While Cryptocurrency is gaining adoption, the space has increasingly evolved. One of the most recent use cases of Cryptocurrency is tokenizations: Fungible and Non-Fungible tokens. Examples of Fungible tokens are regular tokens like Zcash, Eth, EOS, and other tokens that hold value. On the other hand, Komodo, CryptoKitties, CryptoPunks, and any other token that holds information, are examples of Non-Fungible tokens (NFT).
However, NFTs aren’t new concepts, as they started in 2013 through Colored Coins, but really emerged in 2017, through CryptoKitties, an Ethereum blockchain-based game. Non-Fungible tokens, according to Wikipedia, is a particular type of cryptographic token representing something unique and thus not mutually interchangeable by their specification.
Often you may refer Non-Fungible tokens as “Nifty.” They are particularly needful in creating verifiable digital scarcity, digital ownership, and the possibility of asset interoperability across multiple platforms. By implication, NFTs are used in specific applications that require unique digital items like crypto art (rare art), crypto-collectibles, and crypto-gaming.
Fungible vs. Non-Fungible Tokens.
Make sure to familiarize yourself with the differences between Non-Fungible and Fungible tokens, which are shown below:
Compliant: Fungible tokens are generally ERC-20 compliant, while Non-Fungible tokens are ERC-721 and recently emerging ERC-1155 compliant tokens.
Divisibility: You cannot exchange some digital assets in fraction, which is the same for Non-Fungible token. If a Fungible token is $30 per token, since it is divisible, you can send out or receive a fraction of it, let’s say one-third of the whole worth. On the contrary, a Non-Fungible token can be transferred or earned as a whole. That means if a token of a non-exchangeable asset is $55, you can only send, receive, or transfer it as a whole.
Identical: A Non-Fungible token is not identical, but unique. On the other hand, a Fungible token is identical. For instance, your digital certificate cannot be identical with your friend’s, while a 1$ Eth remains a $1 Eth.
Possible Use Cases of NFT
Since 2017, the Nifty tokens have found application in several digital asset management solutions, which can be found below:
- Crypto-collectibles & Crypto-games
- Asset Tokens
- Identity Tokens & Certificates
- Access Tokens
- Access Transfer Tokens
Fungible tokens dominated in the early years of Blockchain, yet Non-Fungible tokens have more extensive applications. They represent a medium of securing and managing digital scare assets, while Fungible does not.
Okereke has a passion for researching blockchain and cryptocurrency. He enjoys creating long form educational content to inform others on the opportunities in this space.