With the rise of cryptocurrency, new terms, like fungible and non-fungible tokens, became the highlight. The concepts of these tokens are old, and these tokens are highly used in arcade games and casino slot machines. These tokens offer services like a public telephone booth, car wash, and parking in the garage.
However, the concept of these tokens remains the same, but these represent in the form of physical and non-physical. However, in the blockchain industry, the fungible tokens are like Bitcoin, and the non-fungible tokens are unique digital assets.
Therefore, if you purchase one, it is essential to know the difference between a non-fungible token and a fungible token. A complete outline will briefly explain the difference between these two tokens.
What are tokens?
Before you understand the difference between fungible and non-fungible tokens, it is essential to understand what tokens are.
Tokens are the assets that use smart contracts and run on the blockchain of other currencies. These tokens are stored in crypto wallets and can be used in multiple ways. For example, a person can use tokens to store value, access blockchain services, support decentralized applications, trade, etc.
What is the significance of tokens?
The role of tokens is not limited to just one thing, but it addresses vast functions. However, these functions include the following things such as-.
- Tokens are served as a gateway for blockchains. Therefore, a user requires these tokens to access the decentralized apps.
- Tokes can signify the qualifications of the individuals, and it helps the person hold a specific type of voting rights.
- With tokes, the user experiences for holders become enriched. The user experience token can improve a person’s overall experience without crossing the environment’s boundaries.
- Moreover, the applications of tokens in the form of currency can serve an essential role in differentiating between fungible and non-fungible tokens. Tokens can be used for performing internal and external transactions.
- Tokens usually refer to the value exchange in the blockchain ecosystem.
- Tokens indicate your ownership of digital assets, representing the ownership of unique items and setting a foundation for the fungible and non-fungible tokens debate.
What are the different types of tokens?
Tokens can be used for several types of services or products. There are several types of tokens, such as.
- Payment token: These coins include Bitcoin and litecoin, which you can use for making transactions in the digital world.
- Utility tokens allow the holder to access all blockchain-based products and services.
- Security tokens are traditional assets such as shares and stocks generally represented by digital tokens on the blockchain.
- On top of that, there are two distinctive types of tokens- Fungible and non-fungible.
What are fungible and non-fungible tokens?
To understand the difference between fungible and non-fungible tokens, understanding the concepts behind them is essential.
- A fungible token is a divisible and non-unique token. These are mainly represented as fiat currencies like dollars, meaning that the values of the tokens remain the same no matter where they are issued.
- On the other hand, non-fungible tokens are unique and non-divisible. A person owning it has a unique ID which helps them differentiate between two NFTs. Moreover, it is believed that ownership of uniqueness and a non-replicate item.
What are fungible tokens used for?
A fungible token works like physical money, and this is because of the characteristics it comes with. These tokens are generally used for making transactions in the crypto economy. Meanwhile, many users also opt for purchasing fungible tokens as a part of the investment. The chances of fungible token values are expected to increase over time.
What are non-fungible tokens used for?
A non-fungible token has existed for decades. But they have gained immense popularity over the past few years. This is because NFTs are only referred to as digital assets, which can be used for different purposes, especially for blockchain gaming.
NFTs represent several assets and ownerships of various unique items. At the point of gaming, NFTs can be a weapon, avatar, skin, or land parcel. Due to this variability, NFTs have become a perfect concept for gaming. These items are unique and have real-world values. Besides, in play to earn games, a player can make big money by trading and acquiring NFTs.
Difference between fungible and non-fungible tokens
To get a clear idea about the non-fungible and fungible tokens, it is crucial to focus on the difference between them. Therefore, here is the list of traits that differentiate fungible and non-fungible tokens.
1. Interchangeability
Fungible tokens are interchangeable. These mainly refer to fiat currencies, and a person can quickly transfer fungible tokens from one owner to another. However, exchanging fungible tokens doesn’t hold any meaning as they hold the same value. These tokens are generally used to make payments and track balances. On the other hand, non-fungible tokens are non- interchangeable as they represent unique assets.
2. Value transfer
Another difference between fungible and non-fungible tokens is the value that it holds. Every account will maintain the balance depending upon the tokens you own. Therefore, transferring the tokens to an Ethereum account is accessible through direct transactions or swap techniques.
