Fracton protocol is a state-less smart contract protocol, built to increase efficiency, decrease gas fees and improve asset security. Fracton protocol was officially launched on August 11, 2022, and runs on an NFT ETF infrastructure, that is, a tool that tracks NFT-related stock, and protocol leverages the monetary value of NFTs to make blue-chip NFTs cost-friendly and composable into Decentralized Applications and CEX. Fracton offers NFTs fractionalization by repackaging them into ERC-20 tokens. Each of the ERC-20 tokens becomes backed by 1/1,000,000 of the original NFT. The ERC20 token referred to as hiNFTs are the fractionalized token (NFT ETFs).
NFT fractionalization is the splitting of one NFT into smaller pieces, in a way that allows multiple but partial ownership of the NFT. NFT fractionalization is a concept that allows the NFT market audience to buy and sell NFTs regardless of their prices and users’ net worth. That is, individuals can own or speculate, and easily trade NFTs regardless of their (whole) prices. NFT fractionalization is also regarded as a bridge between blue-chip NFTs and retail users. Blue chip NFTs are NFT projects believed to have stable value and yield return in the long term. They are characterized by a relatively high floor price, real-life use cases, endorsements, and brand or project commitment.
The Fracton protocol as documented by the team has fractionalized 2000+ ETH worth of blue-chip NFTs, created and listed up to 20 blue-chip NFT ETFs on Kucoin and Uniswap, and has listed its governance token $FT on Kucoin.
An example of the Fracton hiNFT is the HiBAYC, an ERC-20 token pegged to BAYC NFT by fractionalization. Other hiNFTs in Fracton include hiPUNKS, hiSAND33, hiKODA, and hiENS4.
How Fracton works
The Fracton Protocol operates on a non-upgradable smart contract deployed on the blockchain ensuring that the contract cannot be altered even by the creators. This allows that no code is required to handle contract updates and modifications. The stateless system design of the Fracton Protocol makes for better composability of DApps built on Fracton and adds to Ethereum scalability.
On Fracton, the Meta-Swap feature allows swapping for multiple token standards where users can swap ERC-20(hiNFT), ERC1155, and ERC721 at a certain ratio. The Meta-Swap is a reserve vault for the Fracton hiNFT collection and users can swap the ERC-20 NFT to a randomized ERC-721 at a ratio of 1:1,000,000.
Fractionalizing NFTs and redeeming them involves combining three Ethereum token standards: ERC721, ERC1155, and ERC20. For each step, Fracton provides a 2-step fractionalization with a swap rate of 1:1000 leveraging Chainlink VRF. The Chainlink’s VRF (verifiable random function) is a feature that allows Fracton users to swap their NFTs for a randomly selected NFT.
Tokenomics: Fracton Token($FT)
The Fracton token ($FT) serves as the Fracton ecosystem governance token and the native utility token within the Fracton ecosystem. $FT has a total supply of 100,000,000 tokens with a current market cap of $20,847,990. The token distribution will have 51% go to the DAO Treasury, 14% to Mining Incentives and Funding, 3% to marketing, 5% to Advisors, and 10% to the Fracton Team.
According to statistics, the Fracton community has had increased growth from August 2022 to February 2023, it had the highest engagement in October and November 2022. Engagement in January and February 2023 hasn’t shown any difference. Fracton price value has also surged from the time of listing going from below $1 to currently $3.40 according to Coinmarketcap.
Wrap up
NFT fractionalization has a myriad of benefits to traders such as arbitrage opportunities and the creators as well. While it could be a worthwhile innovation and solves many NFT market limitations like lack of ease in ownership and liquidity, it should be researched and understood before engaging or funding.
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