In the blockchain world, there is endless talk about the importance of decentralization. But there is a by-product of the challenge boom that is little talked about.
Fractionalization is an inevitable consequence of the innovations we have seen over the last decade, and when implemented correctly, companies and individuals can benefit.
For example, it is now possible to buy a small fraction of Amazon shares, making it potentially more affordable for millions of investors. With a single stock now costing more than $ 3,000, this can be a big barrier to entry for most.
The explosion of non-expendable tokens has created an urgent need for this fractionation to be applied to cryptocurrencies, especially when NFTs sell for hundreds of thousands, if not millions, of dollars.
A substantial amount of NFT is now valued at a much higher price than the average customer can afford. Fractionalization paves the way for these retail investors to become involved with the market, rather than remaining inactive within the challenging ecosystem. Better yet, this unlocks higher levels of liquidity, which we all know is crucial to its smooth running.
Remembering our roots
Sometimes it is very easy to lose sight of the fact that Bitcoin was created in response to the 2008 financial crisis, which eventually gave people a way to control money for themselves and create a more transparent and democratic economy. . While big banks were excluding people, digital currencies were creating a way to welcome them.
With the total market capitalization of all digital currency recently reaching $ 2 trillion, and the total value locked into challenging protocols reaching $ 90 billion, there is a threat that history will repeat itself. Fractionalization gives everyone the opportunity to enjoy the features that this vibrant ecosystem has to offer, allowing us to own each other’s assets that otherwise would not have been available for purchase. And if fractionation is removed from the equation, only the richest will be able to benefit from the functionality of deficiencies, significantly restricting the depth of the market.
But let’s also take a moment to think about this from an adoption standpoint. If more people have the opportunity to show interest in a specific product, it can increase awareness of its value. Right now, the NFT space is dominated by whales who decide where they want to spend their disposable income, and this creates fear that the industry boom will be unsustainable.
Fractionalization offers the masses the opportunity to decide which projects are truly beneficial to an ecosystem, fosters innovation, and generates passion. It’s the difference between a top-notch football game that is seen by a wealthy investor behind closed doors and 90,000 fans with season tickets who have a chance to enjoy some of the action.
Properly address fractionation
It is difficult to overstate the importance of bridges between chains to help defy reach their full potential, but achieving transparency in how these bridges are designed is by no means easy and should be a concern for all of us. Will they be in chain or out of chain? How are validators chosen? And how can we make sure they always act in our best interest?
Chain bridges are the best choice here because they can help achieve total transparency, addressing the concerns of both users and developers. But there are obstacles ahead. What happens when a large number of users exceed the bottleneck capabilities of connected blockchains? In this case, a bridge can only transfer the problem from one network to another, without solving the underlying problem.
Imagine if the world of cryptography had an infrastructure that could fairly distribute the number of users across different chains, eliminating this problem completely. It would be an equivalent feat to ensure that rush hour passengers are evenly distributed on all trains on a network, eliminating delays and providing a seat for everyone.
Such an approach would mean that the number of users needed to create a bottleneck in the blockchain would have to be extremely high. As a greater variety of digital assets emerge and user bases on networks explode, technological advances like this are becoming an inevitable feature of the future of deficiencies, paving the way for costs to be reduced. congested chains while increasing available market liquidity.
Right now, the promise of splitting is being held back by the extremely fragmented nature of the blockchain industry. The various chains there are probably best compared to small islands in a vast ocean. Just as air travel made our world smaller, creating crucial connections between different lands, we need to build an infrastructure that makes it easier for travelers in the cryptographic world to jump from one platform to another.
True financial independence lies in integration between chains, allowing people to combine an infinite amount of digital assets across a bunch of different chains.
The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Andriy Velykyy is a former Cisco Certified Networking Professional who has worked in IT since 2002, primarily in data center architecture, networking, and switching. Andriy entered the cryptography industry in 2015, building mining farms before advancing further toward technological advances, such as integrating cryptographic payments with point-of-sale devices, cybersecurity, and custodian multiple-chain cryptocurrencies. Its current project, APYSwap, is a protocol for the decentralized trade of tokenized vault shares.