Fractionalisation is a relatively under-appreciated use of NFTs and blockchain technologies. NFT fractionalisation is the act of dividing the ownership of an NFT into smaller fractions, making it possible for several people to own a single NFT.
Fractionalisation isn’t new concept, and exists beyond the crypto space. It is probably most associated with high value assets, like private aircraft, which are often co-owned. Fractionalisation is typically preferred for very expensive assets because fractionalisation reduces the risks and costs of maintaining them — this is also true regarding the fractionalisation of NFTs.
For many crypto investors or NFT collectors, there are assets that are simply out of reach financially. Blue chip NFTs, which refers to some of the most expensive NFTs, can be traded for north of $1 million, and for many they represent the gold, or rather blue standard, of NFT investment. This would be akin to an art collector wanting to invest in or collect the art that hangs in esteemed galleries like the Louvre. For most people, such an investment is either entirely out of reach — or would leave them illiquid. Fractionalisation, which could divide an asset into more affordable segments, results in a lower entry price and more owners.
Fractionalisaiton can benefit the market because it liquifies an infamously illiquid market. But it also enables more people to enjoy more of the pie. Of course, fractionalised assets can be sold more because there are more elements to trade. And with every trade there is an opportunity for the total value of the NFT to increase.
Fractionalisation and NFTs, especially NFT art, is a fairly established relationship that’s benefited many. At Stratis, we are always looking at how blockchain can be enjoyed by non-crypto natives. One such use is property.
A building project could be fundraised through fractionalisation and return royalties upon sale via a smart contract. Similarly, people could fractionalise a house — this could make sense for holiday homes. Unlike timeshares, which quite famously have had poor returns, fractionalisation offers a legal entitlement to rights and usage.
What do you think — would you share ownership of a house or painting?