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Surge in NFT Prices Pushes Along Fractionalization

Fractionalization of NFT

  • Surge in interest in digital art and non-fungible tokens is promoting the rise of fractionalization of holding NFTs
  • Digital creations built atop the blockchain lend themselves well to fractionalization more so than physical creations like oil paintings

Can’t afford a US$69.3 million Beeple? How about owning a fraction of one?

With non-fungible token (“NFT”) and digital art having taken the cryptosphere by storm in 2021 and with pieces such as Beeple’s “Everydays: The First 5000 Days” fetching a record-breaking US$69.3 million, not everyone has pockets deep enough to bid on the burgeoning world of cryptocurrency art.

But that’s what cryptocurrencies were meant to empower anyway wasn’t it? Decentralization and fractional ownership.

Emerging NFT projects are committing themselves to lowering barriers to entry for artists, creators and photographers — making it easier for them to mint their own NFTs and also enabling access to a wider audience by making it possible for buyers to share ownership of an NFT.

Whereas it’s probably not possible to share the ownership of a Monet – would you hang it somewhere on odd days and then hang it somewhere else on even ones? – it’s entirely possible to fractionalize ownership for NFTs, it’s what the blockchain was built for.

Owning just a portion of a piece of digital art is an approach becoming more appealing to collectors, as a way to offer shared ownership.

A new decentralized project called Fractional will allow NFT owners to mint tokenized fractional ownership of their pieces facilitating the buying and selling of percentages of the full NFT. Additionally, fractionalizing allows for the NFT holder to realize some liquidity from their asset without selling the entire piece.

The platform will also enable users to fractionalize entire collections of NFTs and release them under one shared ownership token allowing those with less knowledge of the scene to invest in digital art compiled by more renowned collectors.

An index NFT if you will. Another project called DAOfi has launched a decentralized exchange forked from Uniswap for the trading of fractionalized NFTs.

Designed to solve the liquidity problem in secondary markets for NFTs whereby NFT owners have to wait for someone to bid or buy at an asking price for a single piece, DAOfi borrows some of the concepts from decentralized finance, such as automatic market making and liquidity pools to ensure that a “live” market for NFTs exist.

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