What are Fractionalized Art NFTs (F-NFTs) ?

The concept of fractional asset ownership isn't new. The notion has been effectively applied to a variety of physical assets, including stock, designer items, and high-end assets like as yachts and private aircraft, in industries ranging from real estate to fashion.

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 Art 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. 

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.

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.

3. Collateral

Fractionalized NFTs can thus be used as collateral for a loan after the issue of liquidity is resolved. Fractionalized NFTs also allow for new ways to generate money, such as staking and yield farming.

Fractionalized NFTs: Potential Issues

Fractionalized NFTs have several advantages, but they can also be problematic. The legality of fractionalized NFTs is a grey area in some countries, such as the United States, therefore proceed with caution and do your study before investing in fractionalized NFTs or establishing your own.

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