allow these investors to get into the space.
This problem is not even unique to digital assets. Physical artworks (particularly those credited to the most popular painters of their time) are extremely expensive and are almost impossible to purchase for most people. However, an artful solution is to divide the artworks in principle (not physically cutting them up) and to sell these individual pieces to others. This is referred to as fractional ownership.
This brings us to what is called NFT Fractionalization. NFT fractionalization allows multiple investors to purchase and own a share of an NFT, making it more accessible to a wider audience. For example, a high-value NFT worth $100,000 can be fractionalized into 10,000 shares, each worth $10. Investors can then purchase as many shares as they like, allowing them to own a portion of the NFT and benefit from its appreciation and utility.
An example of this is the NFT of the Doge meme being divided into 16,969,696,969 pieces, with each token sold as $DOG. You can see more details here.
The site right there, fractional.art, is arguably one of the most popular platforms where a collector can purchase fractional NFTs. Other choices include LIQNFT (or Candy Shop) and NFTfy. You can even purchase Bored Ape Yacht Club fractionalized apes, though they are still considerably expensive.
There are several benefits to NFT fractionalization. Like in the previous examples, it allows smaller investors to participate in the NFT market, which was previously only accessible to the high net worth investors. A positive outcome of this is smaller investors won't be burdened with the high risk of owning a whole, expensive NFT.
Additionally, it provides liquidity to NFT owners who may want to sell their assets but don't want to sell the whole NFT just yet. Fractionalization allows them to sell a portion of their NFT, providing them with cash flow while still retaining ownership of their asset. This is good for owners who collect NFTs for reasons other than taking profit (i.e. digital or social identity).
Another benefit of fractionalization is that it provides a new revenue stream for our NFT creators. Instead of selling their NFTs outright, they can fractionalize them and earn a portion of the profits every single time one of their shares is sold. This incentivizes creators to create high-quality NFTs that will appreciate in value over time, good for the sustainability of the creators AND the space.
NFT fractionalization is a beneficial concept for all parties involved: investors can put their eggs in more baskets and have more liquid assets, creators get a new revenue stream, and high-value NFTs generally become more accessible to the general public.
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