The Difference Between Fungible and Non-Fungible Tokens

Until recently the term ‘fungible’ was primarily the purview of economists and Latin scholars. But since the sale of a 69 million dollar digital artwork — which just so happened to be an NFT, or ‘Non-Fungible Token’ — interest in the term has received a considerable boost.

The Difference Between Fungible and Non-Fungible Tokens

How Blockchain Technology is Empowering Creators and Business

Whether you’re an artist or a small business owner, growing your brand can be uniquely challenging. Both face competitive markets where established figures and brands are at a huge advantage. The introduction of NFTs into the mainstream has brought with it a whirlwind of interests, innovative possibilities, and general confusion. We delve into some of the most pertinent jargon, like the difference between fungible, and non-fungible, and what NFTs might mean for future industries.

The elitism of the fine art world is alienating, not just to artists, but also to first-time investors. The staggering prices alone are bound to deter fans and artists who don’t form part of the inner sanctum.

Small businesses face similar challenges of accessibility, especially when trying to grow capital and build brand recognition. They typically face noteworthy competition, often from some of the most well-funded, historic, and recognisable brands in the world. 

So how can individuals and small business owners compete within these powerful institutions? One way is through disruption. The introduction of NFTs has brought with it an entirely new series of possibilities. And while there’s been no shortage of overblown hype and speculation, there’s also been promising examples of substantive and positive long-term applications.

These tokens have had an innovating effect on how we buy and sell art, from empowering digital artists, to fostering a new generation of art investors. But their use cases extend far beyond buying and selling. With the right strategy, NFTs can be leveraged to generate funds and brand recognition for small businesses, and much more. 

Fungible, You Say? 

So, what does a 350-year-old Latin word have to do with digital art, blockchain technology, and a hugely expensive JPEG consisting of over 5,000 images? 

Until recently the term ‘fungible’ was primarily the purview of economists and Latin scholars. But since the sale of a 69 million dollar digital artwork — which happened to be an NFT — interest in the term ‘fungible’ has received a considerable boost.

What is a Fungible Token?

‘Fungible’ essentially refers to identical units that are interchangeable since their value is the same. In economics, fungibility refers to when a commodity consists of individual units that are interchangeable and virtually indistinguishable from one another.

These include familiar monetary assets like the US dollar, as well as units of cryptocurrency, like Ethereum or Bitcoin, both of which are fungible tokens. If two people exchanged one Bitcoin for another there would be no loss of value and neither party would be better off than the other, hence the term fungible.\

Cryptocurrencies are fungible tokens
Cryptocurrencies are prime examples of fungible tokens

What Makes a Token Non-Fungible?

As you might have guessed, the term non-fungible stands in opposition to the term fungible. Non-fungible tokens (NFTs) are an innovation that comes from blockchain technology and gained an explosion of mainstream attention back in March of 2021.

What makes a token non-fungible is that it has unique properties that are mathematically guaranteed to always be unique. This means that there is no equivalent to it that can be traded. Similar to the Mona Lisa. A copy will always be a copy and the original will always be the original.

What are Non-Fungible Tokens?

NFTs are unique digital assets. Ownership of an NFT can be proven thanks to the underlying blockchain technology that keeps a ledger of all its transactions. Because each token is unique it means they cannot be exchanged for one another, which makes them non-fungible.

It would be akin to trying to trade a rare Pokémon card for a vintage car. You could do it, but it would be entirely subjective as to who got the better deal.

How are People Using NFTs?

To date, the most well-known NFTs have been pieces of visual digital art by artists like Grimes and Beeple — but their uses aren’t limited to that. DJ Steve Aoki recently launched a unique range of NFTs that is set to shape the future of music collaboration, while the world of gaming is in the process of reckoning with NFTs’ impact on the concept of play to earn.

Rival brands Adidas and Nike have also each launched their own lines of NFTs in a bid for relevance in the metaverse. Businesses are using NFTs to create unique brand experiences that increase awareness and encourage interaction. It’s an exciting new method for generating interest in your brand or product.

