About Fraction Protocol
The Fraction Protocol is a comprehensive solution designed to enable individuals and businesses to fractionalize their valuable assets into tokens, which can then be sold to interested buyers on the blockchain. In this case, the assets can be divided into two categories:
- Real world assets - Tangible or physical items like real estate, commodities, businesses, artwork, factories, vehicles, collectibles and others.
- Virtual assets - Cryptocurrencies, NFTs, in-game items, digital art, domain names, licenses, online collectibles and intellectual property and other types of virtual assets.
The fractionalization process involves the creation of an ERC-721 or ERC-1155 digital twin NFT that represents a real-world asset. Then, the digital twin NFT gets locked in the vault and fractionalized (divided) into a number of units (fractions), each represented as a token on the blockchain. Below you can see the fractionalization and the token sale process:
Fractions can also be represented as shares, where each share is a percentage of the total asset, allowing multiple buyers
to own a portion of the asset proportional to their investment. For instance, in the diagram above, fraction_#1 and
fraction_#2, owned by user_#1, constitute 66.66% of the total number of issued fractions.
The fractionalization of valuable assets is carried out through Fraction platforms. Each platform is built using the Fraction Protocol, which consists of a set of predeployed smart contracts that function as a framework for creating customized platforms with the desired features. The process of creating a customized platform involves deploying a diamond proxy smart contract, registering the selected facets, and initializing the diamond's storage. Once this is done, the platform is ready to support the creation of campaigns.
Each campaign follows the platform's rules, which are established by the administrator. However, the creator of a campaign defines its specific parameters, such as the number of fractions, their price, and their utility. These configurations must align with the platform's general guidelines. For instance, while the platform may permit only non-perpetual campaigns where fractionalized assets can be bought, the creator is responsible for setting the start and end timestamps for their campaign.
At this stage, the following definitions must be introduced:
- Fraction Platform: Represents a diamond proxy that relays function calls to a set of smart contracts (facets), each containing unique functions required for fractionalizing assets and running campaigns.
- Campaign: Each campaign follows the platform's rules, with the issuer configuring settings such as the number of issued fractions, eligibility criteria, and other parameters.
- Use Case: A use case defines the final fraction platform, with its functionality based on the selected facets. It is deployed as a Diamond smart contract, which handles storage and routes function calls to facets. After deployment, an administrator or issuer can launch campaigns, each tracked by a unique ID.
Roles
The fraction platform revolves around three main entities:
- Administrator - Manages a fraction platform: granting or revoking roles and other.
- Eligible Issuer - Creates campaigns within the platform using a predefined configuration, which is initially set during the deployment of the fraction platform. Each campaign configuration is limited to the functionality defined at the platform level.
- Eligible User - Participates in the fraction campaign.