The fungible and non-fungible tokens comparison depicts that NFTs hold a unique value proposition. Every NFT has a unique ID that differentiates between two tokens in the same smart contract, and NFTs always have a specific owner.
However, the value of NFTs is different, and this is because of the other treatment of every token. Today, NFTs demand digital assets and investors are paying much attention to buying NFTs.
3. Divisibility
Fungible tokens categorize into multiple parts, and these smaller parts help pay off more significant sums of money. On the other side, Non-fungible tokens are not divisible, meaning the value of NFTs will be altogether entity.
4. Token standards
The fungible tokens are based upon the ERC-20 standard, and the non-fungible tokens depend upon the ERC-721 standard.
What are fungible and non-fungible tokens in blockchain?
Tokens in a blockchain refer to crypto tokens generally representing the digital units developed by the blockchain networks. The business owners build their tokens into the blockchain network to serve different purposes.
It includes transferring the value, voting, and even access to the subscription. However, the first fungible tokens were encountered in the Ethereum blockchain network and are known as ERC-20. It allows developers to create applications of a different nature. Conversely, the non-fungible tokens generally represent the real-world assets traded on the bitcoin blockchain network.
These assets are tied up with a contract outside the blockchain industry and entirely rely on trust. However, a group should agree on the specific amount of coins that will represent the value altogether. These digital tokens are tiny fractions of the bitcoin and are marked or coloured in with all the information related to the coins.
The first non-fungible token was developed on the Ethereum blockchain, which helps identify the services, products, and people. NFTs can even be used in the marketplace to store academic titles and digital identities. The NFT marketplace has witnessed incredible growth in the industry in 2020 and 2021.
How do NFTs work?
The non-fungible tokens or NFTs can be stored and created using a public blockchain. This network is open and accessible to everyone, and the teams represented are traceable and verifiable. Therefore, if seen from the technical perspective, then NFTs are generally minted through smart contracts, which will assign the user ownership and transferability management of the NFTs.
How to buy and sell NFTs?
NFTs can be purchased and sold online. These tokens represent proof of ownership of any items. Therefore, the transactions take place in the crypto exchange or different online marketplace that are available. Besides, these tokens are sold at a price that the owner decides. However, to buy the NFTs-
- You need to sign up on the platforms available.
- After which, the users need to transfer the cryptocurrency into their wallet.
- There are multiple wallets, like MetaMask, Trust, and coinbase wallets.
- You need to make sure that the platform you have picked is compatible.
- Once the selected wallets connect with the platform, you must upload the file containing NFTs.
You will also find multiple platforms that allow users to create their NFTs. But for that, the players need to register first and then become one of the listed artists.
What are the benefits of using Non-fungible tokens?
- NFTs are proof of ownership, and a blockchain network identifies the NFTs you own without worrying about copying and duplicating. Moreover, the NFT’s ownership can’t be shared and distributed, which provides security from fraud.
- NFTs are unique and are based on the blockchain, which links digital assets. The character of NFTs makes them rare and valuable. In some cases, the authors can even produce massive tokens and tickets bought online. Therefore, the immutability of blockchain ensures that the tickets are original and free from counterfeit. This immutability feature provides authenticity to the blockchain tokens.
- NFT tokens allow the artist to claim royalties once their artwork gets sold out. The possibility of these claims represents a breakthrough in the art world and motivates the artists to turn toward the new marketplace.
- With blockchain technology, artists and creators can easily monetize their production without third-party assistance. The physical galleries and auctions can remove easily, which allows the artist to make transactions in the digital world smoother and more accessible.
Also read about What Is Tokenized Real Estate or NFT Real Estate
Today the demand for NFTs in every field is increasing, and it is becoming quite popular among investors. Both the fungible and non-fungible tokens provide the digitalization of real-world assets and keep them secure simultaneously. The growth of the NFT market has hit $2.5 billion.
It facilitates transactions and enhances the interactions between people. However, before you purchase fungible and non-fungible tokens, it is essential to learn everything about them and know the difference between fungible and non-fungible tokens. For this, you can follow this guide.