To answer this question, let’s analyze each term.
Fungibility is a property attributed to money, stocks, goods, and commodities, such as gold, grains, natural gas, and more. This property indicates that singular units are similar and interchangeable regardless of origin. For example:
Fungibility is crucial for money, stocks, and goods reliability. Imagine identical $20 bills having different values. How can you make a $20 bill purchase if each bill costs differently? This would make daily transactions impossible. Fungibility is essential for ensuring that each unit of a currency is worth the same no matter which unit is being spent.
Non-fungibility refers to a unique unit that can’t be replaced with something else. For example:
Non-fungible goods can’t be copied or substituted.
According to Token Economy: How the Web3 Reinvents the Internet by Shermin Voshmgirthe:
“Tokens are to Web3 what websites were to Web1.”
Overall, a token is the symbolic representation of a value, a service, or a product.
As Voshmgirthe suggests: “The term “token” is simply a metaphor. Contrary to what the metaphor might suggest, a token does not represent a digital file that is sent from one device to the other. Instead, it manifests as an entry in the ledger that belongs to a blockchain address. Only the person who has the private key for that address can access the respective tokens, using a wallet software, which acts as a blockchain client.”
A non-fungible token or NFT refers to a unique digital good that can’t be interchanged or replaced with anything else.
NFTs can be anything digital, such as:
When you buy an NFT, you become its sole owner. You can’t exchange it for anything else. But, you can sell it or treat it as any other speculative asset, hoping its value will go up one day.
It’s worth noting that behind their speculative allure, the use of NFTs will derive and result in designing multiple use cases that will change how we operate online.