Fungible and non-fungible tokens. What is the difference?
In the previous articles we discussed the main idea about NFTs. Now let’s look at this abbreviation in more detail. NFT stands for non-fungible token, which means that at least there are two kinds of them: non-fungible and fungible. In this article I am going to explain the difference between them.
Imagine, you decided to spend a weekend with your friends in a cabin in the woods. The closest settlement is about a half-day drive. Sure, I know the majority of horror films start like that.
You took, among other things, 24-pack lager beer in cans and mixed 12-pack of different dark craft beers in bottles.
It is pretty easy to understand what a Non-Fungible-Drink is. It is craft beer. Each bottle in this case is unique (until you went to buy more) with its label and taste. When you exchange bottles with a friend, you will get different beer with a different value for you.
Canned beer will be an example of Fungible-Drink. You can take any can of beer from the fridge without even looking, and you’ll know for sure, what you will get. Having put it back and taken another can, you will change nothing. You will get the same result if you exchange cans with your friend.
Let’s return to the crypto world. If we understand that Non-Fungible Token is connected with some unique digital object (photo, avatar, music or text), what can be presented as a Fungible Token?
Firstly, it can be any crypto currency. Moreover, some crypto currencies are already created in the form of tokens, but we will talk about them separately.
We can imagine that a Fungible Token is a vote at making decisions. At a secret ballot the decision could be taken by one vote, no matter whether it belongs to the CEO or an intern. This principle is named “One person, one vote”. Such fungible tokens are used for managing Decentralized Autonomous Organizations (DAO).
Also, we can imagine any digital art object as a Fungible Token, which was issued not as a single copy. Buying a new hero, a battleship or a new skin, you obtain a non-exclusive right to use this Fungible Token. A number of games use blockchains and crypto-tokens for storing game characters’ information and their assets.
Feel free to ask questions!
