NFT Chia Part: How to Open the Door to Digital Assets for Everyone

From the Mona Lisa paintings to rare CryptoPunks, owning high-value artworks or digital assets has long been an elusive dream. But a new trend is transforming the face of the NFT world: Fractional NFT (FNFT) – tradable tokens representing partial ownership of digital collectibles or assets. Instead of needing millions of dollars to own the entire piece, now anyone can own a small fraction for just a few dollars or even cents. This concept is rapidly becoming a hot topic in the crypto community, especially in early 2024 as the NFT market recovers.

What Is a Fractional NFT? Digital Asset Dividing Technology

Simply put, Fractional NFTs are indivisible tokens divided into millions of smaller parts. This process is automated through smart contracts on the blockchain. The original NFT owner can decide how many parts to split it into, set prices for each, and establish other related terms.

The fundamental difference is that traditional NFTs (built on the ERC-721 standard) are unique assets that cannot be divided. When split into FNFTs, these parts become interchangeable tokens (generally following the ERC-20 standard), easily tradable on NFT marketplaces just like regular tokens.

The price of each part is only a small fraction of the original NFT, making it more accessible to most small investors and significantly increasing liquidity in the market.

How It Works: The Two-Step Splitting Process

A typical example is a process designed to unlock liquidity for NFTs through fragmentation. This process uses three successive token standards (ERC721 → ERC1155 → ERC20) to convert a single NFT into up to 1 million token parts.

Platforms supporting this process offer innovative features such as:

• Fractions Vault: Allows creating a shared liquidity pool for NFT parts
• Decentralized Fundraising: Enables community collaboration to co-own top NFTs
• Meta-Swap: Facilitates swapping multiple standard tokens, enhancing traditional exchange models

A practical application is hiBAYC – a token representing 1/1,000,000 ownership of a Bored Ape Yacht Club (BAYC) NFT. Through this mechanism, ordinary users can own a fraction of a high-value NFT, often beyond their affordability.

Current Market Size of Fractional NFTs

NFT fragmentation has grown into a multi-million dollar industry, with most growth occurring in 2021. According to data from February 2024:

• Total NFT Market Capitalization: $50.51 billion
• Fractional NFT Market: Over $268 million

As the crypto market emerges from one of the worst bear cycles in history, experts expect FNFT valuation and trading activity to surge in the coming months.

Benefits of Fractional NFTs Compared to Traditional NFTs

1. Increased Accessibility and Portfolio Diversification

Imagine owning a fraction of a million-dollar NFT, such as digital real estate or a legendary CryptoPunk. Fractional NFTs turn this dream into reality, lowering entry barriers for small investors and allowing them to build diversified portfolios with many exciting assets.

2. Solving Liquidity Issues

Traditional NFTs face a fundamental problem: rarity creates scarcity but also leads to “liquidity nightmares.” A famous example is Jack Dorsey’s “First Tweet” NFT. Sold for $2.9 million in 2021, the owner tried to resell it for $48 million a year later, but the highest bid was only $30,000!

By dividing expensive NFTs into smaller parts, liquidity increases significantly – making buying and selling easier, and enhancing the asset’s perceived value.

3. Fairer Valuation

By observing demand and prices for each part, owners can gather valuable insights into overall interest in the underlying asset. This helps determine the true value of the NFT more transparently.

4. Resilience of the Original NFT

Through smart contract functions, a community can choose to restructure the original NFT by merging all current parts into a single full NFT.

5. Expanding Revenue Streams for Creators

Artists can sell a portion of their work, reach a broader audience, and earn more from their creations. Similarly, NFT marketplaces can attract new investors by integrating FNFT offerings into their platforms.

6. Integration with DeFi

FNFTs built on standards like ERC-20 and BEP-20 have the potential to seamlessly integrate into DeFi ecosystems. This opens opportunities for:

• Margin trading (margin trading)
• Staking
• Yield farming
• Trading on DEXs (decentralized exchanges)

Notable Fractional NFT Transactions

CryptoPunks: From Millionaire Club to Shared Playground

Exclusive CryptoPunks once sold for millions of dollars, symbolizing the upper class of NFTs. Thanks to fractionalization, owning a part of a Punk now costs just a few cents.

