Non-fungible tokens (NFTs) are a new and exciting digital asset that is taking the world by storm. While similar to traditional cryptocurrencies like Bitcoin, the nft collection has some very important differences that make them perfect for unique applications such as digital collectibles and online gaming. This article will explore six fundamental differences between fungible tokens and non-fungible tokens.
1. Non-fungible tokens are unique.
Each individual non-fungible token is unique, whereas another identical unit can replace each unit of a fungible token. Unfortunately, this means that you can’t trade one NFT for another – they must be exchanged hand-to-hand.
This contrasts with fungible tokens, which can be replaced by any other unit of the same type. So, for example, you could trade one bitcoin for another bitcoin or one ether for another ether.
2. NFTs cannot be subdivided
One of the most interesting ways that non-fungible tokens differ from fungible ones is their divisibility – or lack thereof.
Who knew you could learn so much about a token simply by asking if it was ‘divisible’? Well, now you know! Non-fungible tokens are not divisible, meaning that you can’t cut one NFT into two or more units.
This is in direct contrast to fungible tokens, which can be subdivided and combined at will by the token owner.
3. NFTs are rarer.
Since each individual non-fungible token is unique, only a finite number of them exist. This makes them considerably rarer than their fungible counterparts, which can be created and destroyed at will.
In fact, the total number of non-fungible tokens in circulation is already set. This is in stark contrast to fungible tokens, which their owners can create or destroy at will.
4. NFTs are more expensive.
As with any limited resource, non-fungible tokens tend to be slightly more costly than their fungible counterparts – simply because they’re rarer.
This can, of course, depend on the nature of the token and its intended use case. Still, it is generally thought that owning one or more non-fungible tokens is a more expensive proposition than owning fungible tokens.
This contrasts with fungible tokens, which are often seen as cheaper (in terms of price per unit) than their non-fungible counterparts.
5. NFTs are regulated.
Non-fungible tokens have also come under increased scrutiny from regulators since their inception, as they fall into a legal grey area between being securities and digital assets.
Fungible tokens do not face the same regulatory issues because each token can be replaced by any other unit of the same type – meaning that they are not unique and, as a result, lack the same level of scrutiny.
6. NFTs are not as user-friendly.
Non-fungible tokens are still in their early days, and as such, they are not as user-friendly as their fungible counterparts.
This is largely because the infrastructure surrounding non-fungible tokens is still being developed, whereas the infrastructure for fungible tokens has been around for much longer.
This is in contrast to fungible tokens, which are easily replicated and transferred between parties – making them more vulnerable to hackers.
In conclusion, there are several fundamental differences between fungible and non-fungible tokens.
