Is fractional ownership of luxury products a possibility?
Created on April 19, 2021
For most people, owning a thoroughbred horse, a valuable piece of art or a vintage car would be a dream come true. But how many people can afford such luxurious purchases? With fractional ownership, it is now possible for investors to purchase a stake in items that were previously reserved for the very wealthy.
A slice of luxury
Fractional ownership as a concept is not entirely new. Previously, it was associated with real estate and private jets, possessions that are not only costly to purchase but also to maintain. A private jet, for instance, is very costly to buy and comes with additional expenses such as flight insurance, maintenance and repairs.
Recently, fractional ownership has spread to the areas of comic books, vintage cars, wines, and artworks. In 2020, fractional ownership of luxury items experienced a major surge in popularity. Because of the cancellation of events such as betting, most traders were pushed online. That being said, the increase in popularity of fractional ownership is also a reflection of a broader movement towards a more democratized investment world.
Changes in the regulatory environment have also played a role in the surge of fractional ownership. For example, in 2015, the Securities and Exchange Commission allowed companies to raise a maximum of $50 million in their mini IPOs; this has allowed numerous companies to join the space.
Some of the companies recently involved in fractional ownership include My Racehorse (racehorses), Rally Rd (cars, sneakers, watches, and collectibles), Look Lateral (collectibles) Mythic Markets (games and Comic books) Acquicent (fine art and Collectibles), Artopolie (fine art), and Malevich (fine art) among others.
With the rise of Non-fungible tokens, a new class of fractional ownership is rising and it may turn out to be the future of fractional ownership.
F-NFTs are the future of fractional ownership
A fractional non-fungible token (F-NFT) is a variety of non-fungible tokens that is expressly designed for decentralized use and ownership. Such tokens are based on fundamentals such as:
- Co-ownership – all features and benefits of the token must be shared.
- Simultaneous use of the token is possible – use of the token by one shareholder should not prejudice the other co-owners. The same case applies to the release or purchase of part of the token.
F-NTFs are easier to implement with virtual goods. However, there will likely be a cross-over with real-world goods such as traditional investments. Most of the real-world assets will be tokenized to allow fractional ownership through F-NFTs.
Some of the industries that F-NFTs are likely to disrupt include:
- Arts and collectibles- most arts and collectibles increase in value as they age. Unfortunately, they are highly illiquid. With F-NFTs, it’s possible to divide their value and sell it to many investors to increase liquidity.
- Traditional assets and cryptocurrencies can also benefit from F-NFTs. For example, an F-NFT can be used as a portion of a cryptocurrency in relation to its growth and risk tolerance.
- Gamming – transforming a gamming asset into an F-NFT allows for the pooling of resources to co-own and crowdfund gaming assets.
Fractional non-tangible tokens still have a long way to go before they can truly become the future of fractional ownership of luxury goods. There are still a lot of answers that need to be answered before such tokens are designed and produced but we can all agree that they provide a very interesting solution to the world of fractional ownership.
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