How Does Fractionalization Affect the Governance Rights Associated with the Underlying NFT? ▴ Learn

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.

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