In the real estate market, it is a popular approach for individuals to collectively and reasonably purchase property. Owners who purchase fractional ownership receive a deed reflecting their share of the property. Fractionalized NFTs work similarly to fractionalized NFTs.
What are Fractionalized NFTs ?
Some NFTs, such as Beeple's Everydays — The First 5000 Days, which sold for $69.3 million, Human One, which sold for $28.9 million, and Cryptopunk #7523, which sold for $11.75 million, to name a few, have sold for high-end prices.Given that many NFTs are sold for big sums of money, keeping them out of reach for the average person creates a significant barrier for everyone to participate and own a prominent NFT; this has brought the idea of fractionalizing NFTs to the forefront.
NFTs are democratized by breaking them down into smaller bits, making them more accessible to those with limited financial resources. This is advantageous not only to investors, but also to NFTs in general, as it increases market liquidity. It's a win-win situation for everyone.
The goal of NFT fractionalization is to give numerous co-owners access to high-value and distinctive NFT assets that belong to multiple persons at the same time.
NFTs are democratized by breaking them down into smaller bits, making them more accessible to those with limited financial resources. This is advantageous not only to investors, but also to NFTs in general, as it increases market liquidity. It's a win-win situation for everyone.
The goal of NFT fractionalization is to give numerous co-owners access to high-value and distinctive NFT assets that belong to multiple persons at the same time.
The owner of this NFT asset has the ability to produce and distribute a number of tokens that are components of the original NFT.
To fractionalize the purchase on Ethereum, the NFT owner divides the ERC-721 token into multiple ERC-20 tokens, which is the standard for NFTs. As a result, each ERC-20 token represents a portion of the NFT of the asset.
It's also worth noting that when the price of an NFT rises, so does the value of all of its fractions; conversely, if the price of an NFT falls, so does the value of all fractions.
Many investors may be more keen to acquire fractions of an NFT right away, at a reduced price, rather than waiting weeks or months for a single NFT to sell, addressing market liquidity issues.
To fractionalize the purchase on Ethereum, the NFT owner divides the ERC-721 token into multiple ERC-20 tokens, which is the standard for NFTs. As a result, each ERC-20 token represents a portion of the NFT of the asset.
Fractionalized NFTs Have Several Advantages
1. Democratization
Due to the high pricing of some NFTs, smaller investors or investors with limited financial resources may be unable to participate. Fractionalizing a high-cost NFT decreases ownership costs and hurdles, making it more accessible to a larger range of investors.It's also worth noting that when the price of an NFT rises, so does the value of all of its fractions; conversely, if the price of an NFT falls, so does the value of all fractions.
2. Liquidity
Due to their scarcity, only a small number of rich investors have access to NFTs, especially the most valuable ones. Because ERC-20 tokens can be freely sold on secondary marketplaces, fractionalized NFTs solve the liquidity problem that plagues NFTs.Many investors may be more keen to acquire fractions of an NFT right away, at a reduced price, rather than waiting weeks or months for a single NFT to sell, addressing market liquidity issues.
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