With the growing popularity of digital art, the terms fungible and non-fungible tokens have attracted significant user attention in recent years. Despite the fact that even people far from the crypto-sphere have heard of NFT, not many of them know what it means. In this article, we’ll talk about the main differences between fungible and non-fungible tokens and their role in the world of cryptocurrency.
A fungible asset can be exchanged for another identical asset. If goods or services can be substituted for other identical goods or services, they are fungible.
Fungible tokens are digital assets that are fungible with each other (one-to-one). This means that each unit of such a token is identical and fungible.
Examples of fungible tokens include cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). If you have one Bitcoin and exchange it for another, you will still have an asset with the same value. Likewise, if you send someone 10 Ethers, the 10 Ethers you receive in return will have the same value.
Dollar bills, options, stocks, and barrels of oil are also examples of fungible items.
Interchangeability: each unit has the same value as any other unit of the same token.
Uniformity: each unit of a fungible token is identical.
Divisibility: fungible tokens can be divided into smaller units. For example, Bitcoin is divided into smaller units (satoshi).
Value Storage: fungible tokens are often used as a means of exchanging and storing value.
Non-fungible tokens, on the other hand, are unique digital assets that cannot be interchanged. Each NFT has distinct characteristics and properties that set it apart from other tokens. NFTs have gained significant popularity in the digital world.
These tokens are usually created on blockchain platforms such as Ethereum, Polygon, and Solana, using smart contracts. Each NFT has unique characteristics, which is why they have a higher value compared to fungible tokens.
Decentraland is an example of known non-fungible tokens used to buy virtual real estate. The Decentraland platform uses Ethereum-based NFT, which allows users to purchase LAND plots on the platform. These lands can be used and developed by users at their discretion.
Uniqueness: each NFT is distinct from other tokens and represents a specific object, work of art, or asset.
Indivisibility: NFTs are indivisible, which means that they cannot be divided into smaller units. They are treated as complete objects.
Ownership and Authenticity: NFTs use blockchain technology to establish and verify ownership, allowing creators to preserve the copyright and provenance of their digital works.
Both types of tokens play an important role in the digital economy. Fungible tokens are used as a means to exchange and store value, while non-fungible tokens allow unique digital assets to be traded.
As blockchain technology advances, we can expect further innovations and new applications for both types of tokens to shape the future of digital assets.