Zima Red ep 105: Andy8052 - Fractionalize Your NFTs With Fractional
Primer: Some sought-after NFTs are beyond the reach of retail investors. Andy Chorlian aims to solve this issue with Fractional, a decentralized protocol where NFT owners can mint tokenized fractional ownership of their NFTs. In this episode of the Zima Red podcast, he shares his passion for NFTs and Fractional with host Andrew Steinwold.
Background
Graduated with a Computer Engineering degree in 2016
Was working in a FinTech company. Found it boring
Found out about crypto because he was trying to deposit money in a gambling site
In 2017, he changed jobs. Was at a crypto-aware FinTech startup. Was able to learn Solidity on the job
Joined MakerDAO in 2019. Spent 2 years there on their smart contracts team
Started Fractional
Thoughts On Acquiring Crypto For Gambling
Have been tech-forward and was open to it
Thoughts On The Bitcoin Whitepaper
Did not really understand it
Only understood it from the philosophical/idealistic level
His interest shifted from Bitcoin to Ethereum due to the latter’s programmability
Moving To The Crypto-Aware FinTech Startup
They were the first robo-advisor that allows people to invest in Bitcoin
Knew about them through AngelList. Searched for blockchain/crypto companies that were based in New York
When he started, he was a backend Java developer working on APIs
When the ICO craze started, he convinced them to add in blockchain to their API infrastructure
How Did MakerDAO Come About?
Went to a crypto event and got excited about going deeper into the space
It was time for him to move on and he was looking at the different projects
MakerDAO was one of the places that was building interesting things and had funds to hire people at that time
What Happened During Black Thursday/March 2020?
Because of COVID, lockdowns were going into effect
The market started tanking very hard
Technical issue where the code was not configured the way that it should have been
Auctions to liquidate loan positions for no money at all were happening too fast
“A lot of those auctions finished with the winning bid being essentially $0.”
- Andy Chorlian
The system became undercapitalized and had to sell MAKER tokens to recapitalize it
Deciding To Leave MakerDAO
DeFi summer was starting to wind down
Was burnt out because crypto moves very quickly
Started to get obsessed with NFTs
Started spending a lot of time on NBA Top Shot
Was NBA Top Shot His Initial Foray Into NFTs?
Remembered the CryptoKitties craze, but did not participate in it
NBA Top Shot was the first time that he bought an NFT and found it really cool
Wanted to own it instead of flipping it because he loves basketball
When Did He Start Thinking Of Building In The Space?
Was deciding between DeFi or NFTs
Was more into NFTs
At that time, fantasy sports players were coming into Top Shot and pooling funds to purchase the rarest moments
Some people do not have a group to pool their funds together. Decided to create a solution to address this
Fractional
Introduction
Protocol that enables users to buy, sell, and mint fractions of NFTs
NFTs are locked inside a vault and the owner gets 100% of the ownership
The owner can decide what to do with it (e.g. putting some for sale, an auction, etc.)
Why Did He Choose To Focus On Fractionalization?
2 categories of things that could be built on Ethereum:
Protocol
Product
Was more interested in building protocols as it could enable many different use cases
How Does Fractional Work?
Have a factory contract that will pull the NFT out of your wallet and mint a new vault contract that custodies the NFT
The vault contract will send the tokens to the person who fractionalized the NFT
Users are able to vote on the reserve price to execute a buyout
As long as 50% of the tokens are actively voting on a buyout, then the NFT is for sale
The fractional tokens are burnt and holders get back ETH for the sale price
The NFT is reconstituted and sent to the new buyer
Why Do People Fractionalize Their NFTs?
Using it as a way to expand the number of collectors they have
Enables people to take off some profit without selling the entire piece
NFT Lending
Working on a lending function for their next release
Interesting Ways That Fractional Has Been Used
The Hoodie Punk community has memed itself into existence in the Fractional Discord
They have a token-gated channel
“I didn't realize how much of the community building side of things people would be excited about with Fractional, and I guess it makes sense to just like, it's fun to own NFTs with your friends and talk about it. It doesn't really have to be more than that. It doesn't have to be some crazy investor club DAO that owns NFTs and does all this. Like, sometimes it's just all fun to own the same thing.”
- Andy Chorlian
A PartyBid fractionalizing Justin Aversano’s Twin Flames NFTs. Proceeds will be used to fund RAW DAO, a photography DAO
Has He Seen Any Interesting Buyer Behaviour?
A couple of pieces were sold for too cheap in a buyout. Thinks that this is due to Fractional auctions not having the same amount of eyeballs compared to an OpenSea auction
Sometimes, larger owners do not have to pay the full price for a buyout because they get paid back for most of the ETH they are bidding with
Had a case where there was a buyout even though the people didn’t want one. Whales came in to vote for a buyout
Will Fractional Ever Release A Native Token?
At some point, they will need to decentralize their protocol
Currently, their focus is on building their product
Thinks that there should be a separation of protocol and product
Differences In Being A Builder In Web2 VS Web3
Challenges Of Web3
In Web3, it’s challenging to iterate and test things over time
To update a smart contract, they have to deploy it over again
Often, people get around it by having upgradable contracts
Does not like upgradable contracts. They increase the risk of having an error in the code when it gets upgraded
Gas cost is a pain point for their users
Benefits Of Web3
The community engagement and feedback they receive
Marketing And Community Building
Do not have a marketing plan
As they grow and scale, they are looking for professionals to come in
Authenticity is valuable in the space
At a strategic level, they had success with Twitter Spaces
Future Plans
Still a lot of work to be done to work through and nail down the mechanism design
Wants to be positioned to handle the different sorts of NFTs (e.g. gaming NFTs, real world assets NFTs, etc.)
Wants to make it easier for end users to use Fractional
What Sector Within The NFT Market Does He Find The Most Exciting?
The gaming sector
The financialization of NFTs (e.g. fraction of an NFT of a home, renting a home through an NFT, etc.)
Where Does He See NFTs Expanding Into?
Is an NFT bull
Every valuable non-fungible asset will turn into an NFT
Excited about Metaverse stuff
On DAOs
His Thoughts
Is involved in many DAOs
Most active in PleasrDAO
A big fan of collector DAOs
Running a DAO that’s worth a lot of money is challenging
Curious to see how voter apathy gets handled
Solving Pain Points
Having people who are full-time in a DAO is a step in the right direction
Most of the people running protocols have real world jobs and families to attend to. They don’t have the time to be actively contributing
Have to transition to a model where the DAO votes only on really important things. Other than that, they should give more agency to people to do things
Grand 5-10 Year Vision
Fractional is fully decentralized and can run without the input of the core team
Building Fractional Labs to work with large brands
To be actively contributing to DAOs
Single Favourite NFT
His LIRONA Boi NFT
Used it as his Twitter profile picture
Most Controversial Thought On Crypto
Smart contract upgradability and token governance
Important to build systems and DAOs with smart contracts that cannot be changed
If He Could Improve One Thing In The Space
ETH L2s are fully live and integrated with exchanges
Who Is Someone He Look Up To And Why?
Mariano Conti, his old boss at Maker
He’s incredibly smart and one of the nicest person he knows
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