Fungible vs non-fungible tokens on the blockchain
The potential of the blockchain technology is much more than cryptocurrencies. It will enable people, companies to put IDs, certificates, real estate data and other important information of the real world assets on the blockchain. Right now, this is what is causing a lot of buzz. Imagine having your diploma issued on the blockchain as a digital document that is recognized by all authorities around the world — no need to translate, notarize, verify it. While everyone is talking about this, how can this actually be done? The technology which made that possible are non-fungible tokens and we believe they are the future of the blockchain economy. Let’s talk about the difference between the present, fungible tokens, or simply put Cryptocurrencies and the future, non-fungible tokens or Digital certificates.
Without a doubt, blockchain is the right technology for managing digital assets of all kinds, primarily due to its features, such as security and immutability. With fungible tokens, mostly used on the blockchain up to now, this would be impossible to do, since no unique information can be written into the token. However, when you have cryptographic tokens that are unique and hold information instead of value, the blockchain technology can be used. These are non-fungible tokens, which are described on the Ethereum blockchain as the ERC721 standard.
Several companies, governments and other organizations are looking into this new promising technology and its numerous benefits. But in order to make the ideas reality, what we need now is a standardization and a base protocol that would allow for simple proof-validation of the existence, authenticity and ownership of digital certificates. That protocol should also enable dapps to easily be built, thus as a start, extend ERC-721 to become the defacto standard for Non-fungible tokens.
Our vision is to enable storing real world assets onto the blockchain as easy and seamlessly as possible, that’s why we are developing the 0xcert open protocol for certified and standardised certificates on the blockchain.
Fungible tokens were proven as cryptocurrencies
Blockchain is a disruptive technology, that is changing our economy. It is a list of records, stored in a distributed ledger and is immutable by design. Each record (i.e. block) contains a cryptographic hash of a previous record and a timestamp and so creates a list, a chain of blocks — blockchain. Information, once stored on blockchain, cannot be altered. As a result, people trust the information on blockchain. Simply put, what the internet was to communication, blockchain is to trust.
“What the internet did for communications, blockchain will do for trusted transactions.”
— Ginni Rometty, CEO of IBM
Bitcoin was the first proof-of-concept of the blockchain technology, introduced in 2009 in the White Paper by Satoshi Nakamoto. It was the first example of cryptocurrencies, an asset class that shares some characteristics of traditional currencies, hence the name cryptocurrencies, with verification of transactions based on cryptography. The success of Bitcoin encouraged other developers to build new projects on the blockchain and the blockchain economy has blossomed.
What most people think about the blockchain economy today is actually built using fungible tokens and the majority of the hype last year was about companies building cryptocurrencies based on this protocol.
Fungible tokens work fine for cryptocurrencies, in fact fungibility is the essential feature of any currency. However, if we take the fungibility out of tokens and think of non-fungible tokens, a variety of new opportunities for using blockchain technology opens.
Fungible and non-fungible tokens are fundamentally different
Why using non-fungible tokens for storing certificates?
Nowadays, much of our lives is defined by our personal data and no matter how strong security measures we or the data controllers take, data is at risk and identity thefts happen. Remember Equifax incident? In 2017 data breach the sensitive personal information of 143M US citizens were exposed.
As we see with a diploma, a better system is needed for handling identity information, a tamper-proof, secure system, something non-fungible tokens enabled on the blockchain. With non-fungible tokens, users can store proofs of identity on the blockchain while keeping the identity information securely stored by themselves, impossible to be forged or stolen. It empowers them to reclaim the ownership of their lives, from Birth Certificate on, over all important identity information of their lives, with no authority storing this information.
ERC-721 standard for non-fungible tokens on the blockchain
Non-fungible tokens started with Ethereum Implementation Proposal 721 (EIP-721) in late 2017.
Remember CryptoKitties? They were the first use cases of non-fungible tokens and have taken the blockchain community by storm. CryptoKitties are collectables — assets, that are unique and can be stored in your Ethereum wallet. You can buy, sell, trade and even breed them.
However, use cases go far beyond fun collectables as CryptoKitties. Non-fungible tokens can be used in KYC (Know Your Customer) procedures, for academic degrees and other educational certificates, collectibles, badges, voting & elections, loyalty programs, in-game items, copyright, supply chain tracking, medical data, software licenses, warranties, and more.
After EIP721 got confirmed as an official, fully supported Ethereum standard (ERC-721) in March 2018, the ground for developing non-fungible solutions on the blockchain was set.
0xcert protocol for standardization of certified non-fungible tokens
We believe non-fungible tokens will bring the next revolution of the blockchain technology and 0xcert is leading the way with the first open protocol for standardized and certified non-fungible tokens to a wider technical audience. It’s a framework with a set of on-chain and off-chain rules, libraries and conventions for digital certificates on blockchain.
We want to empower developers to easily build dapps and enjoy full benefits of the blockchain, a tamper-proof, transparent and secure decentralized ledger. With 0xcert, they can drastically shorten development time, decrease risk and cut costs associated with developing blockchain solutions.
A wide range of decentralized applications and business models can be supported, giving companies the power to fully utilize the potential of blockchain technology. Non-blockchain companies will be able to make use of the blockchain to easily incorporate the non-fungible technological features into their applications while not requiring their development team to be proficient in low-level blockchain programming.
Visit 0xcert to learn how to benefit from 0xcert and participate in the project. And don’t forget to subscribe to our newsletter to be informed about the project development.
Want to learn more about non-funbile tokens? Join us livestream or in person on April 26th at 6:00pm at a joint 0xcert and the Blockchain Association event Beyond CryptoKitties: ERC721 tokens with special guest William Entriken, the creator of ERC721 standard, who is one of the most important figures in the Ethereum landscape.
