Undoubtedly, NFTs might be the most confusing thing in the blockchain space. As more news comes out about prices rising and falling, almost like the tide, it can leave most of us with more questions than answers. In this blog, I will examine the differences between fungible and non-fungible assets and explain NFTs.
Fungible vs. Non-Fungible Assets
When it comes to NFTs, there are some key terms and concepts that need further clarification before moving forward. Below, I go over the difference between fungible and non-fungible assets, briefly explaining each point.
1. Fungible Assets
The term "fungible" isn't exactly the most common term to hear in daily conversations. The term fungible refers to something exchangeable for an identical item of the same value. For example, if you wanted to, you could exchange one dollar for another, both worth the same amount. The most common fungible asset we all use daily is money, which is transferable.
2. Non-Fungible Assets
Meanwhile, non-fungible tokens, or NFTs, differ much from fungible assets. The main difference is that NFTs have a unique value that isn't identical to any other NFT. This point means that much like a piece of physical art or jewelry, the price is subjective and depends on what people are willing to pay for it, meaning its value can dramatically fluctuate.
Blockchains and NFTs
Essentially, NFTs are bits of unique code on the blockchain, almost like a digital authentication certificate for that asset. Unfortunately, most people are often confused, thinking it's the actual piece of art when that isn't the case.
These tokens are on public ledgers that keep track of each item's existence and who owns what asset. An interesting point that NFTs have brought up is questions around ownership of digital assets and what it means precisely as we move into a more tech-based world.
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