What is NIFTEX?
The Non-Fungible Token (NFT) market is a very promising one, but we think it is held back by an inefficient market structure. The uniqueness of each token makes trading them a lengthier and costlier process than trading cryptocurrencies. Fungibility makes for better markets. Our thesis is that fractional ownership through fungible tokens is the right solution, and enables a host of other benefits that make fractions an inevitable part of the future for NFTs. This is why we’ve built NIFTEX.com, a platform where fractions for any NFT can be created and traded by anyone.
What can fractions do for me?
Fractions, or “Shards” as we call them, have many benefits we’ll highlight here and probably many more that remain to be discovered. At its core, a Shard is an ERC20 token that functions like any other token on Ethereum except for one additional piece of logic, the Buyout Clause. The Clause will be explained further below. Let’s take a look at some of the anticipated advantages of fractions:
- Live Valuation: every time a fraction is traded on the open market, this updates the NFT’s total value, which is simply a multiple of its fractions. That’s something that has never been available so far in the NFT space..
- More Democratic: since you can now buy fractions of NFTs, access to valuable objects is widened from just one to a nearly infinite amount of collectors. That access is of course much cheaper as well: no need to plonk $10k USD down for a rare CryptoPunk - I can buy a fraction of it for $0.1, $1 or $10 now. This makes diversification across NFTs much easier as well for those building portfolios.
- More Liquidity: more buyers and sellers means better markets. Fractions also enable much easier diversifying in and out of scarce digital assets.
- Governance and Rights: as control is now spread over potentially many stakeholders, NFT “rights” such as revenue sharing and voting become tangible concepts, and models for digital object governance are opened up. This is only the beginning.
How does NIFTEX work?
NIFTEX is designed to be a self-service platform for anyone looking to fractionalize their NFT. Broadly speaking, you decide what percentage of the NFT you want to sell at what price. The NFT is custodied in an (audited) smart contract and ERC20 fractions are issued for it. During 2 weeks, people can come in and buy fractions at that price. Once all fractions are sold or the 2-week deadline is reached, you receive the ETH raised from the percentage you sold and everyone gets their respective fractions. The fractions are then listed on a token market platform like Uniswap or an OpenSea storefront. We are actively working on many improvements to this early model.
What’s the Buyout Clause and why is it needed?
Since these are still very early stages we’ve had to make a number of assumptions in building NIFTEX. One such assumption is that people would not want an NFT to remain fractionalized forever. It makes sense that owning 100% of the fractions would give you access to the underlying NFT, but once these fractions have spread out across the market it is an almost impossible task to re-acquire all of them. The Buyout Clause ensures that someone - person X - can recover 100% fractions if they make an acceptable price offer for the fractions. If the offer is not acceptable, person X can be bought out at that offer price instead. The Buyout Clause is inspired from tried-and-tested traditional governance clauses.
What’s in the works?
We have lots of exciting Launches and collaborations in the pipeline, so make sure to keep an eye on our Twitter. Just recently we acquired a rare zombie CryptoPunk valued at more than $11,000 of which we’ll be selling fractions, more info here. We’re continuously adding support for NFTs projects, but you can already get started with any NFT that has an OpenSea URL! A number of improvements and new features are also in the works and we’ll be sure to highlight them once they’re online. If you have questions, comments or feedback, join us in Discord. See you soon!