NFT Fractionalizer

This is a simple project illustrating the fractionalization of an ERC721 with ERC20 tokens.

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Overview

On a high level, the process is as follows

Collector

• A collector owns an ERC721 from a particular collection
• The collector deploys the Fractionalizer contract which is a modified ERC20
• The collector approves the Fractionalize contract to transfer their ERC721
• The collector then calls the fractionalize method on the deployed Fractionalizer contract
• The collector receives a specified number of ERC20 tokens denoting 100% ownership of the ERC721
• The ERC721 is transferred from the collector to the Fractionalizer contract
• The collector can then sell the ERC20 tokens on the market via AMM or similar
• The collector can choose to list the ERC721 for sale for a specified price in ETH

Holder

• The holder purchases ERC20 tokens on the market as a representative share of ownership
• If the ERC721 is sold to the buyer the holder can redeem their ERC20 tokens for eth based on their ownership ratio from the Fractionalizer contract.

Buyer

• The buyer purchases the listed ERC721 for the price in eth and transfers it to the Fractionalizer contract.
• If the buyer somehow is able to acquire all the tokens on the market, they can just redeem all of them for the nft itself. This is probably a low possibility, though. I just included it as it was in the specs.

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Instructions

# Install dependencies
npm i

# Setup .env
mv .env.example .env

# Run Tests
npx hardhat test


# Make sure you update the .env with your Goerli pk
# Deploy to Goerli
npx hardhat deploy --network goerli

# Verify contract
npx hardhat verify-contract --network goerli --address <deployed address>

Issues

• The owner of the Fractionalizer should be a third party - not the collector. I just did it this way for the collector to deploy their own fractionalization implementation.
• The sale price should be a weighted average of a price indicated by holders based on their token holdings. ie. If holder a holds half the supply, their price should weigh more than holder b with a quarter of the supply. I had the collector set the price for simplicity in the example.

Improvement

• Implement a factory that uses the minimal proxy pattern to reduce gas costs if we are deploying a single contract per fractionalized nft.
• See weighted average price issue above
• Maybe use an auction style of sale?
• Research adding withdraw functions for nft/tokens to prevent unexpected locking within contract
• If Fractionalizer is managed by a third party, add a curator fee
• Potentially add permit eip draft for gassless approvals