Fungible Vs Non Fungible Tokens [The Actual Difference]

Fungible Vs Non Fungible Tokens: A token is an object that acts as a visible or tactile representation of a fact, characteristic, feeling, or another concept in real life. You can empty your pockets right now, and there’s a good chance you’ll find a bunch of real-life tokens.

Similarly, a token in the cryptoverse represents “something” in its ecosystem. It could be a monetary value, a stake, a voting privilege, or anything else. A token isn’t confined to a single function; it can play various roles in its native ecosystem. A ticket represents a company’s asset or service, which it usually gives away to investors during a public sale.

Role of Token

In its ecosystem, a token is a representation of something. It could be anything: worth, stake, voting right, or something else entirely. A permit is not confined to a single purpose; it can perform a variety of tasks in its native environment, including:

Fungible Vs Non Fungible Tokens

Fungible Token

Look no further than today’s most popular cryptocurrencies to gain a thorough knowledge of fungible tokens. Fungible tokens, in essence, may be used to trade, sell, and buy products and services among persons.

The rising popularity of cryptocurrencies has sparked the curiosity of several businesses worldwide, who are considering issuing their fungible tokens. Last year, for example, Facebook launched its ambitious Project Libra, which aims to power its ecosystem and promote financial inclusion. Similarly, governments worldwide are warming to digital money and considering creating central bank digital currencies (CBDC).

Non-Fungible Token

Nonfungible assets, on the other hand, are one-of-a-kind and can’t be divided. They should be considered a form of deed or ownership title for a one-of-a-kind, non-replicable item. For example, a flight ticket is nonfungible due to its unique data. Because they are one-of-a-kind, a house, boat, or automobile is a nonfungible physical asset.

Like a photograph or intellectual property, nonfungible tokens represent a single, indivisible, physical, or intangible entity. Blockchain is the underpinning technology that makes proving ownership of an intangible digital property simple.

The content they store is the crucial difference between fungible and nonfungible assets. Nonfungible tokens, unlike fungible tokens like Bitcoin, store data such as an academic title or an artwork.

Fungible Vs Non-Fungible Tokens

	Fungible Token	Non-Fungible Token
Main Features	Divisible	Indivisible
	Non-Unique	Unique
	Interchangeable	Irreplaceable
Real-world purposes	Payment System	Intellectual Property
	Store of Value	Academic Title
		Artwork
		Music Composition
		Gaming
		Utility
		Assets like stockes, shares
		Access to a service i.e., a subscription
Technology used	Own Blockchain	Built on another blockchain
Example of tokens	Bitcoin, Litecoin;ERC-20	ERC-721
Content stored	Value	Data

Ethereum Token Standards: ERC-20 vs ERC-721

It is critical that Dapps created on Ethereum can communicate with one another effortlessly to build a healthy ecosystem. What happens if we have two tokens, say Token Alpha and Token Beta, each with its intelligent contract structure?

For the two tokens to communicate, the developers will need to thoroughly examine each of their contracts and layout exactly how they will interact.

It doesn’t exactly shout “scalability” to you.

If there are 100 separate tokens with 100 different contracts, narrowing down all of the criteria and conditions needed to ensure that transfers between all of these tokens are possible will necessitate a massive amount of complicated mathematics. This is far from an ideal situation.

These are the minimum requirements for ERC-20 tokens regarding rules and functionalities. They can, however, have the three traits listed below as well.

The ERC-20 fungible standard is defined by these rules.

Fungible Tokens’ Features

The Non-Fungible Standard ERC-721

The ERC-721 token standard enables non-fungible tokens to be created. In terms of functionality, it’s very similar to ERC-20. There are two causes for this similarity:

ERC-721 has two methods of communication:

ERC-721 Functions

Name, symbol, totalSupply, balanceOf, ownerOf, approve, takeOwnership, transfer, tokenOfOwnerByIndex, and tokenMetadata are all defined in the ERC-721 standard. It also defines two processes: transfer and approval.

Before we go into the specifics of each function, it’s essential to understand what we mean by the ERC-721 functions Token Ownership and Token Creation.

Token Owenership

When you buy ERC-20 tokens, the smart contracts will specify your ownership rights. The smart contract also contains information on how many tokens each address will receive following the transaction…and that’s all there is to it. Because these contracts are fungible, they don’t need to worry about specific tokens because they are all the same.

However, due to its non-fungibility, the value of one ERC-721 token is not the same as the value of another ERC-721 token. It’s not enough to add an address and a balance to the contract; a token’s unique ownership data must also be included.

Events

When a contract triggers an event, it is broadcast to all listening programs.

Outside of the contract, the program listens for events to execute the code when it is executed. Two events are covered under the ERC-721 standard:

Transfer

This event is triggered whenever a token is exchanged. This event is triggered whenever the ownership of a token is transferred from one person to another. It contains the following information:

Approval

This second event is triggered when a user permits another user to assume ownership of a token. The event specifies which account presently owns the token and which account will be granted the right to do so. It also examines the token ID to see which tokens have been allowed for ownership transfer.

Other Non-Fungible Token Standards

1. ERC-1155

The Enjin team popularised another non-fungible token standard, ERC-1155. The IDs defined here are not for a single asset but rather for asset classes. So, if we want to construct a collectible out of “cards,” we may establish an ID that represents “cards.” There could be 50 of these in a wallet.

A benefit of ERC-1155 over ERC-721 is that a user would have to modify the smart contract’s state to transfer these 50 cards. The downside of ERC-1155 is that it lacks traceability.

2. ERC-998

Composable like ERC-998 gives a framework for non-fungible and fungible assets to be owned by NFTs.

As previously stated, several projects have begun producing NFT coins. RSK happens to be one of them.

What is RSK

Rootstock (RSK) is an innovative contract platform that uses sidechain technology to connect to the Bitcoin blockchain. Rootstock was created with Ethereum’s applications in mind (the web3/EVM/Solidity paradigm). RSK was created to provide smart contract functionality to the Bitcoin blockchain. Rootstock is, at its essence, a combination of:

NFT Use Cases (RSK)

Its relationship with Watafan best exemplifies RSK’s advancements in non-fungible tokens.

Watafan will enable superstars to design their watacards or digital trading cards.