In this section, we will discuss the concept of fractionalization in Caviar's shared pools and its impact on the trading process. Fractionalization allows users to divide NFTs into smaller units, making it possible to trade and earn yield on fractions of NFTs rather than whole units.
NFT Fractionalization Process
In Caviar's shared pools, fractionalization applies only to NFTs. When a user fractionalizes an NFT, they receive one fractional ERC20 token representing their NFT. This token can then be traded in the pool as a fraction of the original NFT.
Trading Fractional NFT Tokens
Fractional NFT tokens enable users to trade smaller portions of an NFT, providing greater flexibility and accessibility for traders. Users can buy or sell fractional NFT tokens just like whole NFTs, allowing them to acquire or divest partial ownership of NFTs.
Impact of Fractionalization on Liquidity
Fractionalization has the potential to increase liquidity in shared pools, as it enables a larger number of users to participate in the trading of NFTs. By allowing users to trade smaller portions of NFTs, fractionalization can attract more traders and encourage greater trading volume.
In summary, fractionalization is an essential feature of Caviar's shared pools, allowing users to trade fractions of NFTs rather than whole units. This feature increases the flexibility and accessibility of NFT trading and can contribute to higher liquidity levels in shared pools.