Fungible and Non-Fungible Tokens
Tokens are digital assets created on a blockchain, and they can be categorized into two main types: fungible tokens and non-fungible tokens (NFTs).
Fungible Tokens
Fungible tokens are interchangeable and identical. This means that each unit is the same as every other unit. For example, cryptocurrencies like Bitcoin or Ethereum are fungible; one Bitcoin can be exchanged for another Bitcoin of equal value. These tokens typically follow standard protocols like ERC-20 on the Ethereum blockchain, allowing for easy trading, transfers, and integration with various wallets and platforms.
Non-Fungible Tokens (NFTs)
Non-fungible tokens, on the other hand, are unique and cannot be exchanged for one another on a one-to-one basis. Each NFT, often built on the ERC-721 or ERC-1155 standards, represents a specific item, artwork, or piece of content, giving it individuality. This uniqueness allows NFTs to convey ownership and provenance, making them particularly popular in digital art, gaming, and collectibles. For instance, one NFT representing a digital painting cannot be directly swapped for another NFT representing a different painting, as they hold different values and meanings.