Introducing What the Frac

What The Frac is a new decentralised application which introduces a new DeFi primitive that tokenises proportional ownership in any NFT.

Introduction

DeFi is growing at a rapid pace, bringing all sorts of traditional and innovative financial products to the masses. Everyday there are new awesome products being built that democratise the access financial tools.

At the same time we are experiencing the rise of blockchain native digital non fungible assets like plots of land in CryptoVoxels and Decentraland or pieces of art from independent artists on SuperRare.

With What The Frac we believe we can bridge these two worlds by removing the barriers to invest in these assets.

Problem

High value digital assets can cost up to multiple thousands of dollars, making the market only accessible to those with large amounts of capital.

If you want to create a portfolio with diversified exposure to digital non fungible assets you would need hundreds of thousands of dollars or settle for less desirable assets which might not appreciate in value as much.

Solution

In the DeFi ecosystem proportional shares in yield generating pools are often tokenised. What The Frac takes a similar approach by tokenising the proportional share in the proceeds of an auction of the non fungible asset.

Users

What The Frac is a multi user type system. Each user has its own incentives to use the product.

NFT Seller

Has an NFT and wants to sell it or a portion of it for the highest price possible.

Fraction Buyer

Wants to speculate on the price of an NFT but does not want to buy the entire item.

NFT Buyer

Wants to buy the NFT on auction because he/she thinks they are sold at a fair price.

Keepers

Get rewarded by calling certain functions in the smart contract in return for some profit.

Fractionate lifecycle

The process of fractionalizing an NFT, selling the fraction tokens, auctioning the NFT and then distributing the profits we call the “Fractionate Lifecycle”.

Fractionate

When a user fractionates an NFT a token is created which represents a proportional share in the proceeds of a future auction.

Liquidity Bootstrapping

To be able to easily distribute the fraction tokens they are deposited into a newly created balancer pool together with some DAI.

The weights of this balancer pool start at 2% DAI and 98% fraction tokens and gradually change over time to the inverse (98% DAI and 2% fraction tokens). This allows users who fractionate the NFTs to easily create a liquid market which is capital efficient.

Auction

When an NFT is fractionalised the user can configure the duration and minimum bid of an auction. We use highest price English style auctions. The proceeds of these auctions are shared proportionally among fraction token holders.

Claim Process

Due to the nature of the EVM its impossible to push the proceeds of the auction to all fraction token holders at the end of the auction. We could require fraction token holders to come back to the dapp and claim their proceeds but we opted for a more user friendly solution by incentivising people to claim the auction proceeds on behalf of someone else. Claiming proceeds on behalf of someone else entitles them to 5% of the proceeds. We call these entities “Keepers”

What’s next?

What the Frac is currently running on rinkeby as a POC. You can find it on whatthefrac.life. We want to bring the project to mainnet and add more ways to fractiolize income and ownership in NFTs.