Will FNFTs S(l)ave the World?
This is a follow-up blog piece on the domain review for domains FNFTs.net. You can read the revew here.
What is fractional ownership?
Firstly, a few words for those who may note be entirely familiar with the concept of FNFTs.. During the first phase of the NFT movement, each NFT had a single owner at any one time. You picked up your Crypto Punk or Bored Ape and it belonged to you. But when floor prices for a single unit ran higher than the average house price in 99% of the world, something had to be done.
In stepped FNFTs to fractionalize a single NFT asset into smaller pieces. One Ape worth $420,000 could thus be split into 1000 parts, each valued at $420 each.
The knock-on effects of this are revolutionary, as allowing multiple holders means greater liquidity and price discovery. Meaning that NFT assets are more accessible to buyers, sellers, and investors of all sizes.
FNFTs will allow the market to scale
While this manuverability may seem highly useful from a functional point of view and also allow more players from traditional finance and other sectors to gain exposure to NFT assets, its future impact for the industry cannot be overstated. This is because within it lies the ability to scale, something which as the NFT movement matures it will either need to ensure or risk falling below the threshold for mass adoption.
Bored Apes are great, but there will never be more than 10,000 of them. 10,000 collectors items with a maximum ownership of 10,000 people (or more accurately, 10,000 blockchain addresses). But break each down into 100, 100,000 or 100,000,000 and now you have a market!
A setting where many more players participate can paarticpate and no one player can easily move the market.
FNFTs as securities
Now follow the thread a little further and see the potential for FNFTs to be embedded as highly liquid securities, pegged to the underlying assets but with an entire ecosphere and purpose of their own.
The implications of this are particularly scene-changing in scope when you think about all the places where NFTs have already ventured. And those places where they could eventually wander…
..very far away from the original borders of the crypto-NFT space — surfing the waves of anything that can be tokenized. That is to say, basically anything — from someone’s fart to the house where said bodily function occurred.
FNFTs are disrupting the real estate sector
Multiple projects have already tokenized ‘hard’ legacy assets like real estate. And people love it. You take a share in a house. If it is rented, you get a proportionate share of that income. If the house is eventually sold, you get your cut.
Much of the success of these FNFT realty projects stem from the inclusivity allowed by this concept of ownership. You may not have the cash to pony up for a house, but you would like the sense of security of owning a property (or calling yourself a homeowner), so you buy a house-shaped NFT. And don’t live in terror that rising maintenance fees will one day force you to sell up!
Or perhaps you are unlikely to get a visa for the country you’re investing in or people of your nationality are prohibited from buying up speculative real estate there. That’s cool, I’ll just get the tokenized version.
The rules (or sanctions) of your country may even prohibit you from investing in the target country altogether. Yet here you are, with your own little stake in it, sitting right there on your ledger.
This is the beauty of NFTs, they allow participants of all shapes and sizes to invest. But there is an extra layer that has already been woven into the system from early on.
In the case of tokenized real estate in works like this..
How tokenized real estate works
Let’s say the firm FNFT.rentals acquires a luxury house in New York for $10 million, then mints 100 tokens, 10 are kept within the firm and 90 are opened up to investors. For each single NFT acquired, the investor gets $100,000 of prime real estate.
But let’s say the one of these investors, FNFTinvestor.com let’s call him, wants to rebalance their portfolio, or needs some quick cashflow. If his original (whole unit) NFT has in turn already been broken down into 1,000 fragments, this could be accomplished very easily. Leaving FNFTinvestor.com far more flexible and able to ride the changing waves of the market.
This investor still believes in the solidity of NYC real estate, but there’s an expansive secondary market, the FNFT market, available to them if they just follow the steps..
- The investor decides to liquidate at market price 200 of his shares in NYC realty to get the cash he needs and, as the market is liquid, decides to place another 200 of these fragments on the order book.
- A few trading days later, the market hits their desired sell price and they are able to direct their capital elsewhere. They now have 20% in cash, 20% for portfolio rebalancing, but still have 60% of their original position in NYC real estate.
The fractionalization of their original investment into smaller constituent parts, FNFTs, has made this possible.
All the investor has done is release some of their particular fragments of a much larger asset into a liquid stream of capital — the buoyancy of which the existence of a large number of fractional shares has spurred.
By being small and easily tradeable, a market for these shreds of NYC real estate developed. And like any well-functioning market, the investor now helps prop up the buoyancy of the market by effortlessly putting these 400 of their fragments back into the stream.
Man is born free, but everywhere is interchained
The future you go into the concept of blockchain, the more you can’t help but see that it has the potential to free and then ultimately — and very comprehensively — enslave the human race. Or rather, making the human race a slave to itself — its warden’s keys chained to its chattels with outstanding efficiency, security and cross-chain transparency.
So it is also with FNFTs. Because, for better or worse, FNFTs have in their DNA the potential to be the decentralized version of the securities markets. Traded on markets limited in their scope only by the power of the human imagination and, eventually, the power of those who can’t afford to let such unbridled power run unchecked.
Think its ridiculous to arbitrage a picture of an ape back and forth for gains of thousands of dollars at a time?
Wait until everything you own, anything you touch, is being, or at least has the potential to be, traded back and forth thousands of times per second.
Derivativum ad infinitum
Or rather, wait until derivatives of derivatives of derivatives of derivatives of those things you value are whizzing about blockchain parts uknown. With major consequences for your finances and the society you live in.
Sounds a little far-fetched?
Pray tell then, what had the rebundling and rebundling of subprime mortgage debt in the mid-2000s to do with the estimated 100+ million jobs lost worldwide a few years later?
Or cut to the core of the matter and realize that mankind has been pulling the same shit for millennia! As a species.
We say we would never sell our grandmothers, until one of us breaks the line and does — getting some of our neighbors to thinking about we got quite a pretty penny for old Agnes. Then pop! Someone sets up a market for it and granny-selling becomes a viable if (at first) somewhat distasteful business.
Now it definitely all sounds way too far-fetched?
In that case, we will assume that you’ve never paid for any of the readily abundant assets humankind has eagerly repackaged and sold off in bits to the highest bidder.
Land, animals, or water, say.
At least with FNFTs you can weave set scarcity into their fabric from the start. Instead of relying on price/supply/trade restrictions later on — or, more inefficient still, the ever-shifting weight of moral judgement!