If you haven't heard of NFTs, you've probably been living under a rock - but most certainly not this rock. Two days ago, the cheapest NFT was sold for $305,000. NFTs have been the hottest craze in the cryptoverse for the past few months. In August 2021 alone, Open C, the largest marketplace for NFTs, facilitated $3.4 billion worth of trades. It's clear that NFTs are changing the game for digital ownership, but what exactly are they, and how do they work? In this blog, we'll dive into everything you need to know about NFTs and explore fractionalized ownership, a solution to some of the challenges posed by NFTs.
What are NFTs?
NFT stands for "non-fungible token," which means it's a unique digital asset. Ethereum, for example, is a fungible token; my Ethereum is no different from your Ethereum. They're identical in every manner and worth just as much. NFTs, on the other hand, are different. Each NFT is unique, making them non-fungible. This uniqueness means that NFTs can represent anything from digital art, sports cards, gaming items, music, domain names, collectibles, and more. NFTs are creating a big digital world out there.
How much do NFTs cost?
Some NFTs can be incredibly expensive, like the "Ether Rock," one of the earliest NFTs ever created. To buy one, you'd better be ready to fork out at least 500 Ethereum, or about $1.5 million. However, fractionalized NFTs provide a solution for those who can't afford to buy an entire NFT. Fractionalized NFTs allow you to buy a portion of an NFT, making them more accessible to a wider audience.
The Challenges of NFT Ownership
NFTs can be challenging to own. They aren't very liquid, and unlike traditional art pieces, it's much harder to assign a value to NFTs since there are so many unquantifiable factors. They're also not great as collaterals, which means they aren't ideal for capital efficiency. However, fractionalization of NFTs has been made possible, which helps to solve these problems by making NFTs divisible and more tradable.
Fractionalized NFT Platforms
Let's take a look at some of the exciting projects out there that focus on NFT fractionalization:
Uniquely - Launched in April 2021, Uniquely is a relative newcomer to the NFT space compared to the rest. Uniquely NFT owners have the option of locking their NFTs in return for "U" tokens. U-tokens are fungible ERC-20 tokens that represent your share of the entire U-collection. Your NFTs can now be liquid too, as U-tokens can be easily swapped for other assets on UniSwap. As a U-collection owner, you also have a say in which NFTs are to be included and whether or not the U-collection should be unlocked. Uniquely currently has a TVL of $45 million.
Netfex - Another fractionalized NFT platform, Netfex, was launched in May 2020, way before the recent NFT hype. Similar to Uniquely, you can fractionalize a single NFT or even a bundle of NFTs into shards. As a shard owner, you'll also be entitled to a portion of the revenue generated by the NFT, making it a potentially lucrative investment.
Conclusion:
The rise of NFTs has been nothing short of spectacular. With their unique properties, they've opened up a world of opportunities for digital ownership. However, owning an NFT can be challenging due to their illiquidity, valuation difficulties, and lack of collateralization. Fortunately, fractionalized NFTs have emerged as a solution to these problems, making them more accessible and tradable. Platforms like Uniquely and Netfex offer exciting new ways to participate in fractionalized NFT ownership, with potentially lucrative rewards. As NFTs continue to gain popularity, fractionalized ownership is likely to become a more common way of participating in the digital asset market.
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