Before you buy or sell cryptocurrencies, it’s important to know what are fungible and non-fungible tokens? This knowledge will help you make more educated decisions when trading in the crypto market because it will allow you to understand the difference between all of the various cryptocurrencies on the market, as well as what these tokens are used for.
What are Fungible and Non-Fungible Tokens?
An Introduction To Tokens:
The two main types of digital assets that live on blockchains are fungible and non-fungible. Most people know what a token is: It’s a digital asset that can be bought, sold, or traded on a blockchain. The word token is often used interchangeably with cryptocurrency, but it doesn’t have to be tied to any currency whatsoever.
Some cryptocurrency tokens represent store credit for online marketplaces, for example—and some cryptocurrencies have no purpose besides being an investment vehicle. But there are other kinds of tokens that don’t fit into such a neat category. Fungible vs Non Fungible Tokens – What’s the Difference? If you’ve heard about ERC20 tokens before, you may have wondered why there was so much talk about fungibility in relation to them.
Well, it’s because ERC20 is just one type of token out of many others which exist on Ethereum’s network. Other tokens might not be as easy to classify as either fungible or non-fungible; they might fall somewhere in between! Let’s take a look at how each of these terms applies to different types of crypto assets… Fungibility vs Non-Fungibility: What Are They & How Do They Work? In order to understand fungibility vs non-fungibility, we first need to understand what makes something fungible or non-fungible.
The Merriam-Webster dictionary defines both of these words as follows: capable of being substituted by another of equal value without loss of function or prestige. In other words, if something is fungible then it can be replaced by another object without affecting its overall value.
Non-Fungible Tokens (NFTs)
A non-fungible token is a type of digital token that is unique in one or more ways. Many NFTs are unique because they belong to a class that makes them distinguishable from other members of their class. For example, in CryptoKitties, each kitty is distinct because it belongs to a particular breed, color pattern, generation level, and so on.
The most common type of NFTs we see today are collectibles like CryptoKitties, but these tokens can represent anything — real estate property titles, rare diseases, trading cards — even works of art! These types of tokens provide an added layer of complexity over traditional fungible cryptocurrencies (like Bitcoin) in terms of security as well as how ownership is managed.
Non-fungible tokens have been around for years now, with early examples including Colored Coins and Ethereum’s ERC721 standard. However, recent developments in blockchain technology have led to increased interest in NFTs by developers and investors alike. Non-Fungible Tokens (NFTs): A non-fungible token is a type of digital token that is unique in one or more ways.
Many NFTs are unique because they belong to a class that makes them distinguishable from other members of their class. For example, in CryptoKitties, each kitty is distinct because it belongs to a particular breed, color pattern, generation level, and so on. The most common type of NFTs we see today are collectibles like CryptoKitties, but these tokens can represent anything — real estate property titles, rare diseases, trading cards — even works of art!
These types of tokens provide an added layer of complexity over traditional fungible cryptocurrencies (like Bitcoin) in terms of security as well as how ownership is managed. Non-fungible tokens have been around for years now, with early examples including Colored Coins and Ethereum’s ERC721 standard.
Fungible Tokens (FTs)
FTs can be divided into small parts, each of which is still valuable. When it comes to FTs, every token is equal to another. Bitcoin (BTC) is a classic example of a cryptocurrency that uses fungible tokens. Each unit of BTC on its own isn’t worth much more than any other unit – but when you consider that one BTC can be split into 100 million units, it becomes clear how valuable they really are. In fact, many people have started referring to BTC as digital gold because of their fungibility.
A single gram of gold is always worth $1,000. It doesn’t matter if it has scratches or dents or even if there are tiny impurities in it – a gram of gold will always be worth $1,000. The same applies to BTC: no matter what happens with its technology or price fluctuations, one BTC will always be worth $1,000. Fungible tokens are also called divisible or liquid assets. Every unit of an FT is equally as valuable as any other. Fungible vs Non-Fungible Tokens (NFTs):
NFTs are not equal to each other like all tokens of an FT are. If we take CryptoKitties for example, we see that these virtual cats aren’t equal at all. They come in different colors and designs and some might even have special traits like rare eye color or whiskers instead of noses! Because NFTs aren’t identical, we say they’re non-fungible. Their value depends not only on their current market price but also on who owns them – unique collectors’ items so to speak!
As such, it would be impossible to divide a CryptoKitty into small parts without destroying its value completely. In fact, no one would want to buy half of a CryptoKitty because it wouldn’t be worth anything anymore! NFTs are also called non-divisible assets or collectibles. Every unit of an NFT is different from another and thus has its own individual value.
Fungibility, Trustlessness, Divisibility, Interoperability
Fungibility is a core concept behind cryptocurrencies. The term, used in economics to describe a good or asset that can be substituted for another identical item of the same type, is commonly accepted as true for Bitcoin—every BTC token you own is equal to every other BTC token out there. And since we know that 1 BTC = 1 BTC, it makes sense to compare different cryptos using only their market capitalization (the value of all coins combined) rather than breaking them down into separate units.
However, for many cryptocurrencies, including ERC20 Tokens built on top of Ethereum’s blockchain network or NEM’s Mijin chain, not all tokens are interchangeable. This means that if I have one token from a specific company or project, it may have more value to me than another one with exactly the same code.
This difference in value is known as non-fungibility and occurs when each individual unit of currency has unique properties attached to it. For example, let’s say I owned one share of Apple stock worth $200 USD at some point during 2017.
That share would likely be worth much more today—but still not enough for me to buy an iPhone X outright! If I were able to sell my share now, however, I could use those funds toward purchasing my dream phone without having to save up any additional money first.
In theory, anyone can open their own NFT store. Everyone can create jobs, convert them to NFTs (mostly on Blockchain), and sell them on their preferred marketplace. NFT tokens can be purchased or sold by anyone. You can do all of this on NFT. Essentially, the platform enables you to set up your store in a matter of minutes. It is available in Polygon, Ethereum, Digital Art, Mint, and other platforms.
You could even include a royalty clause in the document that will pay you if each person purchases the item, as well as sale prices. You’ll need to create an account, just like when buying NFTs, and it must be loaded with cryptocurrencies. And it is the demand for cash up front that is causing the issues.
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