KuCoin: Fracton Protocol - What Is It? How Does It Work?
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Table of Contents:
· What is Fracton Protocol?
· How Does Fracton Protocol Work?
· What Makes Fracton Protocol Unique?
· What is hiBAYC?
· Closing Thoughts
Non-fungible tokens (NFTs) went live in 2014 as unique blockchain tokens that signify ownership over other assets. The industry grew sluggishly over the years until it peaked in 2021, recording a volume of over $20 billion. With NFTs allowing creators to benefit directly from their creations, people have increasingly embraced the burgeoning sector.
However, the non-fungible nature of NFTs prevents their division, inhibiting adoption among small collectors. Additionally, most leading NFT collections have floor prices exceeding one Ethereum (ETH), approximately $1,500.
For instance, the cheapest NFT in Yuga Labs-owned Bored Ape Yacht Club (BAYC) currently goes for 93 ETH on OpenSea, the largest NFT marketplace. With some BAYC NFTs selling for as much as $2 million, it is clear that only the affluent population can afford digital collectibles in the collection.
Hoping to address the liquidity problem in NFTs and encourage broader participation by the wider public, a group of NFT fanatics, collectors, and traders rolled out Fracton Protocol. Check out what is Fracton Protocol in this video on KuCoin YouTube channel: https://www.youtube.com/watch?v=iO4sX7HZhjY
What is Fracton Protocol?
Fracton Protocol is a NFT liquidity infrastructure, with 2 steps of fractionalization (ERC721-ERC1155-ERC20), provides permissionless liquidity and oracle for all kinds of NFTs. Based on a deeply reformed ERC1155 middle layer standard, Fracton is building a non-status smart contract system, to increase the protocol’s efficiency, lower gas fees, and maximize asset security.
This project is dedicated to abstracting the financial layer apart from the utility of NFTs, Fracton can be easily integrated into both CEX and Dapps, and also offer solutions for both inter-protocol liquidity providers and fractionalized NFT market makers.
At the moment, Fracton Protocol supports the fractionalization of BAYC and PUNKS. However, the project seeks to expand into other flagship NFT projects over time.
How Does Fracton Protocol Work?
Before purchasing a BAYC NFT, Fracton Protocol launches minting campaigns for the particular digital collectible. The protocol raises funds through the public sale of Blind Boxes. Blind Boxes feature two properties: Collection and Round.
The Collection option involves Fracton depositing multiple acquired BAYC NFTs in the BAYC Meta-Swap. Fracton treats all NFTs in this Meta-Swap as if they have an equal valuation. People that purchase Collection Blind Boxes share ownership of the BAYC Meta-Swap.
On the other hand, Round involves the sale of 1,000 Blind Boxes to acquire a single BAYC NFT. This option ensures Fracton reasonably uses the raised funds, regardless of whether the BAYC purchase goes through.
Upon successful minting round, Fracton purchases the target BAYC and deposits the digital collectible into the Meta-Swap. Here the users can open the Blind Boxes to get People’s BAYC. The platform’s users can leverage People’s BAYC to withdraw BAYC from the Meta-Swap.
Fracton uses a dynamic pricing model while selling Blind Boxes. This model takes into account the low liquidity and high volatility of NFTs while setting prices. As a result, Fracton adjusts the prices of Blind Boxes daily, depending on the floor prices of target NFT collections on OpenSea. Additionally, the platform features an active premium buffer in case of insufficient funds.
Fracton leverages Meta-Swap to change Blind Box and People’s BAYC fractions - ERC-1155 tokens - to ERC-20 fractions. Through Meta-Swap, users can swap People’s BAYC and Blind Boxes to hiBAYC, which is the ERC-20 token for the BAYC collection on Fracton.
However, users can only swap hiBAYC to People’s BAYC, not Blind Box. Fracton does not have a time limit for swapping Blind Boxes into hiBAYC, meaning users can always swap Blind Boxes to trade hiBAYC in the market. The exchange rate for the ERC-1155 fractions for hiBAYC is constantly 1:1000.
In the event of a failed purchase, Fracton repurchases all accrued ERC-20 fraction with the raised funds. This process helps control the inflation of ERC-20 tokens, ensuring that the intrinsic value of each token has the backing of equal ownership of one NFT in the Meta-Swap.
In the case of BAYC, users need to collect 1,000 People’s BAYC to redeem a random BAYC NFT from the Meta-Swap.
What Makes Fracton Protocol Unique?
Unlike other NFT trading platforms, Fracton Protocol allows users to buy, own, or sell top NFTs fractionally. This approach helps more people onboard the NFT space and actively participate in trading the most coveted NFT collections.
There are several innovative mechanisms in Fracton Protocol.For instance, it creates Meta-Swap, a One-Stop NFT liquidity tool, for multiple standard tokens to break through the traditional paradigm. Meanwhile, Fracton rewrote the ERC-1155 standards, making it convertible to the fractionalization process.
Additionally, Fracton features the Non-Fungible Crew, a collection of 10,000 profile picture (PFP) NFTs. Holders of these NFTs will get the power to become decentralized verifiers in the Fracton ecosystem.
Moreover, Fracton also aspires to become a decentralized, open, and collaborative NFT fractionalization protocol. The Fracton (FT) token is a vital part of the project’s mission because it serves as the protocol’s governance token.
Other use cases of the FT token include incentivizing user participation and serving as the primary payment means in the Fracton ecosystem.
What is hiBAYC?
To streamline the process of trading NFTs on its platform, Fracton Protocol integrates ERC-20 tokens. As aforementioned, the Fracton platform currently supports BAYC NFTs. The ERC-20 token compatible with BAYC is hiBAYC. hiBAYC represents 1/1,000,000 ownership of one BAYC in the BAYC Meta-Swap
As Fracton continues integrating more top NFT collections into its platform, it will add more ERC-20 tokens. For instance, if the project adds support for CryptoPunks, it will introduce an ERC-20 token for the collection.
Closing Thoughts
By fractionalizing top NFTs, Fracton Protocol exposes a large population to top NFTs. This approach helps the platform stand out as an NFT trading platform for retail investors, giving it a competitive edge against digital marketplaces that only support the trading of whole NFTs.
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