Token in general can be regarded as a digital asset that can be effortlessly transferred betwixt peers in a blockchain network. Even though the main purpose of tokens is to serve as the currency for the network, they can be used to give access to certain services on the platform.
Coins that have basically the same functionalities as Ether is known as Tokens. They can be transmitted on the Ethereum blockchain and serve as a representation of value. Moreover, they are not stored in wallets but are kept in what is called a “contract”, which is a list of addresses with their balances.
These so-called “Tokens” are distributed and developed by companies, organizations, and individuals to incentivize certain behaviors. For instance, systems that facilitate crowdfunding may issue tokens that may be exchanged for goods or services. Other applications include event tickets, memberships, licenses, loyalty programs, coupons, loyalty cards, and more. In this article, let us know more about fungible and non-fungible tokens and the difference between them.
A Brief on Fungible Tokens
Fungible tokens denote a method to exchange one good for another of the same category. For an instance, if you possess a dollar bill, it is possible to exchange that dollar for another dollar bill of the same value. Fungibility is mainly connected with the idea that any commodity can be exchanged with another of the same type without any loss in value.
The most prominent example of fungible cryptocurrencies is bitcoin. Bitcoins can be effortlessly exchanged with one another without any reduction in value. The anonymity behind Bitcoin also makes it highly fungible as it is extremely difficult to track transactions and prove ownership of specific bitcoins.
Benefits of Fungible-tokens
- Allows for a decentralized monetary system because there is no central agency responsible for coin issuance.
- As transactions can be completed through a centralized platform or blockchain system with little assistance from outside parties, they are simple to process.
- As one token cannot be recognized from another, the system is impervious to deception.
What are Non-Fungible Tokens?
Tokens that are unique are known as non-fungible tokens. They have a separate value from one another because they can be sold, exchanged, or transferred without involving other NFTs.
Non-fungible currencies can also be exchanged for goods and services provided by outside parties or used as a form of payment at some establishments, just like fungible tokens can. They cannot be exchanged for other coins of the same value, though.
Benefits of Non-fungible Tokens
- Creates digital items that can be used in games and other virtual worlds. Since these assets are specific to each user, they cannot be copied, making them extremely valuable to their owners and lowering fraud risks inside the system.
- As users can acquire shares in a firm but cannot transfer their ownership rights to other persons, this enables the establishment of decentralized organizations. This makes sure that shares cannot be sold more than once or transferred between people without consent from a centralized authority, such as the management team or board of directors of a corporation.
Difference between Fungible Tokens and Non-fungible tokens
Tokens that are fungible and non-fungible are two distinct token kinds that are utilized for various blockchain functionalities. The nature of each makes the major distinction between fungible and non-fungible tokens. They cannot be switched for one of the same kind because both are unique.
A commodity or product’s ability to replace other items of the same sort of value is known as fungibility. For instance, a dollar note is fungible because it is interchangeable with other bills of the same denomination or type. Non-fungible objects, on the other hand, are the polar opposite of fungible ones since they cannot be replaced by objects that are similar to them. For instance, you cannot use someone else’s identity to replace your own, making it non-fungible.
How to Create Non-fungible Tokens?
Follow the steps below to make your NFT collections easily and efficiently.
- Select an NFT design
Select the NFT template you want from the extensive selection. - Customize your NFT
Make your NFT stand out by changing the way it looks and feels. - Export and sell your NFT
Download the NFT in your preferred format and sell it online
Conclusion
Despite using the same blockchain technology, fungible and non-fungible tokens have different functions and applications in the real world. You can choose whether to employ fungible or non-fungible tokens in your project by being aware of these distinctions, just as you can choose whether to use blockchain technology at all.