Gate.io Fraction Token’s — Stronger liquidity and greater flexibility for “blue chip” NFTs
On the 15th of January, Gate.io launched the 4th installment of its Fraction Token, ITRUMP — the The First Digital Trading Card by President Trump.
To summarise, On December 15, 2022, the Trump Digital Trading Cards collection were released for $99 each. Despite the collection receiving widespread criticism from media outlets, all 45,000 NFTs (featuring former President Donald Trump in various poses and attire) sold out within 12 hours of launch. This collection follows the controversial release of the Melania Trump NFT series, which was auctioned on Solana in January 2022.
Prevalent to note is that the Trump Digital Trading Cards collection on OpenSea is an independent venture from his campaign for re-election. Purchasing these NFTs will not affect his chances of reclaiming the office. However, buyers of 45 NFTs will be given the opportunity to have dinner with the former President. For those who are not interested in purchasing 45 NFTs, there is still an opportunity to win various prizes through the Trump Sweepstakes, such as signed merchandise and video calls with the former President.
Given Trump’s social and cultural acclaim as a global media and business icon, Gate.io released ITRUMP on the 15th of January to strengthen liquidity of the collection.
As mentioned, in the lead up to ITRUMP, Gate.io has also launched several related fractional tokens — IPUNKS, IAZUKI, and IBAYC. IPUNKS
To recap, the NFT Fraction Token initiative is a creative solution proposed by Gate.io to solve the perpetual issues around low liquidity and high costs for top-tier NFTs.
CryptoPunks, created in 2017 by Larva Labs, is the anchor for this endeavour. By purchasing an original CryptoPunk and pledging it to the Treasury, Gate then issued a corresponding number of ERC20 tokens that people could buy to hold fractional ownership of the original CryptoPunk NFT. The issuance ratio is 1:10,000 or 10,000 ERC20 tokens for 1 x original NFT with each ERC20 token representing 1/10,000 ownership of the original NFT work. Gate’s unique NFT AMM tool allows for easy exchange of ERC20 tokens for fractional NFTs, with the option to redeem the original NFT once a certain amount of fractional NFTs are collected.
The ERC20 token issued for the CryptoPunks collection trades under the label IPUNKS with a USDT pairing. The circulating supply of PUNKS is equal to the total supply and number of CryptoPunks in the CryptoPunks Liquidity pool. CryptoPunks in the pool can be redeemed by IPUNKS from Liquidity pool at any time.
IBAYC
Following IPUNKs was IBAYC — an ERC-20 token pegged to Bored Ape Yacht Club NFTs owned by Gate.io. One IBAYC token represents 1/10,000 BAYC in the BAYC Liquidity pool.
The circulating supply of BAYC is equal to the total supply of BAYC in the liquidity pool and can be redeemed at any time. IBAYC also has a trading pair with USDT.
IAZUKI
Phase three was IAZUKI.
The Startup Sale for IAZUKI tokens took place from 06:00 am on January 8th, 2023 to 06:00 am on January 9th, 2023 (UTC) with trading for IAZUKI/USDT pairs beginning at 09:00 am on January 9th. As with IPUNK and IBAYC, each Azuki NFT is fractionalized into 10,000 IAZUKI ERC-20 tokens and available to trade with USDT pairing.
How does the Fraction Token help with NFT Liquidity?
As the popularity of NFTs grows, the prices of popular collections can skyrocket, making them only accessible to a select few wealthy investors. By dividing the ownership of ERC-721 or ERC-1155 tokens into multiple ERC-20 tokens through fractionalization, the NFTs become more affordable. Other related benefits that aid in liquidity include:
Democratization
One of the main advantages of fractional NFTs is democratization. The high cost of some popular NFTs can make it difficult for smaller investors or collectors to participate in the market. By fractionalizing an expensive NFT, the cost is lowered and it becomes more accessible to a wider range of people.
Price Discovery
Fractionalizing NFTs also aids in price discovery. Determining the right price for an expensive NFT with limited transaction history can be challenging. By breaking down the NFT into more affordable pieces, more people can participate in trading the asset, making it easier to determine its actual value.
Increased visibility for creators
Creators also benefit from fractionalization as it allows for greater visibility online and a more liquid market, enabling them to reach a wider audience.
How Do Fractional NFT Holders Benefit?
Fractional NFT holders can own a percentage of a larger, more expensive NFT. Depending on the NFT and the platform it was purchased on, the holder may have access to exclusive NFT communities and other perks such as voting rights. Some fractionalized NFT projects even have staking options, allowing holders to lock up their NFT on a platform or protocol to receive staking rewards and other benefits.
Exchange Listing & added Liquidity
Users also benefit from having the fractional tokens listed on gate.io, as it helps strengthen and streamline liquidity. Unlike the more specialised and restrictive NFT vaults on platforms such as NFTX, Gate.io fractional tokens are ERC-20 compliant. As such, when the exchange purchases an NFT, issues and lists 10,000 corresponding tokens, any user of the platform can buy or sell the tokens for USDT.
NFT Redemption
Although this feature is still under development, eventually, if a user holds more than 10,000 tokens relating to a specific NFT like IPUNK, they visit the gate.io NFT market to redeem said tokens for the original and the whole NFT at its original price. Furthermore, this also allows for added incentives as users can buy listed fractional ERC20 tokens from the market, swap the 10,000 tokens for the original NFT, and then resell the original NFT on secondary marketplaces like OpenSea.
Wider NFT Investment Opportunities
Following the launch of the fractional tokens, users can also add their own NFTs to the liquidity pool, and Gate.io will help issue ERC-20 pegged tokens accordingly.
