How does it work?

1. First, the real-life data and statistics are tokenized using the Fractional NFT methodology, giving users something to trade. These are called ‘Smart Tokens’.

2. The tokens are managed using a bonding curve which automatically sets and adjusts the price of each share token based on supply and demand.

3. When the user purchases a Smart Token, their payment gets added to the reserve balance of that token, and new Smart Tokens are issued to the buyer. What this means is that the reserve balance of the token will increase, as will the supply of that token, and so its price will increase too. When a Smart Token is then liquidated by the user, their username is removed from the supply chain, the reserve tokens are transferred back to the seller, and the overall token price drops again. It really is all about supply and demand.

4. Of course, what this means is that the reserve price is constantly changing and fluctuating – and that’s where stable coin comes in as the common reserve token, designed to ensure that the price fluctuation of the reserve does not impact the overall price of smart tokens as a whole.

Other factors that need to be considered include the hard data – both real time and historic – as these help to build a formula which can influence the shares’ final price and help users to identify those investments which promise the biggest outlays.

Not every user holds on to their shares and tokens – there are many who look to constantly buy and then sell on their shares in order to make additional profit. These kinds of users add to the fluctuation in the price of assets. However, for those who do hold ownership of their Fractional NFT’s and sell a larger volume in one go, the benefits include less in the way of purchase transaction fees which are channeled back to the NFT owner.

All of these factors add up to create a hyper liquid market which exists around the real-life tokenized asset – i.e., the player or the team – represented by the Fractional NFT.