NFT Practice Guide: How to use Fractional to fragment NFT?

Someone once told me that the biggest problem with non-fungible tokens (NFT) is lack of liquidity. My answer is “DeFi will solve this problem.”

This is true, and today we will explore how to use fragmentation tools to split NFT into a bunch of fragments (usually in the form of ERC20 tokens) and then use them in DeFi.

Trading NFT fragments on Uniswap ? Of course there is no problem.

Put them in Aave’s currency market? It is also possible (has not happened yet, but it will happen soon).

Fragmentation means that we can create liquidity on NFT through effective pricing.

The agreement called Fractional is one of the new agreements to address this niche market, and its team has just received a $7.9 million seed round led by Paradigm.

Tips: Is this project likely to be retroactively airdropped in the future?

The following content will show you how to create NFT tokenized fragment ownership through Fractional, and some gameplay around this upstart agreement.

  • Goal: understand how to use Fractional to fragment NFT
  • Skills: Intermediate
  • Effort: It takes at least 30 minutes to learn the basics of Fractional
  • ROI: Understanding the new NFT vertical industry

None of the content here constitutes financial advice. Fragmented NFTs may involve legal issues, depending on your jurisdiction, including the United States. Please consult a lawyer and use it at your own risk!

Unlock NFT liquidity through Fractional

As the intersection between DeFi and NFT continues to flourish, NFT fragmentation protocols are emerging. They promote NFT liquidity and improve price discovery, and democratize NFT access through collective ownership.

The idea of ​​it? Holders can use a fragmented protocol to split and mint an ideal but poorly liquid NFT into many ERC20 tokens. These ERC20 tokens are fungible (and therefore easily traded) and divisible, which means that they collectively represent the underlying asset and can be distributed among multiple owners.

So far, we have seen the rise of some NFT fragmentation protocols, such as NIFTEX and Unicly.

The Fractional appear are the latest in Ethernet Square NFT fragmentation of the main Internet protocols, which launched in July 2021 and became popular unlock NFT liquidity agreement in the short term.

NFT Practice Guide: How to use Fractional to fragment NFT?

A brief guide to Fractional

There are two main types of stakeholders at the core of the Fractional Agreement:

  1. Buyers: users who purchase fragmented NFTs to access these cultural assets;
  2. Curator: A user who mints NFT into fragmented ERC20 tokens through an agreement and earns curator fees;

NFT Practice Guide: How to use Fractional to fragment NFT?

To facilitate these processes, Fractional revolves around three main smart contracts: one for a single fragmented NFT vault, another for multiple fragmented NFT vaults, and the last one to facilitate vault governance parameters.

In addition, please remember that because these smart contracts are open and permissionless, anyone can build their own Fractional front-end or use the Web3 wallet to directly interact with the protocol, that is, users can use it without visiting the fractional.art website. this agreement.

This is the charm of Ethereum.

How to fragment NFT

NFT Practice Guide: How to use Fractional to fragment NFT?

Figure: Fractional interface of Fractional

If you are interested in splitting an NFT through Fractional, your first step is to determine which NFT to use.

Once you have confirmed your goal, the whole process is like this:

  1. Go to fractional.art, connect to your Web3 wallet, and click the “Fractionalize” button at the top of the website.
  2. You will enter an interface where you can select the NFT to be split, and then enter your vault name, token supply, token symbol, reserve price, and management fee.
  3. Press “Continue” to continue. At this time, the system will prompt you to approve Fractional transfer related NFTs. Confirm the approval in the wallet, and then make the transfer as needed. Finally, press the “Fractionalize” button and confirm the final casting steps. (Remember, each NFT needs to go through the process of approval + individual transfer before it can mint ERC20 tokens)
  4. Once your vault is online, you can use the “Settings & Actions” dashboard to edit its description, update its auction parameters, etc.

Set the reserve price of the vault

In the face of potential future purchases, Fractional’s vault relies on a price system in which NFT shard holders continue to vote on the reserve price, and the weighted average of this vote determines the price required to initiate the acquisition.

This may sound a bit confusing, and in a recent blog post, the Fractional team provided two very simple examples to illustrate this rule.

Examples are as follows:

“If you own 100% of the ownership tokens and set the reserve price to 100 ETH , then the reserve price is 100 ETH. But if you own 75% of the tokens, and those who own the other 25% of the voting rights have done it at the reserve price of 50 ETH Voting, the final reserve price will be 81.25 ETH.

If you only own 49% of the token supply and vote on the reserve price, but others who own the remaining 51% of the tokens do not vote on the reserve price, then the reserve price will not be set for the vault.

In other words, when an individual or group deposits enough ETH to meet or exceed the reserve price determined by the vault, the Fractional acquisition starts. Then the auction process begins. If this acquisition is successful, the holders of the NFT shards of the vault can exchange their ERC20 tokens for ETH.

Use with PartyBid

We believe that Fractional is a new cultural Lego block at the crossroads of DeFi and NFT. This dynamic opens up a variety of novel Web3 possibilities, such as PartyDAO’s recently released PartyBid tool.

PartyBid is a decentralized application that is used to promote collective bidding for NFTs. This application allows a group of friends and/or strangers to carry out raids on selected NFTs together (“raid” in the sense of the game), which gives ordinary investors an advantage for the first time in the NFT ecosystem.

To make a long story short, PartyBid helps groups obtain NFTs through Foundation or Zora auctions, then divide the auction items without trust through Fractional, and then distribute the subsequent ERC20 tokens to party participants in proportion.

This Dapp has been used by investors to acquire CryptoPunks , Nouns and other major NFTs, all thanks to Fractional’s open infrastructure.

NFT Practice Guide: How to use Fractional to fragment NFT?

Remind

Fractional is paving the way for new NFT liquidity and the possibility of token utility, and the above PartyBid example is just an attempt at innovations that may appear around the Fractional protocol in the future.

At the same time, as a fan of DeFi+NFT, I am personally painful to say that Fractional is not a protocol that everyone should try now. This is because some jurisdictions such as the United States treat fragmented artworks as securities.

In other words, in these jurisdictions, fragmented NFTs seem to be securities. Before issuing a fragmented NFT, please make sure you understand the relevant laws in your jurisdiction.

Finally, it is worth noting that the Fractional team has previously stated that they plan to gradually decentralize the agreement to ensure long-term flexibility and scalability of the agreement. Therefore, it is entirely possible for Fractional to issue governance tokens in the future. You can use it now and accumulate potential retroactive airdrop rewards.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/nft-practice-guide-how-to-use-fractional-to-fragment-nft/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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