Token Models: Fungible Vs. Non-Fungible Tokens

by | Sep 7, 2020 | Token | 0 comments

In the crypto space, tokens are the king. Tokens can indeed be effectively classified into three distinct classes, but this is (mostly) for regulators to frame the best regulatory measures necessary to regulate their issuance and use.

When we zoom out to learn how tokens are built, rather than just how they should be regulated, we realize that there are actually two models of tokens: fungible and non-fungible tokens. Confused? Yeah, okay. Fair enough. Castaway all your fears! The difference between them is quite simple and better yet- easy to understand.

So, what is the difference between fungible and non-fungible tokens?

When something is fungible, in our case, a token, it implies it can be easily replaced by something identical- it is easily interchangeable. Practical illustrations of fungible things include maize grains or the $100 banknote in your account. If you were to lend that $100 to a friend, it wouldn’t matter if they didn’t return the same note.

This is different from non-fungible tokens (NFTs). While two items may seem identical at a glance, each has unique information or characteristics that are irreplaceable or impossible to exchange.

One real-world example of a non-fungible asset can be a train ticket. Although they look the same as other tickets, each carries different passenger names, destinations, departure times, and even seat numbers. Exchanging yours with a neighbor could raise serious issues- not only could you end up thousands of miles away from where you wanted to be, but also, the bus management may be upset with you.

NFTs are the virtual representation of scarce assets. They are unique, with different features that can be distinguished from each other. Cryptokitties is a good example of a NFT. It is a game build on Ethereum blockchain where players can collect and breed digital cats, which they pay for in ETH, and where each cat’s digital “genetic material” is stored on the Ethereum network.

Offering and managing digital, unique, and thus scarce assets, like collectibles, is not a new thing under the sun. However, before the emergence of blockchain technology, this type of scarcity was expensive to manage. It depended on the authentication and security of centralized issuing establishments. Blockchain technology offers a decentralized and publicly verifiable substrate to issue and manage such assets at cost-effective operational expenses.

What are the uses of NFTs?

NFTs can be used in decentralized applications, like collectibles and crypto games. Besides, they can represent certificates of any type (driving license, academic certificates, and other educational documents), as well as keys, passes, identities, wills, voting rights, tickets, and all types of access rights, loyalty programs, copyright, supply chain tracking, medical data, warranties, and many more.

NFTs further allow the tokenization of all manner of assets, whether digital or real-world. They facilitate unique investments linked to a physical object, like a piece of art, property, or any real-world assets and securities. They also enable fractional ownership of goods that were not easily divisible before, like real estate.

Final thoughts

The world is moving on from paper, and the crypto community believes there are endless applications for NFTs beyond collectibles. For instance, NFTs are a secure and immutable way of storing birth certificates, academic qualifications, warranties, identities, bonds, artwork, and property ownership.

Tokenizer is a blockchain investment platform for fundraising, investing, and trading in both fungible and non-fungible tokens. We digitize real-world assets, store them in digital wallets, keep them safe, and ensure that they cannot be altered or counterfeited by a third party. We also have an exchange for trading both fungible and non-fungible tokens. Visit our website today, and learn more about our token economy system.

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