Fungible Vs Non-Fungible Tokens- Do you know the Differences, 2022

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Fungible Vs Non-Fungible Tokens

Token

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.

  • Your office ID card proves that a corporation employs you.
  • Your driver’s license is a symbol indicating you have completed the necessary training to drive in your nation.
  • Your hotel key card verifies that you have paid for your accommodation at the hotel.

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:

  • Toll: A token can be used to access a Dapp. To access the Dapp, you’ll need to have the tokens on hand.
  • Voting Rights: The holders of the tokens may be granted certain voting rights. Consider EOS: if you own EOS tokens, you can vote for block makers.
  • Value Exchange: One of the more conventional roles of tokens inside the ecosystem is a value exchange. Tokens can aid in the development of an application’s internal economic system.
  • Enhancement of User Experience: The token can also be used to improve the user experience within the limits of a specific location. For example, holders of BAT (the Brave token) will be able to enhance the customer experience by using their tokens to add adverts or other attention-based services to the Brave platform.
  • Currency: It can perform transactions both inside and outside the ecosystem as a store of value.
  • Ownership of a one-of-a-kind item: A non-fungible token can represent something one-of-a-kind to that user. Cryptokitties, for example.

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 TokenNon-Fungible Token
Main FeaturesDivisibleIndivisible
Non-UniqueUnique
InterchangeableIrreplaceable
Real-world purposesPayment System Intellectual Property
Store of ValueAcademic Title
Artwork
Music Composition
Gaming
Utility
Assets like stockes, shares
Access to a service i.e., a subscription
Technology usedOwn BlockchainBuilt on another blockchain
Example of tokensBitcoin, Litecoin;ERC-20 ERC-721
Content storedValueData

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.

  • TotalSupply
  • BalanceOf
  • Transfer
  • TransferFrom
  • Approve
  • Allowance

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

  • Token Name
  • Symbol
  • Decimal (up to 18)

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

Fungible Tokens’ Features

  • Another of the same type can replace one token.
  • The tokens are all governed by the same fundamental principles.
  • Because fungible tokens are divisible, smaller fractions could be used to repay a more significant sum. For example, 1 BTC can be repaid as 0.50 BTC, 0.30 BTC, and 0.20 BTC.

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:

  • To begin with, developers will find it easier to transition because they will not need to learn a slew of new skills.
  • Users may store these tokens in regular wallets and trade them on exchanges, making life much easier for them.

ERC-721 has two methods of communication:

  • ownerOf: to find out who owns a token
  • transferFrom: to change the owner of a token

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.

Non-fungible token

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
  • Approval

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:

  • Which account was used to send the token?
  • What account did the token go to?
  • Which token was transferred (based on ID verification)?

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.

Advantages and Disadvantages of Non-Fungible Token Standards

Advantages

  1. The ERC-721 standard can be used to tokenize any critical asset on a public or hybrid blockchain while maintaining total immutability and security.
  2. Non-fungible tokens can be created with far more resources than most people had at the time. This can be done by users, who can contribute additional context and information to the asset’s metadata.

Disadvantages

  1. The ERC-721 token standard is still in its early stages of development.
  2. Fungible tokens can be divided up to a certain extent. ERC-721 cannot be separated and must be purchased or sold entirely.

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:

  • Compatible with Ethereum’s EVM, a Turing-complete resource-accounted deterministic virtual computer (for smart contracts).
  • A powerful federation-based two-way pegged Bitcoin sidechain (for BTC denominated transactions).
  • A 30-second block interval SHA256D merge-mining consensus protocol (for consensus security relying on Bitcoin miners). (to receive funds quickly).

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.

  • Watacards can be given as gifts or autographed by celebrities to their fans.
  • They can sign these cards cryptographically using their wallet.
  • Intelligent contracts protect the idols’ intellectual property.
  • Every time fans buy and sell watacards on the secondary market. A portion of the shares will go to the worried celebrity.
  • Watafan wants to use smart contracts to take digital property to the next level. RSK smart contracts allow Watafan idols to protect their copyright and digital identity.
  • Watacards will establish themselves as a new type of asset that may help artists, sports, singers, actors, and others protect their intellectual properties in the long run.

Fungible Vs. Non-Fungible Tokens

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What is token?

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.

What is the 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.

What is the 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.

What is the difference between Fungible Token Vs Non-Fungible Token?

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.

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 designed to provide smart contract functionality to the Bitcoin blockchain.

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