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Fractional NFTs: What They are and How Do They Work?

Fractional NFTs: What They are and How Do They Work?

November 11, 2022

Would you like to learn more about fractional NFTs? When it comes to NFTs, there are many different ways that people can invest in them. One option that has become increasingly popular is fractional NFT investing. Fractional NFTs essentially allow people to invest in a piece of an NFT rather than the entire thing. This can be helpful for several reasons.

For one, it can make investing in NFTs more accessible to more people. Not everyone has the funds to invest in an entire NFT, but fractional ownership makes it possible for pretty much anyone to get involved. Additionally, this type of investment can help diversify your portfolio and spread your risk a bit more. By dividing an NFT into multiple fractions, called "fractional NTFs," investing in real-world assets is now easier than ever before.

Difference Between Fractional and Whole NFTs

NFTs that are fractionalized into several set parts by a smart contract differ from non-fractionalized NFTs. The owner sets the minimum price, after which each new owner can sell it for more. Noteworthy is the fact that fractional NFTs have been created by some of the largest online marketplaces and protocols, such as OpenSea, Decentraland, and Rarible.

These assets that enable fractional ownership of NFTs, when applied to physical assets, provide an exciting opportunity for those who want to invest in real-world goods of high value. By effectively spreading the cost of asset ownership over many people, fractional NFTs have the potential to democratize asset ownership and make it accessible to a broader range of individuals without the friction that exists in today's markets.

So, How Does Fractional NFT Ownership Work?

Well, let's say that you're interested in investing in an NFT that's currently worth 1 ETH. However, you don't have 1 ETH to invest. With fractional NTFs, you can purchase a portion of that NFT for whatever amount you have available. So, if you only have 0.5 ETH, you can still get involved with the investment by purchasing half of a fractional NFT.

Of course, there are some downsides to fractional NFT ownership as well. For one thing, it can be more challenging to keep track of your investment if it's divided up into multiple fractions. Additionally, you may not have as much control over what happens with the asset since you only own a portion of it. Still, fractional NFT ownership can be a great way to get involved in the world of NFTs without having to spend a lot of money. And as we mentioned before, it can also help diversify your investment portfolio.

Fractional Ownership of NFT & Use Cases

Fractional ownership is not only limited to NFTs but can be used for any type of asset, including real estate, art, and even physical commodities. The benefits are the same: fractional ownership makes these assets accessible to a broader range of people and helps to spread the risk out over multiple investors.

The world of non-fungible tokens (NFTs) is still relatively new, and there are a lot of different ways to get involved. For the sake of this article, a definition of NFTs is needed. NFTs are digital assets that are stored on the blockchain and have a unique identifier. This makes them incredibly valuable, as they can't be replicated or counterfeited.

Digital Art

One of the reasons why NFTs are so valuable is because they're often associated with digital art. For example, an artist may create an NFT and sell it for 1 ETH. However, not everyone has 1 ETH to spend on an NFT. This is where fractional NFTs come in handy. By fractionalizing the NFT, the artist can sell it to multiple people for a smaller amount of ETH each.

Real Estate

Another exciting use case for fractional NFTs is in virtual worlds like Decentraland and Somnium Space. In these worlds, users can purchase land and build on it however they want. By fractionalizing these parcels of land, more people can afford to get involved and invest in these virtual worlds.


Play-to-earn games are another excellent use case for fractional NFTs. In these games, players can earn in-game items that have real value. For example, in the game Axie Infinity, players can earn AXS tokens that can be sold for Ethereum. However, not everyone has the time or money to invest in earning these in-game items. By fractionalizing these items, players can sell them to multiple people for a smaller amount of ETH each. This allows more people to get involved and play the game without having to invest a lot of money.

Physical Assets

Physical gold and gold bullion, for example, are difficult to store and transport. But, with fractional gold NFTs, investors can own a piece of gold without having to worry about these logistics. Plus, owning an NFT is much more convenient than lugging around a physical bar of gold!

In the world of cryptocurrency, there are a lot of different ways to invest. And, with fractional NFTs, there's yet another way to get involved. So, whether you're interested in investing in digital art, virtual real estate, or even physical commodities, fractional NFT ownership can help make it more affordable and accessible.

What Are The Risks of Fractional NFT Ownership?

Regulation: One of the most significant risks associated with fractional NFT ownership is regulation. Right now, the world of NFTs is largely unregulated. And while this may change in the future, it's impossible to say for sure what will happen.

