The rise of crypto has spurred the birth of vast digital economies that seem to output a new asset class every few years. A prominent recent trend has been the onset of non-fungible tokens (NFTs) — which include digital art, membership passes, and PFP collectibles. Despite being in a bear market, the market cap value of all NFT collections currently sits at $24B, and that number is only expected to increase in the coming years. Several industries, ranging from gaming to event hosting, have begun exploring their potential seats in this ecosystem — resulting in a legitimization of the underlying technology and an exponentially increasing level of demand for NFTs.
But despite the excitement forming around this new asset class, there exists a strong barrier to entry preventing a vast amount of users from entering the market. This barrier is commonly composed of high floor prices, illiquidity, fees, and an overcomplicated user experience. All together, the factors primarily effect both small money retail and risk-averse entities with sidelined capital.
While physical assets (such as real estate and commodities) are not easily fractionalized into shared ownership, it is possible to create such models in the digital space by use of smart contracts. Collective ownership via fractions extends to any non-fungible asset — including generative art, PFPs, digital real estate, utility NFTs, ownership and copyright, blockchain domains, GameFi items, and more. While there are a handful of web3 products that provide a proof-of-concept for this solution, this Whitepaper will show what existing applications are missing, and how Moonlight aims to fill the gap. Moonlight is a web3 platform built with crowdfunding, fractional trading, and liquidity providing — all in an effort to enhance collective ownership of NFTs.
As mentioned in the abstract above, art and utility NFTs are increasingly taking hold of the digital asset space. Even so, the high barrier to entry has remained stagnant — leaving a large audience of interested users unable to take on the financial risk of buying an entire NFT.
The overall value in the NFT market has accrued towards the top ecosystems. The established projects (e.g. Bored Ape Yacht Club, CryptoPunks, Fidenzas) are now considered ‘blue-chips’, meaning their anticipated risk is far less than any new collection. Due to this phenomena, a significant number of NFT users would rather own a fraction of a blue-chip asset than bet on a lesser known project which may be worthless in a few months. With fractionalization, an NFT can be split up into tokens that represent partial ownership, thus opening the door for an entirely new collector base.
Further benefits of fractionalization include price discovery and improved liquidity. Instead of floor listings, NFTs can achieve a more efficient value estimation via fractional trading volume on a decentralized exchange. The value of an NFT would be referenced as the price of a fractionalized token multiplied by the number of existing tokens. In terms of liquidity, it’s evident that the NFT market is inherently illiquid, especially as demand cools off in a bear cycle. Floor prices slowly sink as listers struggle to find a willing buyer, and thus are forced to lower their offer until a buyer is found. With the use of liquidity providing, fractional NFTs are optimized for quick and fair value transactions.
With crypto quickly maturing, NFTs have the potential to expand into real-life applications — such as legal contracts, car titles, real estate deeds, authentication of luxury goods, ticket sales, and more. The subset of ‘fractionalization’ will, in turn, have massive use cases in the future.
While a few fractional NFT marketplaces do exist, they all fail to provide every essential feature that the market demands: crowdfunding, trading, automated market making (AMM), curated NFT offerings, and support for non crypto-native users. Additionally, even the best competitors are too complex for the average user and have significant slippage. The lack of AMMs and liquidity-providing leads to sizable pain points for those who wish to trade fractional tokens. Slippage can make such protocols unusable in many cases, and an overly complex user experience fails to simplify fractions to their most basic form. Moonlight solves all of these pressures by bundling every optimal feature into one platform.
The vision for Moonlight is simple: to create a crowdfunding and fractional NFT platform designed to introduce the world to top digital assets**.** Moonlight is an amazing tool for NFT users searching for an affordable or low-risk entry into their favorite projects. The platform also supports non crypto-native users by integrating third-party APIs that allow the seamless creation of Ethereum wallets other than MetaMask.
Moonlight’s ‘Crowdfunding’ page is where users can collectively raise ETH to purchase a community-curated NFT listing from Opensea. If the crowdfund raises the required funds, the target NFT is purchased automatically and fractions are distributed to the contributors. The item then becomes a listing on Moonlight’s ‘Trading’ page, where any user can buy/sell fractions and provide liquidity.
Collective ownership platforms that do not incorporate crowdfunding features are only catering to the users intending to fractionalize their own assets (many of whom have no interest in fractionalization because they are likely to afford the entire piece). The addition of liquidity providing, referred to as ‘locking’, will help alleviate the slippage concerns often associated with fractional marketplaces.
During the Beta launch, Moonlight will curate all NFT assets that are onboarded to the platform in order to reduce clutter and valueless items. In a later phase, we will open to all listings but maintain minimum criteria, similar to Art Blocks. More technical details on all these features will be discussed below.
Target Audience: Moonlight will capture 100% of the digital asset population by catering to both non-crypto and crypto-native audiences by making it easy to get onboarded into the Ethereum ecosystem. The vision is for all users to be able to collect pieces of their favorite projects.