## What is a fractional NFT? - A fractional NFT is simply a whole NFT that has been divided into smaller fractions, allowing different numbers of people to claim ownership of a piece of the same NFT. The NFT is fractionalized using a smart contract that generates a set of tokens linked to the indivisible original. - These fractional tokens give each holder a percentage of ownership of an NFT, and can be traded or exchanged on secondary markets. ## How does it work? To break this NFT into fractions, it must first be locked in a smart contract, which will split the ERC-721 token into multiple ERC-20 tokens as per the instructions the NFT owner has given. The owner specifies everything, from the number of ERC-20 tokens to be created, to their prices, to the metadata to be used, to any other property they deem important. Each fraction or ERC-20 token created represents partial ownership of the NFT. The fractions can then be put up for sale at a fixed price for a particular time or until they get sold out. ![](_assets/Y8tFCaq.png) ## Benefits of fractional NFT - **Price discovery**: the asset is extremely valuable and they want help finding price discovery, fractionalizing the item and selling 20% on the market can be a valuable tool to help understand how the market values the NFT. - **More liquidity**: owners have significantly better exit liquidity than if they owned the NFT themselves. This can be achieved through on-chain exchanges such Uniswap. - **Curator incentives**: an NFT owner who divides their asset into fractions receives a curator fee from their chosen NFT marketplace. Although the owner can set and update the amount of this fee, it is subject to a maximum price limit to prevent reckless pricing. ## References - https://www.coindesk.com/learn/how-can-you-share-an-nft-fractional-nfts-explained/ - https://learn.bybit.com/nft/what-are-fractional-nfts/ - https://www.leewayhertz.com/fractional-nft/ - https://medium.com/fractional-art/what-is-fractional-dd4f86e6458a