Fungible vs Non-Fungible Tokens: Major Differences

Have you been struggling to understand fungible and non-fungible tokens?

I’ll guide you with simple words and detailed examples.

And at the end of this article, you’d be able to spot differences between fungible and non-fungible tokens.

Let’s go!

Fungible Tokens

Think of something valuable that can be exchanged for another valuable item of the same kind.

Simply put, fungible tokens are divisible assets that are not unique and can be exchanged for another asset of the same kind.

Bitcoin, Ethereum and other cryptocurrencies are examples of fungible tokens.

Gold, stocks and dollar bills are examples of fungible assets.

Examples of fungible tokens and assets
Fungible Assets and Tokens

Non-Fungible Tokens

For an item to be non-fungible;

  • It should be unique and
  • Cannot be interchanged or divided into smaller units.

Therefore, non-fungible tokens are unique digital assets containing units of data stored on the blockchain.

It is considered unique because of the data stored on each token.

Different NFTs can store data relating to picture, audio, video or any other digital files.

Non-Fungible Assets and Tokens

Major Differences

Now that you’ve understood fungible and non-fungible tokens, let’s see the unique features that set them apart.

  • Interchangeability

Fungible tokens are generally used for making payments and tracking balances.

On the other hand, non-fungible tokens are proof of ownership of digital assets.

The ownership proof in form of data stored on the blockchain enables you track the owners.

  • Content Stored

Fungible tokens contain value (numerical worth) of a cryptocurrency like Bitcoin value.

Non-fungible tokens store units of data on top an existing blockchain.

Like an artwork, ticket or certificate.

  • Technology Used

Fungible tokens have their own blockchain.

Good examples are Ethereum and Bitcoin.

On the other hand, non-fungible tokens are built on top of existing blockchain.

Most NFTs are built on top of Ethereum, Solana, Zilliqa, Flow, Cardano and Tezos.

  • Ethereum Token Standard

Fungible tokens use ERC-20.

It’s a fungible token standard used to create fungible tokens on Ethereum blockchain.

Non-fungible tokens use ERC-721.

Conclusion

Finally, it’s important to note that NFTs can be bought using several fungible tokens and currencies.
In my opinion, this is the bridge that connects both tokens.

Did you gain some experience with tokens from this article?

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