Just as what its predecessor did during the height of the Cryptocurrency Bull Run in 2021, Fractional NFTs are steadily taking the whole world by storm thanks to the massive benefits they entail, and the surprisingly-increasing interest of the people in NFTs and the cryptocurrency industry despite an anticlimactic downtrend in the past year. Still, being a fairly new concept only inaugurated in the latter parts of 2021, the idea of dividing your NFTs for more profit is still a work-in-progress idea, despite the fact that it has already seen use and sale in the cryptocurrency market.
With developments starting and more people taking notice of Fractional NFTs instead of the more expensive and more power-intensive Fractional NFTs, there’s a lot to uncover in this $200 million budding industry! From its astounding features which enable empowered tokenized ownership in the industry, to profit opportunities you wouldn’t find elsewhere!
So let’s dive deeper and gain proper understanding on what Fractional NFTs bring to the table, as well as what caveats they carry along with the boons they possess!
Fractional NFTs: What are They?
In case you’re living under a rock or something, Fractional NFTs are one of, if not biggest trend in the NFT landscape. With the idea of dividing an NFT into equal parts and endowing each unit with the same perks and benefits, this simplistic concept brings massive doors of unlocked possibilities for every individual that’s involved with NFTs, from creators who aspire to bring more than just glorified images, to investors who are sick and tired of burning through their pockets for a single NFT that’s as volatile as the industry it’s in.
Now why are they so sought-after in the industry?
For one, the price entry accessibility that they bring to every investor’s doorstep is an indispensable tool that enables them to buy otherwise expensively-unattainable NFTs for a fraction of the price. This gives every NFT investor a chance to get on expensive blue-chip projects and collections without breaking the bank!
Another would be the benefits they provide the creator. Since Fractional NFTs are made in bulk, content creators, artists, and projects enjoy profits from royalties which they otherwise wouldn’t receive if not for Fractional NFTs. This alone empowers the artist community in the NFT space to create more, leading to an abundance of great projects that fill the industry!
Market Impact and Potential Benefits
In a short span of time, Fractional NFTs proved to be a formidable force in the NFT industry that could turn the whole thing upside down and unlock possibilities that would otherwise stay unreachable had it not been for its features. With this in mind the potential market impact they could make, as well as benefits they could provide every NFT enthusiast is just boundless, but here’s some to paint a clear picture of how awesome these things are.
The introduction of Fractional NFTs in the industry unlocked a lot of possibilities for investors to enjoy and experience. One of which is the increased capabilities offered to investors as NFTs that were once inaccessible due to high price entry, are able to be bought and held by these same investors without breaking the bank!
Furthermore, it brings NFT projects closer to the people, as even those who do not have the fattest pockets could get into expensive projects and earn with the same propensity as the whales and bagholders!
Fractional NFTs bring Flexibility to investors and the projects itself. For one, since Fractional NFTs are bite-sized, they can easily be traded and sold without worrying about losing out on amazing perks and benefits since you can buy more than one at a time anyway. This gives investors the opportunity to mobilize and make immediate profits from their NFTs without losing their perks and benefits while at the same time this also benefits the projects as this empowers their trade volume which is very important in growing projects in this space!
You would think that just because Fractional NFTs are cheaper, they’d stop making NFTs as a valuable asset in exchange for more reach. That’s where you got it wrong!
Since Fractional NFTs are made in bulk, the price difference is made up for in sales, which means NFTs are not devalued in the process. If anything, the lower price entices more people to invest and buy Fractional NFTs altogether, driving the project’s liquidity even further than if it would remain dealing with regular NFTs that are not fractionalized!
- Portfolio Diversification
Fractional NFTs’ low price entry is just a gift that keeps on giving!
With the low price of Fractional NFTs, investors are encouraged to buy multiple NFTs from different projects that helps them diversify their portfolio! Aside from the financial security that it provides since it’s much better to diversify your assets instead of putting all your eggs in one basket, it gives investors more power as they are able to dip their fingers in different projects all at once and enjoy various communities and perks without spending stupendous amounts of money in the process!
- Value for Content Creators
Empowering NFT Creators and artists to make more projects and support the industry is just as important as ensuring that investors get the best every step of the way!
