Someone asked me to cover the difference between fungible and non-fungible tokens. I decided to do just that by explaining the differences, showing some examples of each, and sharing some potential future use cases of NFTs.
The 3 main identifiers for NFTs or non-fungible tokens are:
- Not interchangeable
- Unique
- Non-divisible
The 3 main identifiers for fungible tokens are:
- Interchangeable
- Uniform aka not unique (they are all the same identifier)
- Divisible
Some common examples of NFTs are Cryptokitties or crypto domain like .eth or .crypto. Common examples of fungible tokens are BAT, 1UP, ENJ, and HYDRO.
You will always find fungible and non-fungible tokens on another protocol. Most of the tokens I deal with and NFTs are on Ethereum. Fungible tokens there are listed as ERC20 tokens and NFTs follow the ERC721 standard. What’s most interesting is the potential use cases we will see in the future. I think a lot of video game assets like skins and other things you can earn will become NFTs and allow you to trade them with other players using smart contracts. We will also see supply chain tracking, copyright, and so many more use cases evolving over the next few years.
A great resource that helped me learn is this great article on Medium on NFTs: https://medium.com/0xcert/fungible-vs-non-fungible-tokens-on-the-blockchain-ab4b12e0181a
What are your favorite NFTs? Did this make sense and is there anything you’d like to have clarified or that you believe needs correcting? Let me know what you think about this in the comments below and don’t forget to subscribe!
