Blockchain101 Education Series: non-fungible tokens

What’s the difference between cryptocurrency NFTs and other cryptocurrency tokens like Bitcoin?

• The difference between a cryptocurrency token like Ethereum and a NFT created or minted on Ethereum is mainly fungibility.

Fungibility, nonfungible tokens and fungible tokens.

• I will start with NFTs or NonFungibleTokens.

Non-fungible Tokens

• A non-fungible tokens*, which are frequent called NFT’s, are cryptocurrency token which are each created to be unique, and to represent something unique.
• For example a NFT could contain a picture file, which is the only digital picture in existence of your mother.
• Or a NFT could be one of a limited production series of ten pictures of your mom, numbered 1000, 1001, 1002, 1003… 1009. This means even though each is a picture of your mom, they each have a unique number.
• Instead of simply being numbered differently they could also each have your mom in a unique and different dress or a unique and different pose. Or each could have a unique and different colored background or unique colored border.
• These characteristics where each cryptocurrency token represents something unique, and thus they are not interchangeable is called non-fungibility. They are not the same, and they are not interchangeable.
• Now that we have defined non-fungible, we should discus the opposite term Fungible

Fungible

• The word Fungible means that each Fungible cryptocurrency token is basically the same in size and appearance, and more importantly worth the same. This means I’m terms of value and utility, they are the same. This means that in a utility and value sense they are interchangeable.
• For example, just like you and I can exchange dollars we have in our wallets, because they are interchangeable.
• Another example is that Fungible means that each Bitcoin is worth the same as any other Bitcoin, and they are interchangeable, just like you and I can exchange dollars we have in our wallets, because they are functionally and descriptively the same. It doesn’t mean they are identified, like dollar bills may have different serial numbers or may have been created or minted in different places, but otherwise in appearance, function and value they are the same.

• Why are these difference

• Non-fungible Tokens or NFT’s are different, in that each is created to be unique, to represent something unique.
• They can describe an entire object or a specific piece.
• As you may know, non-fungible Tokens, which by definition are non-interchangeable and unique, are used in the very popular decentralized gaming application called Splinterlands. This is a playing card game similar to the Pokémon Cards, but different in that Splinterlands are digital representations, which are unique..
• The non-fungible Token contains all the information about your card and the Token represents your card.
• The data properties for Splinterlands cards are the card type, rarity, level, edition (Alpha, Beta, Promo, Reward, or Untamed), and the data properties distinguish the cards from each other.
• Non-fungible Tokens are encoded with the data properties these cards possess and these properties make both the cards and coins unique.

A closer look at some terms you need to understand in this space of DeFi;

• The Ethereum Blockchain has multiple types of nonfungible tokens called ERC tokens with a number after the ERC..
• The number better defines the type of Token.
• From Token comes the term “Tokenization”.
• Tokenization is a new word, which describes a new way to raise money using cryptocurrency, during which the Project creator creates tokens which represent a share in a property or real estate asset, and investors trade fiat or cryptocurrency for these Tokens to secure partial ownership.
• This type of ownership is also called fractional ownership, which isn’t new, but the process which creates the fractional ownership is new.
• In a nutshell, tokenization is one way to represent real assets using cryptocurrency nonfungible tokens.
• This process “Tokenization” is also called “digitization” to mean the physical assets are represented in the virtual world or blockchain by digital representations.
• These representations are also called nonfungible tokens.
• Lastly Tokenization is also called “securitization”.
• To securitize an asset means to secure the ownership of this asset within the tokens which represent it.
• A token can represent the whole value, but more commonly represents a fraction of the entire value.
• These non-fungible tokens securely represent an ownership of a asset, and they are sometimes called “security tokens”.
• These tokens are tradeable via cryptocurrency exchanges.
• That’s a lot to process, so I will stop here. Comment below with questions.#

• @shortsegments