Thanks to Fractional NFTs changing the game for the better, NFT creators are given more avenues to shine! Artists now enjoy bigger royalties without charging the investors too much, NFT creators are encouraged to create more projects thanks to the added liquidity and demand for Fractional NFTs, and furthermore, NFT projects get bigger, more tight-knit communities courtesy of the lower price entry brought about by Fractional NFTs!
These benefits alone give Fractional NFTs a competitive edge against conventional NFTs, who not only are expensive in most cases and gatekeeping, but are also power-intensive which is detrimental to the environment!
- Empowered Tokenized Ownership
Especially useful in NFTs that are dabbling with Web3.0 games, the empowered Tokenized Ownership that Fractional NFTs bring to the table ensures that owners get more than just a glorified item to fill their inventory.
For one, trading of in-game assets and achievements could be done with a click of a button. And for game developers out there who see value in providing gamers with true ownership, Fractional NFTs for In-game items secures this too, regardless of how unique or common the item is, further driving the idea of a tokenized landscape that could even bridge into real-world assets if given the chance to flourish!
However, the abundance of benefits and perks in the Fractional NFT world isn’t to say that they don’t come with caveats. So, in the spirit of fairness and transparency, let’s glide over what challenges and risks Fractional NFTs are presented with!
Market Challenges and Risks
The Fractional NFT Market, while one of the most profitable ventures in the NFT industry, comes with its own set of risks and challenges that may make it a daunting concept for beginning investors and NFT creators. Here are some of them
- Immaturity of Fractional NFTs
Fractional NFTs, amazing of a concept as it may be, are still immature compared to the conventional NFTs who stood the tests of time and the relentless tides of the industry. The shortage of Fractional NFT Marketplaces where you can buy and sell Fractional NFTs, as well as low media coverage despite Fractional NFTs grossing over $200 million in sales and trade volume is also a little discouraging on the side of creators. Not to mention that there’s few fractionalization platforms where you can fractionalize your NFTs.
This is only a temporary challenge however, as with time progressing and the bull run commencing, there will be more opportunities for investors, creators, and developers to discover and explore the vast world of Fractional NFTs, as well as enjoy its massive benefits!
- Smart Contract Vulnerabilities
Fractional NFTs are just as secure as their smart contracts. If a smart contract’s filled with bugs and holes for bad actors to exploit and abuse unwitting investors and developers out of which leads to losses on the investor’s part, as well as a massive decline in their confidence with the industry. This high dependency on smart contracts oftentimes scare beginning developers in the industry from exploring Fractional NFTs despite its low entry level.
- Market Fragmentation
Its greatest feat, could also sometimes act against it.
Fractional NFTs, while great at promoting portfolio and project diversification among investors, are also inadvertently promoting Market Fragmentation, where an NFT’s value is dispersed across multiple fractions. This is especially detrimental to Fractional NFTs with higher unit counts which altogether creates an illusion of NFT devaluation, further disencouraging potential investors from putting in their trust and money into projects that dabble with it.
Two Cents about Fractional NFTs
Fractional NFTs is an inherently astounding concept that proves that NFTs are not dead. Its innovative feature packed in a simplistic design built to empower the creator and investor in multiple facets open doors of opportunities for further developments and a massive upheaval in the industry which it severely needs.
Despite the inherent risks and challenges that people may face when dealing with Fractional NFTs and its nascent market, it doesn’t discredit the fact that the potential benefits and growth opportunities it provides not only to itself but to the entirety of the NFT world is nothing short of substantial.
As its technology progresses and as more people discover its latent potential in providing accessible and marketable opportunities for aspiring creators and investors in the market, Fractional NFTs are poised to uncover new frontiers in tokenized ownership, which may very well redefine how we perceive and interact with NFTs, and digital assets in the future!
Author Sophia Wilson: Sophia Wilson is a seasoned content writer with a focus on crypto-related subjects, including fractional NFT and crypto back. Her expertise has gained recognition in various publications, where she strives to spread knowledge and awareness about the possibilities of cryptocurrencies and blockchain technology. Besides her writing pursuits, Sophia finds solace in practicing yoga and cherishing moments with her loved ones and adorable pets.