ShardingDAO: Free NFT Liquidity!

5 min readMar 18, 2021

ShardingDAO hits the ground!

It is a protocol that combines of NFT Fractionization, AMM and DAO.


ShardingDAO( is an NFT contract Dapp, which provides a fragmentation method for NFTs and enables the public to collectively own and rule their belongings. It is the last puzzle of the crypto industry bull market — Free NFT!

On this platform, NFTs belong to the public, and its price discovery, development direction, and benefit distribution are determined by the public; anyone can trade NFT shards and create capital efficiency based on the AMM mechanism;

Besides, the platform is an open ecosystem that supports the integration with other DeFi protocols to achieve interaction with DeFi Lego.

Background of the NFT market

At present, NFTs only account for 0.2% of the market value of the entire crypto market. The market value is small and still in the early stage.

Although the NFT market is actively embracing DeFi and trying to unlock new market space, the existing model has not yet been recognized by the public.

Fortunately, the financial market has indicated a strong preference for NFT. As we all witnessed, art collectibles account for 1/3 of the NFT market, and the secondary market is roughly 2x larger than the primary market in trading volume. And we can see NFT market activity has increased rapidly in the past months.

Trends in the existing market environment

There are two angles to interpret the trends and problems of the NFT market: one is the art history angle, and the other is the financial markets angle.

From the art history angle, the art market tends to be capitalized and decentralized. And now, crypto’s industry environment provides artists with opportunities to realize cash income and provides the public with opportunities to access high-value, low-liquidity artworks or collectibles. At present, there have been some communities and DAOs for collectively owned artworks.

From the financial markets angle, people have realized that the limited liquidity hinders the NFT market’s growth, and price discovery will be critical in the NFT space. Therefore, those who solve the capital efficiency problem of NFT will win the market.

ShardingDAO’s solution

Based on the background, problems, and trends of the current NFT market, the ShardingDAO team proposes the following principles as the core of a viable solution:

  • Use Fractionization Method to lower down the participating bar for individuals;
  • Sharding high-value NFTs will unfasten the liquidity of NFT, therefore, enhance its status as a financial asset. For those who need lesser funds, shards of one high-value NFT can be used as collateral to get a loan or be exchanged for cash in the market. Art collectibles collateralization is no longer the game only for the wealthiest 1%.
  • Let the free market decide what’s the price of the art. Artwork and collectibles will not survive in the market if it does not provide value constantly to the public. NFT is a alive, and is a programmable, organic form of art.
  • Single NFTs could be put into bigger collections and made as one asset.

Based on these principles, ShardingDAO has designed the whole protocol and critical mechanisms:

The protocol is illustrated as below.

In the protocol, there are 3 key elements we’d like to highlight:

  • Fractionization Mechanism: Fractionalization shards one or more nonfungibles into an ERC20 currency which can gain liquidity on a DEX or centralized exchange. Anyone can buy some amount of the currency and helps to establish an overall valuation, which brings down the valuation cost for each user (but not necessarily in the mechanism as a whole).
  • Interact with DeFi Lego to realize the composability of DeFi protocols: Integrated with an AMM-enabled DEX, the protocol provides essential liquidity support for NFT sharding; Yield Farming incentivizes the public to provide liquidity; Besides, our protocol can also interact with other NFT protocols, which facilitates an NFT assets common market across networks.
  • DAO realizes the co-creation of art assets and determines the future financial directions for these assets: The DAO of the protocol provides an autonomous community for Shard owners to jointly manage the NFT. This means they collectively decide the development directions, the distribution of benefits, which encourages the public to add more assets to the community and play more active roles in governing the NFT.

It’s also worth mentioning that although NFT itself conforms to token standards like ERC721 token, the shard token, which is fractionalized from an NFT token, is essentially an ERC20 token.

As the name “shard” implies, shard token stands for the NFT share of holders, such that holders can jointly decide the usage of the NFT. In return, holders share the revenue generated from the NFT. Besides, holders can also choose on additional mint or burn of the shards.

Token Distribution: $SHD

$SHD is the governance token of the protocol, distributed as:

  • Liquidity Mining (56%): distributed to the public through liquidity mining
  • Marketing & Airdrop (13.33%): reserved for Marketing and Airdrop to incentivize users
  • Investors (13.33%): reserved for future investors
  • Developer DAO (17.34%): reserved for developers, released along with protocol liquidity mining

Comparing with competitions

1. Unlock higher liquidity for NFTs and form a free market to discover the value and price of NFT.

The first step is to build a platform to fractionize the NFT and allows the crowds to enjoy the co-ownership of crypto art collectibles.

2. Public co-ownership and DAO governance faciliates more future developments.

For every NFT sharding , we will help to organize a DAO and let them discover the future value of the NFT.

3. Open ecosystem in partnership with existing DEX/swaps to grow further

We believe Web 3 should be permissionless and inclusive that each platform plays its role as one piece of the lego, instead of trying to build their own mutually exclusive ecosystems.

IP in Negotiations

Ghost in the Shell, Monster Friend, Attack on Titan, One Piece, etc.