In April 2022, 50 Punks were split into 250 million “uPunk” tokens. These micro-ownership rights traded at around $0.046 on decentralized exchanges, making them extremely accessible to new investors.

Art by Grimes: From Million Dollars to $20 Per Part

Canadian artist Grimes gained attention in 2021 with an NFT collection sold for $6 million. Two pieces – Newborn 1 & 3 – were divided into 100 parts each and sold at just $20 per part. This move allowed fans to own her art without spending too much.

Mutant Cats: DAO Community with Token $FISH

Mutant Cats is a DAO community focused on collecting and splitting hot NFT collections like Cool Cats, CryptoPunks, and Bored Ape Yacht Club. Token holders $FISH not only own a part of NFTs but also have:

• Exclusive access to DAO community
• Voting rights
• Participation in special NFT drops

Doge Meme: From Viral Icon to $E0@Million Project

The Doge meme became the mascot of Dogecoin and was sold as an NFT for $4 million in 2021. Owner $220 PleasrDAO( split this NFT into 17 billion parts called $DOG tokens.

Result: In just a few months, they raised $44.6 million. Currently, each token is valued at $0.0032 – proving that even a meme can become a valuable asset in the FNFT world.

Popular Fractional NFT Trading Platforms

) Otis: Connecting the Physical and Digital Worlds

Otis allows art enthusiasts to build NFT portfolios by purchasing fractional shares of digital artworks and physical collectibles. Notable items include CryptoPunk $DOG 524, first edition Pokémon Charizard card, Super Mario 64, and Kobe Bryant’s final game ticket.

Otis has integrated with Public.com, making it the first platform enabling investors to build diversified portfolios including stocks, cryptocurrencies, and alternative assets.

Unicly: Revolutionizing Decentralized NFT Trading

Unicly is a decentralized NFT platform that allows users to encode NFT collections into tradable assets with guaranteed liquidity. It combines DeFi profit-generating features with NFT tokenization, offering unique opportunities for collectors, investors, and creators.

Unicly splits NFTs into uTokens – manageable tokens representing parts of an NFT collection. The platform uses an automated market maker model #543, Chromie Squiggle #AMM### and integrates liquidity farming via the native UNIC token.

Main features:

• Rewards for liquidity provision and staking
• Flexible NFT collection management
• Fair and transparent mechanisms for selling and auctioning NFTs

Potential Risks to Watch Out For

( Regulatory Uncertainty

The FNFT space is largely unregulated, similar to many other crypto assets. This poses potential risks as regulations may change. Investing in FNFTs does not enjoy the same protections as traditional financial instruments.

) Intellectual Property Ownership Issues

Digital art may be subject to ###IP### rights. When investing, always verify that the seller owns the necessary rights to the underlying assets. Proof of ownership can often be verified through metadata linked to smart contracts.

( Smart Contract Vulnerabilities

The security of FNFTs directly depends on the security of the underlying smart contracts. Blockchain-based contracts that are insecure are more vulnerable to exploits or attacks. Thorough checks are essential.

) Market Volatility

Like most crypto assets, fractionalized NFTs can be highly volatile. These assets are susceptible to price swings. Learning strategies such as staking can help mitigate potential losses during downturns.

Conclusion: The Future of Digital Ownership

The concept of fractional ownership is not new, but its application to NFTs has sparked a revolution. Fractional NFTs are breaking down barriers and opening new possibilities for investors and creators.

From easier access to valuable assets, improved liquidity, to exciting DeFi integrations – FNFTs are reshaping the NFT landscape. However, the industry still faces challenges, especially in management and investor protection.

One thing is certain: Fractional NFTs will stay, and their impact on the future of digital ownership is undeniable. Whether in bull or bear markets, FNFTs are expected to drive innovation and accessibility, ushering in a new era for the dynamic world of NFTs.