A Secure Standard for NFT Fractionalization

Abstract: Non-fungible tokens (NFTs) offer a unique method for representing digital and physical assets on the blockchain. However, the NFT market has recently experienced a downturn in interest, mainly due to challenges related to high entry barriers and limited market liquidity. Fractionalization emerges as a promising solution, allowing multiple parties to hold a stake in a single NFT. By breaking down ownership into fractional shares, this approach lowers the entry barrier for investors, enhances market liquidity, and democratizes access to valuable digital assets. Despite these benefits, the current landscape of NFT fractionalization is fragmented, with no standardized framework to guide the secure and interoperable implementation of fractionalization mechanisms. This paper contributions are twofold: first, we provide a detailed analysis of the current NFT fractionalization landscape focusing on security challenges; second, we introduce a standardized approach that addresses these challenges, paving the way for more secure, interoperable, and accessible NFT fractionalization platforms.