How Does Fractionalization Affect the Governance Rights Associated with the Underlying NFT?
Fractionalization often transfers the governance rights of the underlying NFT from the single original owner to the collective body of the fractional share (ERC-20) holders. The unique NFT is locked in a vault, and the fungible token holders vote on key decisions, such as setting a reserve price, accepting a buyout offer, or determining the NFT's utility.
This mechanism decentralizes the decision-making process, converting unique ownership control into a democratic, token-weighted governance system.
Glossar
Fractionalization
Process ⎊ Fractionalization is the procedural mechanism by which a single, high-value asset, often a non-fungible token (NFT) or a large block of cryptocurrency, is mathematically divided into multiple, smaller, and typically fungible tokens.
NFT
Provenance ⎊ Non-Fungible Tokens, within cryptocurrency markets, represent a unique cryptographic token linked to a specific digital or physical asset, establishing verifiable ownership and authenticity.
Governance Rights
Voting ⎊ These rights, typically conferred by holding a protocol's native token, grant the holder the capacity to participate in on-chain decision-making processes.