NFT, or non-fungible token, is one of the latest innovations in the field of digital currencies, which have a relatively short lifespan and do not have their own blockchain. Many people are familiar with this field in general, but the important point is, how do NFTs or non-fungible tokens differ from fungible tokens? In this article, we intend to fully address this issue.
Types of tokens in terms of exchangeability
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Tokens are produced in different types, each of which has its own category and has different uses, and they fall into two categories: “Fungible Tokens” (FT) and “Nonfungible Tokens” (NFT).
Fungible Tokens or FT
Fungible tokens are assets that can be exchanged; without reducing their value. Like a 100 dollar bill which is equal to another 100 dollar bill and therefore they can be exchanged and moved with each other. On the other hand, these assets can be divided without reducing their value.
Note, these tokens follow the ERC-20 standard. This standard is, in fact, a special set of rules that tokens created on the Ethereum blockchain network use. The important thing to pay attention to is that exchangeable tokens basically have the following characteristics:
- Fungible tokens that are of the same type can replace each other.
- Similar general rules apply to these tokens.
- These tokens are easily divisible.
Non-fungible tokens or NFTs
Non-fungible Tokens (NFT) are tokens that use blockchain technology to link to another unique digital asset and are non-fungible. In fact, non-fungible tokens are digital assets that are unique and cannot be divided. Also, these tokens do not have equal value to each other. For example, 2 different paintings never have the same values and they cannot be divided into smaller works of art.