But NFTs aren’t restricted to arts, gaming, and collectibles. They also have fascinating potential use cases in other fields, like healthcare, real estate, and logistics. 

We're beginning to see some incredibly exciting trends within NFTs, and these will continue to roll out in the coming years.

The Potential of NFTs

In healthcare, NFTs have a bunch of exciting potential use cases. NFT ledgers, for example, have the ability to store a patient’s medical records without compromising their confidentiality. Their records would be protected from outside manipulation, thanks to the fact that it requires validation from multiple nodes, ensuring that every record is accurate, safe, and secure.

NFTs are also uniquely suited to real estate. They could be used to transfer land deeds, provide proof of ownership, and keep track of changes in property value over time through the use of timestamped NFTs.

Logistics is another field that is well prepared for the transformative power of NFTs. One way they will do this is by empowering consumers with the ability to ensure that the product they are purchasing is authentic. The blockchain is able to permanently store information about the product, like details about the manufacturing and shipping process, making it far easier to authenticate fair trade.

NFTs will also be able to address the global issue of fake food products and supplements in a big way. They could help solve the problem by reliably tracking and tracing food throughout their entire global process. 

In the future it’s very likely you’ll simply be able to scan a QR code on your product and get all the information you need about its journey, from manufacturing to shipment, to purchase. 

Don’t Forget About Semi-Fungible Tokens

Just to make things slightly more complicated, there’s one more category to keep track of, Semi-Fungible tokens (SFTs). They’re a relatively recent class of tokens that can be both fungible and non-fungible during their life cycle. 

Initially, SFTs act like any other fungible token since they can be traded with other identical SFTs. But after a certain date or action, their value changes, and they become non-fungible.

What is a Semi-Fungible Token?

One example of SFTs would be a token that represents a valid gift voucher for your favourite store. Once you redeem it, it loses its value. But, prior to spending it, the card is identical and therefore interchangeable with any other gift card of the same amount (and the same expiration date). This means the token is originally fungible but becomes non-fungible once you redeem it, hence the term semi-fungible.

Another way to understand SFTs is by examining how the value of a concert ticket might change once the event has passed. Imagine you had a token representing the first concert performed by David Bowie. The monetary value of your ticket would be identical to other tickets with the same date and seating area, (we’ll leave ticket scalpers out of the equation for this example) making them interchangeable and fungible. 

Once you’ve attended the event, rather than losing its value entirely, the token takes on a new kind of worth as a piece of memorabilia or a collector’s item. It has now reached the non-fungible period of its lifecycle. 

How Momint Uses Semi-fungible Tokens

You may be surprised to learn that Momint offers semi-fungible tokens. This is because users can purchase different editions of the same art piece.

Creators are able to produce up to 25 editions of an art piece, providing a larger portion of their fan base with the opportunity to own one of their works. The creator alone owns the first edition and has the power to set its price.

Initially, the editions are all identical, however, each edition has its own unique token ID, essentially making it an NFT. Because the artwork/edition is identical, we can these semi-fungible tokens.

NFTs And Beyond

NFTs are undoubtedly one of the most exciting developments to come out of the burgeoning field of blockchain technology. It has the potential to facilitate huge innovations in how we track supplies across the world and how we hold companies accountable. 

So far the most common applications of NFTs have been in the world of gaming, collectables, and selling digital artworks. But as this technology becomes more prevalent, we can begin to gain a clearer understanding of how it could impact our everyday lives. 

The potential for NFTs to transform industries like art, healthcare, and logistics is still in its early stages. Even in the realm of digital art, its potential is far from fully realised. There are countless creators who haven’t even begun to explore its potential and even more buyers who haven’t entered the market yet.

And as more businesses and industries become familiar with terms like ‘fungible’, ‘non-fungible’, and ‘NFTs’, you can expect to see an increasing number of companies starting to explore the immense possibilities that these technologies have to offer.

We believe that the platforms that help NFT creators thrive will not only continue to play a key role in growing this important industry but will also impact how other industries adopt this meaningful technology. We’re excited to contribute to the future of NFTs in South Africa, Africa and beyond!

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