Fungible vs Nonfungible Tokens: What Is the Difference?

Tokens reign supreme in the cryptocurrency industry. A token is a little object that acts as a physical representation of a truth or a trait, and it can be anything of value.

Tokens aren't limited to a particular purpose; in their natural context, they may perform a range of tasks. Tokens may be used for a variety of reasons, such as acting as a gateway to decentralized apps (DApps).

Furthermore, they may entitle the owner to specific voting privileges. Fungible tokens are totally interchangeable with one another, and fungible assets include fiat currencies. The rapid success of crypto cats, a virtual cat collector game, has propelled non-fungible tokens into the mainstream.

What are fungible and non-fungible tokens?

Let's take a closer look at both sorts of tokens now that we've seen what they are.

Fungible Tokens:

Blockchain is widely regarded as the ideal technology for handling all forms of digital assets because of its decentralization, security, and immutability. With such replaceable tokens, this would be impossible.

Such tokens are acceptable in the context of cryptocurrencies since fungibility is an important feature of any money. This form of token is built so that each fraction of a token is equivalent to the next.

For example, Bitcoin, the most widely used cryptocurrency, is fungible, meaning that one Bitcoin is equal to another Bitcoin and all other Bitcoins. Such tokens are assumed interchangeable and divisible.

To put it another way, they are cryptographic tokens that are substantially identical or consistent in appearance and may be readily exchanged with other fungible tokens of the same type. Such tokens are related to the things we use daily, and they apply to both real-world and digital assets.

Non-Fungible Tokens:

non-fungible tokens differ from fungible tokens in that they represent unique, collectable items. Because they can't be divided or swapped for other non-fungible tokens of the same type, they're one-of-a-kind.

NFTs may be thought of as non-fungible tokens that provide many unique uses for blockchain technology. Crypto Kitties is the most well-known example of non-fungible, collectable tokens.

Unlike fungible assets like Bitcoin, every Crypto Kitty is unique, and no two Crypto Kitties are alike; it is impossible to break a Crypto Kitty into smaller parts, exchange them, and reassemble them to make an equally valued Crypto Kitty.

Tokens That Are Fungible vs. Non-Fungible:

Let's look at the key distinctions between the two sorts of tokens now that we know what they are.

Interchangeable Fungibles:

As previously stated, such tokens are interchangeable and may be swapped for any other token of the same type. Fiat currencies, for example, are fungible. For example, $50 bills can be exchanged for other $50 bills. Similarly, one Bitcoin value may be traded for another, with no effect on the holders.

Non-Fungible Tokens are non-Interchangeable:

Unlike fungible tokens, non-fungible tokens cannot be substituted with a non-fungible token of the same sort.

Fungible Tokens are Divisible:

These tokens may be divided into smaller units, and the quantity of units obtained is irrelevant to the holders as long as the value remains constant.

Non-Divisible Non-Fungible Tokens:

These tokens cannot be split in any way.

Uniform Fungible Tokens:

Each token is distinct from all others of the same type.

Non-Fungible Tokens are One-of-a-Kind:

The specifications of each type of token are the same, and each token is identical to the others.

NFTs may be a feasible alternative for tokenizing ownership and property as the world becomes increasingly digital. These tokens enable the correct digitization and storage of real-world assets while also ensuring their security. As a result, NFTs are likely to rise in popularity shortly.

Blockchain technology's amazing potential has changed the way organizations and sectors operate, paving the way for blockchain specialists. Enrol in Blockchain Council today and get certified if you want to learn more about Blockchain technology and become a Blockchain Professional.

Written By- Tanya C