A Beginner’s Guide to Buying Fractions on Fractional.art

Dec 8, 2021 · 3 min read

Fractional.art is a way to purchase tokens which represent partial ownership of iconic and historic NFTs.

Q: What determines the price of a fraction?

A: Initially, the price of a fraction is set by the creator of the vault. They typically make fractions available in a liquidity pool via a fraction-to-ETH pairing using an AMM (e.g., Uniswap v3) which sets the price in ETH. Once purchases of the vault’s fractions begin, the price per fraction is dynamic and impacted by supply, demand, AMM bonding curves, whoever else decides to provide liquidity, and even how many fractions you are looking to collect.

Q: What does buying a fraction mean for me?

Fractional Ownership: You can say you own a part of the NFT(s) within the vault, prove to everyone you do in your wallet, join token-gated communities related to the vault, and appreciate the art within the vault collection you are now an owner of.

Flexibility: You have full control over what you do with the fractions you now own, which function as typical ERC-20 tokens. Voting Rights: When you own fractions, you can vote on the reserve price (ETH) for its vault which is the weighted average of all reserve price votes, based on the % of total fraction supply the voter owns. The reserve price is the minimum price someone needs to bid in order to trigger an auction!

ETH: If and when a buyout for the vault completes, all fraction owners will be able to trade in their fractions in exchange for the winning ETH. Your owned % of the total supply of fractions equals the % of winning ETH you will receive. So if you own 5% of ΞFRACTIONAL for example, and ΞFRACTIONAL gets bought out for 100 ETH, you can claim 5 ETH back in return for your ΞFRACTIONAL tokens.

Q: Why is this token so expensive?

A: This is a function of how liquidity pools work. The more liquidity there is, relative to the position you’re trying to trade, the easier it is to find a lower price. Note: If you’re interacting with a vault, and you see this warning, it’s a sign that liquidity is low. The implied valuation or “value” of the token at time of your trade may differ from the overall implied valuation of the vault.

Q: Who sets the reserve price?

A: The reserve price is the weighted average of all owners of the fraction who have set a reserve price. The auction process is kicked off when a bidder sets a bid that’s equal to or higher than the reserve price. The minimum length of an auction is 3 days and maximum is 8 days.

Q: What is Collectable Supply?

A: The amount of fractions a vault that are currently available in liquidity pools on a DEX.

Q: What is Implied Valuation?

A: Implied valuation is calculated as the total supply of tokens * the token price. The total supply is set by the creator of the vault (# of tokens). The token price corresponds to the dynamic pricing from the respective liquidity pool(s) where tokens are available for purchase.

Q: Anything else I should know?

A: Beware of slippage!


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