What is Token and What is the Main difference between Fungible and Non-fungible Tokens.
We are in the middle of Economic Revolution.
With an ongoing revolution in information technology, our economic system of organization are being disrupted and transformed by the rise of information networks. We are currently in the process of remaking the internet which primary component is blockchain. You have probably heard of it, but do you completely understand the importance of distributed ledgers which allows us to interact with each other without the need of having a mediator.
This distributed ledger enables a networks of computers to maintain collective database of value, ownership and exchanges via internet protocols. It is public and distributed across the network and there is no single point of failure which is just one of the advantages blockchain has over centralized networks. The conclusion is that we don’t need to trust the third party as peer to peer interaction emerges. In an attempt to explain the problem of trust take a look at this video.
What is a token?
A token is a unit value that exists on an existing blockchain. Tokens do not have their own blockchain but depend or exist on an existing blockchain of a crypto currency. Eg, Ethereum, Bitcoin etc. As token has a unit value, that value is tradable. The value can be in the form of coins, points, certificated, in-game items etc.
Difference between fungible and non-fungible tokens.
In short, when something is fungible, then that is the substitute for the identical copy of the same thing. That’s all.
For instance, if you have 100 dollar banknote, that piece of paper is identical to another 100 dollar banknote. It is fungible in the way that every 100 dollar banknote can be replaced for another 100 dollar banknote.
On the other hand when something is non-fungible it basically means that it can’t be replaced with identical copy as one does not exist. For instance, pokemons. Every single one of them has its own individual characteristics which defines them and make different from others. So Bulbasaur can’t be fungible with pikachu as they are not the same( i’m not talking about subjective value).
The Emergence of the first NFT
First Non-fungible tokens appeared somewhere in 2016, but none of them made such an impact like crypto kitties did. Each cat is a unique token with special attributes which is different from others and therefore it is non-fungible. The maiting of a cat could have created a new cat with new attributes, some of which inherited from parents, and some received randomly from the system.
These attributes influenced the appearance of a cat, so every cat was unique in appearance. The more details cat has the more its worth.
By now you are probably asking yourself on how can we be sure there is no identical copy of it out there. This is when blockchain takes over as it can not be compromised. Non-fungible digital goods existed before but the company that “printed” them could print more without a problem and directly influence on its value. Since blockchain is invariable as
thousands of computers execute the same code and ensure the same outcome, the problem of trust is solved. These computers ensure that there is always only one copy of a NFT at some point.
NFT’s are personalized money, access cards, collectibles, digital post stamps, pokemons, digital personal documents. I hope the article helped you understand the tokens in general and i will try to do it more often.