“..the tokenization of everything is the biggest thing we have ever seen and will ever see. It dwarfs all other opportunities for risk reward over time.” — Raoul Pal
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? Why It Matters
High-quality assets tend to have above-average returns.
? Problem
Most of us can’t afford to buy fine art, an entire commercial building or billion-dollar company.
? Solution
Fractionalization democratizes ownership.
Don’t have millions for a Rembrandt or Monaco condo?
No problem. Buy shares instead.
? Players
Platforms
Fractional.art • Buy, sell and mint fractions of NFTs.
Royal • Buy ownership in songs directly from artists.
Republic • Invest in startups, real estate and crypto projects.
FranShares • Earn cash flow from franchises without operating.
Otis • Trade shares of collectibles, NFTs and art.
Pacasso • Buy shares in a second home.
Tokenized Assets
House of Tiara • A CryptoPunk bought by Crypto Cookout.
ConstitutionDAO • An attempt to buy a copy of the US Constitution.
CryptoPunk #7171 • A fractionalized hoodie punk.
Trippy Apedog • A pair of NFTs from BAYC and BAKC.
Stay Free • An Edward Snowden NFT bought for 2,224 ETH by PleasrDAO.
DAOs
WhaleShark • DAO with a token backed by NFTs.
Crypto Cookout • A group that pooled funds to buy several CryptoPunks.
PleasrDAO • The group behind iconic NFTs purchases.
CityDAO • An experiment in decentralized land ownership.
? Predictions
Fractionally-owned networks will become more common. Shared ownership is an acquisition and retention strategy. See Chris Dixon’s Why Decentralization Matters.
NFT projects with limited supply (say 10,000 items) will have millions of owners. CryptoPunk #7171 is an early example with 700+ owners (including me).
NFT indices will become a popular way to lower volatility and boost diversification. Fractional vaults consist of single items and collections.
☁️ Opportunities
Look into high-quality, tokenized assets. See Fractional, PartyBid and Rally.
Own protocols that you use. See ENS, Mirror and Audius.
Share ownership with your audience. 3LAU fans own 50% of streaming rights for “Worst Case.” Lyrah shows what the future of contracts may look like.
Tokenize high-quality assets. Fractional has a “Curator’s Fee” to reward initial owners.
?️ Risks
High Valuations • Keep an eye on fundamentals and valuations. Share prices (such as $1 per share) are arbitrary. What’s the valuation?
Illiquidity • How will you get paid back? Is there a secondary market for your shares? Will you have to wait for an acquisition? Understand liquidity events.
? Key Lessons
Fractionalization increases access to quality assets and makes it easier to diversify.
Fractionalization unlocks liquidity and boosts valuations. See the liquidity premiums.
? Haters
“Facebook is a public company. It’s technically a user-owned network.”
Facebook went public after 8 years. They have dual-class shares. There’s not much overlap between users and decision makers.
“PFPs should not be fractionalized. If they are, who gets bragging rights?”
Social consensus will decide. Some add party hats to NFTs to indicate fractional ownership.
“This report is too focused on web3.”
We looked at traditional asset classes in past reports. See Equity Crowdfunding.
? Links
Who should I talk to about fractional ownership? • The tweet behind this report.
From MakerDAO and NBA Top Shots to Fractionalizing NFTs • On the past and future of DeFi and NFTs.
Farmland and Rural Opportunities • On platforms fractionalizing farmland.
? Related Reports
Equity Crowdfunding • Fractionalization of non-web3 assets.
NFTs • A closer look at NFTs.
DAOs • DAOs are vehicles for financial, human and cultural capital formation.
Alternative Assets • Other long-tail asset classes.
Crowdsourcing • See how information, effort and innovation are being crowdsourced.
? Thanks
Thanks to Stewart Townsend (Podcast Hawk), Stefan von Imhof (Alternative Assets Club), Wyatt Cavalier (Alternative Assets Club), Vajresh Balaji (SuperLayer Labs), Yarty Kim (A4E), Sean Hua, Aadil Razvi (Demand Curve), Ashwin (Trends.vc) and Rick Segal (CRAAG Angel Group). We had a great time jamming on this report.
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Trends PRO #0076 — Fractional Ownership has more insights.
What you’ll get:
20 Platforms (233% More)
10 Tokenized Assets (100% More)
8 DAOs (100% More)
6 Predictions (100% More)
8 Opportunities (100% More)
4 Risks (150% More)
5 Key Lessons (153% More)
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