fNFT is an NFT split into small fractions for sale separately. It works in about the same way as equity ownership of real estate.
How does fNFT work? On the example of NFT on Ethereum
The owner of the full NFT decides how many ERC-20 tokens will be issued, sets the minimum price and other parameters.
To counterfeit NFT, the smart contract divides the ERC 721 token standard into smaller fractions in the form of ERC-20 tokens.
Each ERC-20 token = partial ownership of the NFT source. The token can be purchased by anyone through the Fractional.art platform.
Is it possible to reverse the fractionalization process?
fNFTs usually have the option of repurchase through auction. This allows any fNFT owner or third party to buy all the other fractions, acquiring ownership of the original, entire NFT.
The advantages of fNFT
- This is much more affordable than a full NFT.
- Liquidity may be higher – precisely because the cost is usually lower.
- It is easier to estimate the real cost of a full NFT. To do this, you need to follow the interest rates of investors on different factions.
- Some marketplaces pay a curator’s fee for the sale of fractional NFTs.
Failures of fNFT
- Unwanted fNFT ransom. As a result, you may lose some of your income.
- Confusion with regulation. Since fNFTs offer collective ownership of digital assets, the SEC may treat them as interchangeable securities.
- The security of fNFT depends on the smart contract to which it is bound.
In a nutshell, if you can’t afford a very high-value NFT, then fractionalized NFTs (fNFTs) may be the route to take. gifts divide one NFT into many small, affordable fractions, as a result of which partial ownership is made available, somewhat akin to owning shares in real estate. This will democratize access to valuable NFTs, increase liquidity, and make it much easier to assess total market value of an NFT. But beware: there are unwanted takeout risks and regulatory challenges. The success and security of fNFTs depend a lot on how robust the underlying smart contracts are.
