Fractional Non-fungible Tokens (F-NFTs) dominate discussions throughout the tech industry. They’re the latest development in the NFT sector that could change the fundamental structure of NFTs and provide new opportunities for investors. Anyone who follows NFT developments will have noticed that NFTs are often the subject of headlines due to their insane valuations. The price of the most well-known NFTs can reach millions, which makes them extremely expensive for consumers. The necessity to address this issue caused the rise of F-NFTs.

In terms of profit from a profit perspective, owning a tiny piece of a renowned, yet costly NFT is far superior to getting full ownership of a few tiny ones for the same amount.

The concept of F-NFTs is quickly gaining momentum. They are being seen as a paradigm shift that will push the limits of what is feasible within the domain of ownership of digital assets.

What exactly is fractional NFT?

A F-NFT also called fractionalized NFT can be described as an NFT that is broken down into parts to be sold by themselves.

It is believed that the Doge NFT sale is a real-world illustration of NFT fractionalization. In June 2021 The Doge meme, also known as an NFT was purchased for $4 million. PleasrDAO who bought the NFT and later provided fractional ownership of the NFT in tokens of $DOG that users could buy for as little as $1.

Use cases for NFT fractions

Gaming and F-NFTs

Many play-to-earn games allow players to purchase or sell different items in the game including NFTs. These games that are multiplayer can utilize F-NFTs in order to let players get together to buy and sell costly in-game assets through investing in fractionalized shares. Axie Infinity is an online video game, that has already tested the possibility of trading with F-NFT through the sale of fractionalized ownership of rare Axies which is one of the most well-known game-related NFT assets.

F-NFTs and metaverse

With the possibility that the metaverse will be a part of the mainstream, we can anticipate massive investment into projects that are related to the metaverse. Companies such as Decentraland or Sandbox are already making forays into the metaverse.

F-NFTs are a way to allow investors, conglomerates, or even individuals to join forces to purchase virtual land and other digital assets similar to the world of virtual reality.

The F-NFT and the real estate industry

NFTs can dramatically improve the speed of purchasing property by replacing intermediaries by using smart contracts that allow for a simple and secure transfer of ownership. The conversion of a real estate property to an NFT can also provide other important advantages, including instant ownership settlement, and a simpler entire transaction process. Furthermore, since the rights and ownership history of the property can be stored directly on the blockchain, the details of transactions are usually verified quickly and simply.

F-NFTs are like NFTs by the fact that they permit the sale and purchase of property without the involvement in the involvement of an intermediary. The only difference is that they permit multiple parties, not just one to share ownership of the property. Although F-NFTs have not yet become integral to the real estate business, however, it is simple to imagine that their usage can help make investing in real estate more convenient and less expensive in the future.

Do fractional NFTs function?

Because the majority of NFTs employ Ethereum’s ERC-721 standard, here we will explore fractionalization using the case of an ERC-721 NFT.

To split this NFT into smaller pieces It must first be locked into an intelligent contract that will divide the ERC-721 token into multiple ERC-20 tokens in accordance with the instructions that the NFT owner has provided. The owner has all the details including the number of ERC-20 tokens that will be made, their costs, the metadata that will be used, and any other properties they consider crucial. Each fraction or token that is created represents a portion of part of ownership in the NFT. The fractions are then offered for sale at a set price for a specific period of time or until they are sold out.

The advantages of fractionalizing NFTs

Efficient price discovery

F-NFTs facilitate efficient price discovery in NFTs. The price discovery process is the process through which a market determines the correct cost for the asset.

It is usually difficult to estimate the cost of newly-created NFTs and NFTs that have no or little transactions record. Fractionalization allows NFT pricing simple by allowing for an NFT to be split into several parts. These is then released to the market for bids on. This can help determine the value of an NFT according to market demand.

So, F-NFTs are an easy way to determine the value on the market of exclusive as well as rare NFTs. In addition, when the value of an NFT rises in value, the value of its fractions increases as well. However the value of an NFT could also be worthless, as is the norm in the case of cryptocurrency, and the value of its fractions can fall in a situation.

High liquidity

NFTs benefit from their rareness. But, this means that they are less liquid than most other digital assets that are tradable. F-NFTs can help increase liquidity in the NFT market, permitting smaller investors to hold assets together. Fractionalization is the simplest and most effective method to market high-priced NFTs quickly. Therefore, if you have an NFT that is priced too high and you are having trouble finding an investor for the asset, you could divide it into the number of parts needed to guarantee a certain amount of affordability. Fractionalization has not just made NFTs more attractive to investors, but successfully solved the issue of liquidity that is associated with this type of asset.

Curator incentives

An NFT owner who breaks their asset into parts receives an amount for the curator from their preferred NFT marketplace. Although the owner has the ability to determine and change the amount of the fee, however, it is subjected to a limit on price to avoid reckless pricing.