Fracada il Primo
With the support of Project Catalyst, dcSpark is excited to announce the release of a new upgraded version of Fracada i.e. Fracada v2: il Primo.
This new update gives novel application developers the tools to build new and exciting products for the Cardano ecosystem. In this post, we’ll explore the base functionality Fracada provides to developers and speculate on some potential new use cases they can begin building with Fracada il Primo.
Included in Fracada il Primo is a script that deploys the example smart contract on the Cardano testnet and then utilizes it to demonstrate core functionality of the smart contract. First, an NFT is locked in exchange for one hundred fractions. Next, a second NFT is added to the contract, creating an ‘NFT bag’. At this point, the demo burns the 100 tokens in exchange for the 2 NFTs that are locked in the contract from the first two steps. You will be able to learn more about the technical aspects of Fracada il Primo in our upcoming blog post.
Fractionalizing NFTs on Cardano
The most straightforward use of Fracada is locking an asset behind a contract and minting the desired number of fractional tokens. The wallet which fractionalizes the NFT will receive 100% of all the fractional tokens created. At this stage, the fractional tokens represent split pieces of the NFT as a whole, thus bringing fungibility and better price discovery to CNFTs!
With these new fractional tokens in hand, an individual can begin using them within various DeFi dApps. One example of such is increasing liquidity for high-value NFTs via DEXs. By allowing the market to have the ability to buy/sell on portions of the NFT and thus also potentially go long/short on NFTs, we now enable those NFTs to finally be priced by the market.
Other examples include cases where a user cannot afford the whole NFT. However, they may still be interested in owning a piece of it as a speculative investment or for the ability to show off the NFT as a profile picture on social media. In another scenario, owning a fraction of the whole could represent voting power in a DAO or entitle the partial owner to any other possible uses the NFT can come up with.
Beyond the digital environment, fractional NFT usage could also have benefits in the physical world. Ownership of big-ticket items such as houses, cars, apartment buildings, community centers, etc., can all be fractionalized. Their fractions become tradable assets with access to all the DeFi tools that exist on-chain, which brings liquidity to traditionally illiquid asset classes.
These applications are possible when the contract locks a single asset and fractionalizes it, but that’s not all that Fracada can do–introducing the ‘NFT Bag’.
‘NFT Bag’
Fracada il Primo now enables the combining of several NFTs together to be represented by the exact same fractional tokens.
For example, with Fracada il Primo a single NFT can be locked with 100 fractional tokens minted and dispersed to others. At a later date, the holders can decide to add another NFT into the “bag”, thereby increasing the value of the fractional tokens of all holders. This can be repeated ad-infinitum, thereby continuously providing more and more value to token holders.
This has several fascinating applications, which we’ll elaborate on, but we are excited to see what the Cardano Community can come up with. This demo uses a multisig majority to prevent arbitrary NFTs from being added to the bag.
DAO NFT Treasuries
There are currently several DAOs in the Cardano community which collect NFTs and have tokens that represent a shared ownership of those NFTs. However, at the moment this is done in a trusted manner–the community members must trust the individual with the keys to be responsible with the bag. By building on Fracada, a DAO would be able to utilize a smart contract to do this fully trustlessly. As the treasury funds are used to purchase NFTs, each NFT could be added to the DAO’s NFT Treasury–a smart contract based on the primitives provided by Fracada.
This unlocks great potential, wherein the DAO NFT Treasury continues to accrue more and more value over time, potentially opening up the option to interop with DeFi protocols either to collateralize or use the NFTs otherwise in new ways.
NFT Indexes
Individual NFTs are an illiquid investment vehicle, subject to high variation in valuation due to their perceived value built upon scarcity. An NFT Index could allow speculative investment in small fractional ownership of numerous NFTs rather than complete ownership of a single NFT asset. An example of this could be owning 1/20th of 20 different floor SpaceBudz instead of one particular SpaceBud, or owning a piece of the floor from each of the top 10 NFT project collections. This makes possible a new way to invest in NFTs, which are subject to different market forces than a single NFT.
Trading ‘NFT Bags’
When Cardano NFTs first entered the ecosystem, Discord powered the markets. Negotiations happened on public servers, auctions were run by bots, and server mods performed escrow. This collective drive created a functioning market, but the market still operated as a high-trust environment without smart contracts. Today we have reduced trust significantly post Alonzo hard fork, yet we haven’t achieved the same functionality that the Discord servers once provided. While the current NFT marketplaces use smart contracts, none of them allow for larger trades (with many NFTs).
Fracada provides the foundation for developers to learn and work off of by displaying how one can lock many NFTs into a single contract with conditional unlocking. This capacity is exactly what’s needed to enable use cases such as these ‘NFT Bag’ sales. With some parameter changes, this can be composed and integrated into NFT marketplaces, and individuals would be able to sell bulk NFTs in a single contract, just like we used to do.
Conclusion
We’ve discussed the core features of this new financial primitive, which is now available to the entire Cardano community to take advantage of. From the various potential applications it unlocks, users can start to really understand what is possible with Fracada in their hands. An upcoming audit will solidify the security of the Fracada il Primo contracts, thereby ensuring the developer community has a solid base to build off of. We can’t wait to see what the community comes up with and what future iterations or forks others manage to create!
At dcSpark, we have a keen focus on building the core primitives, tooling, and other ecosystem components to further our mission of growing blockchain ecosystems. With the funding and support of the Cardano community, we’re happy to deliver on our proposal from Project Catalyst’s Fund 7 and open source the Fracada V2: il Primo.
Connect with us:
- dcSpark Website
- dcSpark Discord
- dcSpark Twitter
- Urbit Group: ~havbex/dcspark
