CoinMarketCap takes a deep dive into a new NFT marketplace that offers fractionalized non-fungible token.
Non-fungible tokens, or NFTs, have taken the crypto world by storm in recent months, as is demonstrated by the wave after wave of record-setting NFT sales, spiking search interest and exponentially growing NFT trading volumes.
Traditionally, NFTs have been something of an all-or-nothing affair. You either own a whole one or you don’t — unlike most regular cryptocurrencies, which are divisible into subunits. But this might soon be set to change with the advent of Nftfy — a platform that looks to make NFTs both more liquid and accessible through a novel fractionalization process.
What Is Nftfy (NFTFY)?
Nftfy is a novel blockchain-powered platform designed to address some of the inefficiencies in the non-fungible token (NFT) market by allowing anybody to easily fractionalize NFTs into fully-backed ERC-20 tokens which can be sold through Nftfy’s permissionless marketplace.
The platform wants to democratize access to NFT ownership by ensuring even high-ticket NFTs can be safely shared among multiple owners through a provable and reversible fractionalization process. These NFT fractions can then be used throughout the broader decentralized finance (DeFi) ecosystem, traded or stored as a fungible NFT shard.
The project was born in April 2020, after members of Brazilian research firm BlockchainBH participated in the Hackmoney ETH Global Hackathon and recognized an unmet demand for more accessible NFTs with greater utility.
Leonardo Carvalho is Nftfy’s CEO and co-founder. He is an accomplished electronics engineer that has been working full time in the crypto space since joining BlockchainBH as head of innovation in 2018. Other prominent members of the Nftfy team include Rodrigo Ferreria, who is a renowned smart contracts specialist with a Ph.D. in computer science from Yale, in addition to André Salles — a lawyer and MBA Professor of blockchain and cryptoeconomics.
How Does Nftfy Work?
As we previously touched on, Nftfy allows users to create their own ERC-20 compliant NFT fractions. This process is simple and intuitive, making it accessible to practically any NFT holder who wants to split ownership of their token. Briefly, there are three main processes a user needs to consider when using Nftfy:
- Fractionalization: Users select the NFT (or potentially NFT portfolio) they want to fractionalize, pick an exit price and select the cryptocurrency used for exit. Once complete, the NFT remains locked in a smart contract and ERC-20 compliant tokens are issued (i.e. the NFT fractions). Users can then make a private offering for their NFT fractions, or an IDO, e.g. by using Balancer's LBP.
- Redemption: If somebody wants to buy the whole NFT, they will need to pay the exit price as set by the original NFT owner. This can either be paid in fractions or in the cryptocurrency set during the fractionalization process. Users who already hold some fractions can count this against the exit price to reduce the final cost.
- Claiming: The funds used to purchase the NFT are locked in a vault which remaining fraction token holders can use to claim a proportionate chunk of the proceeds. This ensures fraction holders are appropriately rewarded for their original investment.
Using the recently sold $69 million Beeple NFT “Everydays: The First 5,000 Days” as an example, the owner could take the token and fractionalize it into 1 million ERC-20 fraction tokens, selling each for $100 (for a total of $100 million). The exit price could be set to $200 million, which if filled, would mean each NFT fraction could be redeemed for $200 a pop — achieving a 100% profit.
Each of these processes is carried out in a completely decentralized manner, while all fraction tokens are probably backed by an underlying NFT — which can be checked on-chain at any time.
Users will need NFTFY tokens to maximize the value they get from the platform. It is used for a variety of purposes within the Nftfy ecosystem, many of which are designed to incentivize holders and boost the liquidity of ERC-20 fractions. NFTFY holders will be able to participate in various yield farms, airdrops and liquidity pools using their tokens — earning NFT fractions and other rewards as a result.
The NFTFY token launched in May 2021, following an initial DEX offering (IDO) on Poolz and a final Liquidity Bootstrapping Pool (LBP) on Balancer.
What Makes Nftfy Unique?
Nftfy aims to tackle a major problem in the NFT market; the lack of liquidity. When a user purchases a NFT as an investment, they typically then need to worry about sourcing a buyer for their investment — which can be a challenge for high ticket NFTs.
Nftfy overcomes this problem by crafting a more liquid environment for NFT creators (including artists, entrepreneurs, and developers) and investors (including collectors and traders) by reducing the barriers to entry to NFT ownership through its fractionalization process.
Nftfy helps to hedge against volatility risks by ensuring fraction holders are less affected by short-term price fluctuations since their tokens are fully liquid — users can trade their tokens at any time on Nftfy’s decentralized marketplace or external platforms. While long-term holders stand a better chance at attaining the maximum value for their share, since anybody can buy the token at its full exit price at any time — the NFTs are perpetually available until sold.
Since fraction tokens are fully fungible and based on the ERC-20 standard, holders will be able to use their tokens throughout the broader DeFi landscape — such as for liquidity mining, open lending collateral or arbitrage.
As a decentralized, permissionless and trustless platform, Nftfy uses smart contracts to ensure that fraction token holders can be sure that the underlying NFT cannot be tampered with or taken back by its original owner.
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