Nftfy User’s Guide

A manual for decentralized fractionalization of NFTs

Following the series of articles about Nftfy and the process of decentralized fractionalization of NFTs — you can check them out in Exponential Framework on DeFi and The Decentralized Fractionalitization — in this text, we will discuss how the Nftfy protocol works and how the legal clauses selected for the Minimum Viable Fractionalization (MVS) apply to the smart contracts.

As discussed in the previous articles, the clauses of the Exit Mechanism are extremely necessary for the perfect operation of a fractionalization process, which runs in an autonomous, fluid and immediate manner, without depending on the intervention of those involved.

The Fractionalization Protocol must guarantee 3 topics.

1. The Fractions must be backed by the NFT;
2. A simple, fluid and immediate process for redeeming the NFT;
3. A process that guarantees the rights of shareholders after the Redeem.

Therefore, during the Fractionalization, the NFT’s owner stakes it in the contract and creates a Shareholders’ Agreement. This is simply the action of defining the Exit Price Fixed, by determining the amount and the cryptocurrency to be used as a token basis. For example: 20 ETH; 300,000 DAI; 10,000,000 MANA.

Any other ERC20 can be used as a token basis. However, in order to simplify the explanation in this article, we are going to consider ETH as the cryptocurrency determined.

According to that rule, any user can redeem the NFT by paying this amount in ETH, or using a combination of Shares and ETH. The part paid in ETH is stored in a vault, where it waits for other users who still have shares to be exchanged, rewarding them with the respective amount of ETH.

It all can be resumed in three processes: Fractionalization, Redeem, and Claim. In this article, we focus on the practical part, that is, on how to use the Nftfy platform. The whole procedure is fully explained in our White Paper.

How to fractionalize NFTs in Nftfy Protocol?

Fractionalization

1. Log in via wallet (Metamask and Portis);
2. Visualize your NFTs on Nftfy Dapp;
3. Select the NFT to be fractionalized;
4. View the complete NFT metadata and establish your contract rules: determine the exit price by choosing a cryptocurrency and the respective amount;
5. Confirm the blockchain transaction via wallet;
6. Fractionalization completed: you receive 100% of Shares (ERC20 tokens) in your wallet.

After this process, the Shares can be distributed in any way the owner wishes, whether by donating or selling them in private or public offerings.

Redeem

The Redeem process establishes that any user can pay to extract the NFT for himself/herself. The only necessary thing is to pay the Exit Price as previously described, no matter the way. However, there is an interesting possibility the user can proceed in order to spend less ETH. This process consists of the following steps:

1. In the open market, the user starts to search for and buy as many Shares of the NFT as possible at the lowest prices. This search is not an obligation; it is simply a possibility that might be useful.
2. After accumulating a significant amount of Shares, the next step is to access the Nftfy protocol to do the Redeem.
3. The Shares are presented and the remaining quantity is paid in ETH.
4. Once the process is confirmed, the user receives the NFT.

Two other events take place internally within the contract:

• The contract burns the Shares that were sent;
• The amount of ETH paid is stored in the Vault.

Claim

The process called Claim is important to guarantee the right of the shareholders who own Shares of the NFT, which, at this moment, is no longer at stake. In this case, after the Redeem, the amount of ETH paid is stored in the contract Vault awaiting the shareholders to present their Shares that were previously backed by the subjective value of the NFT and are now backed directly by an amount of ETH.

The Claim process can be understood as follows:

1. The Claimer access the contract of the Shares;
2. The Claim is requested to exchange the Shares for the ETH;
3. Once the transaction is confirmed, the respective amount of ETH is sent to the Claimer’s address.

Internally to the contract, after each Claim operation, the Shares received are burned and the quantity of ETH is sent to the Claimers’ addresses. After the total burning of Shares, the contract is finalized on the Ethereum blockchain.

Therefore, the three basic functions that enable the MVS are completed, which can be performed in a completely trivial way on the Nftfy platform. The fractionalization process, until then considered so complex and expensive, is remodeled in a simple protocol, decentralized and resistant to censorship, that does not restrict the activity of fractionalization to the elite and democratizes the access to everyone. We can analyze the impact of this on the DeFi and NFT ecosystems, and on the society in general, which will now be able to access a whole new class assets. In addition, we are about to experience an expansion in the number of launches of public offerings.

Feel free to follow more upcoming news and posts about Nftfy Protocol in our Discord community. We invite you to know more about Nftfy by accessing our White Paper.

The project is already running! Join us and fractionalize your NFTs on the Nftfy Platform.