Fractional non‐fungible tokens: Overview, evaluation, marketplaces, and challenges

Abstract

Fractional non-fungible tokens (NFTs) have emerged at the forefront of blockchain innovation, merging tokenization, NFTs, and fractional ownership to democratize access to high-value digital assets. In this paper, we explore the fundamental concepts of blockchain technology, smart contracts, NFTs, and tokenization to lay the groundwork for understanding fractional NFTs. We investigate key ERC standards, including ERC-20, ERC-721, and ERC-1155, which are pivotal in enabling the creation and management of fractional NFTs on the Ethereum blockchain. Then, we present two major processes in fractional NFTs, minting and reconstitution. We develop fractional NFTs based on ERC standards and evaluate their gas consumption. Furthermore, through a comprehensive review of existing platforms, we analyze their minting and reconstitution processes and underlying ERC standards. Challenges, such as regulatory compliance and security, are also examined. We highlight the significance of robust security measures and transparency to build trust in fractional NFT ecosystems. While the field is still evolving, fractional NFTs have the potential to disrupt traditional ownership models and revolutionize industries. We envision fractional NFTs fostering a more inclusive and decentralized digital economy as technology advances and adoption grows.