If regulations are put in place that restrict or prohibit fractional NFT ownership, it could have a major impact on the market. So, if you're thinking about investing in fractional NFTs, it's important to be aware of this risk, even though it's highly unlikely.

Liquidity: Another risk to be aware of is liquidity. When you invest in an NFT, you're effectively tying up your money in a digital asset. If you want to sell that asset, you'll need to find a buyer who's willing to pay the price you're asking.

This can be difficult, especially for less popular NFTs. So make sure you're comfortable with the idea of tying up your assets for an extended period of time.

  • Counterparty Risk: There's always the risk that the person or platform you're buying your fractional NFT from will default on their obligations. For example, let's say you buy a fraction of an NFT from an artist. If the artist doesn't deliver the NFT to you, then you'll be out of luck (and possibly out of money).

    Of course, this risk can be mitigated by buying from reputable sources like Golteum. But it's still something to be aware of.
  • Fraud: Unfortunately, there's always the risk of fraud. Since the world of NFTs is still relatively new, there are a lot of scams out there. So, if you're thinking about investing in fractional NFTs, make sure you do your research and only buy from trusted sources.
  • Inefficient Security Protocols: Another considerable risk when it comes to fractional NFT ownership is the possibility of inefficient security protocols. For example, let's say you purchase a fraction of an NFT that's stored on a centralized platform. If that platform is hacked, your NFT could be stolen.
  • Volatility: It's important to be aware of the volatility of the NFT market. Prices can go up and down very quickly, and there's always the possibility that your NFT could lose value.

What Are The Benefits of Fractional NFT Ownership?

There are a few key benefits associated with fractional NFT ownership:

  • Accessibility: One of the most significant benefits is that it makes these assets more accessible to a wider range of people. Let's say you want to invest in a piece of digital art. Right now, that would be out of reach for most people. But, if you purchase a fractional NFT, it becomes much more affordable.
  • Democratization: Another significant benefit is that it helps to democratize the world of NFTs. Making these assets more accessible allows anyone and everyone to get involved in the market.
  • Convenience: Another benefit of fractional NFT ownership is convenience. When you purchase an NFT, you're effectively buying a digital asset. This means there's no need to worry about storage or security. Plus, contrary to bullion or physical assets, you can easily transfer your NFTs with the click of a button.
  • Liquidity: Fractionalizing NFTs eliminates the lack of liquidity that they often have. For example, when you want to sell a high-priced NFT, you usually have to wait because only a handful of people can afford the entire thing. F-NFTs, on the other hand, can be easily sold because there are more people who can afford to purchase a fraction of the NFT.

Barriers to Fractional NFT Adoption

Though fractional NFTs might make it easier for potential investors to enter the market, conditions in the financial world could stop their growth. There are a few key barriers to the adoption of fractional NFTs:

1. Lack of Understanding: One of the biggest barriers is that most people don't understand how they work. The world of NFTs is still relatively new, and there's a lot of confusion about how these assets can be used.

As more people become aware of fractional NFTs, and as the market continues to grow, this barrier will eventually disappear.

2. High Entry Costs: Another significant barrier is the high entry cost associated with purchasing an NFT. For example, let's say you want to buy a gold bullion F-NFT. The price of gold is currently around $1,700 per ounce. So, if you want to purchase a fraction of an ounce, you'll still have to pay a pretty penny.

This could dissuade some potential investors from entering the market. However, as the market grows and more people start buying F-NFTs, the price of these assets is likely to go down.

3. Lack of Decentralized Platforms: Finally, another big barrier is the lack of decentralized platforms that offer fractional NFT ownership.

4. Regulatory Uncertainty: Finally, there's a lot of regulatory uncertainty surrounding NFTs. Right now, it's unclear how these assets will be taxed or regulated. This uncertainty could discourage potential investors from entering the market.

How to Get Involved in Fractional NFTs

If you're interested in purchasing fractional NFTs, there are a few things you need to do:

1. Do your research: Before you invest in any asset, it's essential to do your research. This is especially true for fractional NFTs, as there's still a lot of confusion about how they work.

2. Find a reputable platform: Once you've done your research, you'll need to find a reputable platform that offers F-NFTs, like Golteum.

3. Choose your asset carefully: Finally, once you've found a platform and decided to invest, it's important to choose your asset carefully. Remember, NFT prices can be volatile, so it's important to pick an asset that you're comfortable holding for the long term.

4. Diversify your portfolio: As with any investment, it's highly advisable to diversify your portfolio. This will help to protect you from potential losses if the price of an NFT falls.

By following these steps, you'll be well on your way to investing in fractional NFTs.

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