Non-fungible tokens or NFTs are unique one-of-the-one digital assets that are supported by verifiable ownership by using blockchain system. In very recent years, lots of people and investors have shown interest in NFT market and many have already invested in it. The market attracted has been trying its best to attract more artists and investors by producing NFT collections such as Bore Ape Yacht Club, CryptoPunks and even NFT games. In some cases, NFT price of a well-known project is too expensive that a single investor cannot afford it individually. At this stage, the market came up with a solution called fractionalized NFT to help out the situation. It is a way to allow fractionalizing of a single NFT so that every single fraction can be owned by an investor. In this article, our team aims to provide a complete guide on the topic.
What are fractional NFTs?
Fractionalization basically means that individuals can own a share of an asset, property or even a company. The same idea is used with fractional NFTs. Therefore, if an NFT is fractionalized it implies that smaller shares of an NFT can be owned by different people, especially when the main NFT is expensive to buy. As the result, fractionalization seems to be an innovative solution to have NFTs on smaller scale and attract more medium-tier investors.
It is necessary to know that fractional NFTs are not any different from the regular NFTs since they all use the same technical design and are based on blockchain technology. Both fractional NFTs and regular NFTs make use of smart contracts, that create a specific quantity of ownership of a token relative to the original NFT. Besides, just like a regular NFT, fractional NFT owners can trade their share of a token in a secondary marketplace.
How are fractional NFTs different from regular NFTs?
Fractional NFTs or F-NFTs for short are similar to regular NFTs in many ways. Though, they are different in a few aspects. The main difference comes from the fact that a regular NFT is a whole-body while an F-NFT is a piece from a bigger picture. Therefore, fractional NFTs are just smaller shares of the original NFT.
On the other hand, the smart contract provided with fractional NFTs allows reversing the fractionalization process. It means that the owner of an F-NFT is allowed to buy all other shares of an NFT and return the original NFT.
F-NFTs are also different from regular NFTs since regular NFTs can be issued in several editions while fractional NFTs are pieces of one larger puzzle. When regular NFTs are offered in several editions, the owner owns the original version and as well as the other editions, though there might be some slight modifications. However, fractional NFTs are fixed and there can be no other editions with them. In fact, F-NFTs are not different versions of the same NFT, but portions of the entire picture.
Why are fractional NFTs necessary?
Fractionalization seems to provide a credible response to many problems in the NFT market, such as a limited number of great NFT collections and barriers to access them. It goes without saying that NFT investors look for the best projects to invest in and take the most advantages. However, it is always cost high to pay for famous, successful NFTs. Therefore, fractionalizing an NFT can provide enough NFTs to invest in at lower prices.
Besides, the division of an NFT into smaller pieces creates a more democratic approach in the market and more investors can decide about the future of the NFT market. On the other hand, since fractionalization helps increase the number of NFT investors, it directly improves the liquidity of the NFT market. 
The most popular fractional NFT marketplace: fractional.art
Fractional.art was first launched in July 2021. It provides the opportunity for its users to fractionalize their NFTs into smaller tokens. By fractionalizing, an NFT divides into tokenized shares that have the same properties of regular NFTs and can be traded normally in NFT marketplaces.
It is also an Ethereum-based decentralized platform where investors can look up for trading fractional NFTs. Almost all famous collections are presented on fractional.art, including CryptoPunks, Cool Cats, Bored Ape Yacht Club’s pics, Pudgy Penguins, etc. all in fractions.
How does fractional.art work?
Fractional.art requires its users to deposit an NFT and receive fractionalized tokens at the end of the process. The owner of an NFT defines the number of fractions that the NFT should be divided into. Later, the fractional NFTs can be easily traded on all NFT marketplaces, such as OpenSea, foundation, if the liquidity pool is already created on Uniswap or similar platforms. Fractional.art is unique in that it also provides a platform to put the fractional NFTs for an auction.
The process of fractionalization includes some definitions which are necessary to know before using fractional.art. Let’s define the most important ones:.
- Implied valuation refers to the entry price of the NFT to be fractionalized in fractional.art.com.
- Collectible supply is the shares of a fractionalized NFT that are available to purchase. A zero percent suggests that all the shares are currently owned.
- Reserve price defines the amount of ETH required to initiate an auction for a collectively owned NFT. All fractional owners of an NFT can vote on the reserve price and the weighted average of the votes determines the price range. When the reserve price is set, the auction may start.
- Buyout occurs when someone pays the reserve price for an NFT. Therefore, it is possible to collect all shares from fraction owners and form the NFT as a single item owned by only one investor.
- Swap is the case when an investor purchases fractional shares of an NFT. There is no limitation on the number of shares one may purchase.
Is fractional.art safe?
It is believed to be one of the most reliable websites as it makes use of blockchain technology and smart contracts; therefore, it provides transparent transactions. Besides, the website tends to verify NFTs. This guarantee that investors are not paying for faulty NFTs and ensures that the NFTs are originally from an intended collection. Some of the world-class investors such as Robot Ventures, Paradigm, Mechanism Capital use fractional.art to trade fractional NFTs.
How to sell fractional NFTs on fractional.art?
It is a relatively easy process to fractionalize an NFt and put it on an auction. Let’s describe the process in detail.
- Create an account on fractional.art.com and connect your digital wallet, like MetaMask, to your account.
- Then click Fractionalize on the top of the screen.
- Choose between the fractionalization methods, ERC-20 tokens (fungible tokens) or ERC-1155 (non-fungible fractions).
- Load the NFT you would like to fractionalize.
- Enter a name and define the supply or the number of fractions required.
- Pay for the service price and annual management fees.
- All done!
How to buy fractional NFT on fractional.art?
- First, connect a digital wallet to your account.
- Click Explore to find a live auction (with verified NFTs).
- Set the amount of cryptocurrency you want to spend on fractions.
- Review your order and check for the gas fees.
- Finally, confirm your trade and open your digital wallet to see if the fraction is added to your assets.