Tessera Shutdown: What It Means for NFT Fractionalization and Market Evolution

Sunset over a digital art marketplace, intricate cyberpunk cityscape, NFTs transforming into fractional tokens, blend of warm and cool tones, somber mood, focus on Tessera's closure, glimmers of hope for NFT evolution, hints of impressionist and futuristic styles.

In a surprising turn of events, Tessera, a prominent protocol that facilitates collective ownership and governance of non-fungible tokens (NFTs), announced that it will be winding down its operations over the next few weeks. Co-founder Andy Chorlian shared the news with the community via Twitter, revealing that the decision was an outcome of thoroughly examining potential market scenarios, company structure, and financial status. This announcement also implies that Escher, Tessera’s curated digital fine art marketplace, will be shutting down.

Chorlian stated that the economic model for Escher didn’t make sense from a business perspective, considering the targets required for profitability and the resources needed to scale. Tessera’s portfolio also includes Nounlets, a fractional ownership platform for Nouns NFTs, and We Do a Little, a podcast hosted by Chorlian and NFT influencer Deeze.

Interestingly, Tessera’s sudden shutdown comes less than a year after it rebranded from its original name, Fractional, and raised $20 million in a funding round led by crypto investment giant Paradigm. Other investors in their Series A funding round included Focus Labs, Uniswap Labs Ventures, eGirl Capital, and Yunt Capital.

Fractionalizing NFTs involves creating fungible tokens connected to an underlying digital asset, such as a Bored Ape or CryptoPunk. This allows these assets to become accessible to investors with limited upfront capital, while the NFTs remain securely stored in a vault. By creating fractional tokens, these NFTs can be traded on secondary marketplaces, leading to increased liquidity.

As the NFT market faces a prolonged downturn, various marketplaces have adopted innovative ways to enable users to invest in digital collectibles more affordably. For instance, leading NFT marketplace Blur recently introduced a peer-to-peer lending network called Blend, allowing traders to make a partial upfront payment and finance the remaining balance. Furthermore, NFTX, another fractionalizing platform, enables traders to group NFTs of equal value into index funds and issues fungible ERC-20 tokens tied to the underlying NFTs (ERC-721 tokens).

While the NFT market adjusts to these changes, it is critical to recognize that the closure of Tessera and Escher does not necessarily signify the end of the NFT space nor fractionalization protocols. These closures may merely represent growing pains as the market matures and consolidates. Ultimately, time will reveal whether these shifts are indicative of a broader trend or if they are isolated instances in an ever-evolving sector.

Source: Coindesk

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