September 8, 2022

5th Edition: NFTs, Fungibility, and the ERC-721 Token Standard

Hi friends — 👋

Let’s discuss NFTs and the resources you can access to learn more about this subject.

👾 Definitions

It’s not always easy to comprehend the idea behind NFTs. To better understand this term, though, check Anthony Pompliano’s definition.

As Pompliano highlights, NFT is a non-fungible token, meaning there’s no fungibility. Fungibility is a fancy word that can be easily explained through the following example:

  • If you take a $100 bill and put it on the table with a bunch of other $100 official bills and mix them up, you can grab any bill without losing anything. As long as you have $100, there’s no relevance whether you grabbed your or someone else’s bill. In other words, those $100 bills are fungible.
  • Non-fungible would be like art. If you’d mix the paintings of Picasso with three less known artists, you’d lose if you’d take a random piece of art that is not Picasso. The non-fungible tokes create scarcity and originality in a digital environment.

► Quick info: Anthony Pompliano, entrepreneur and investor [official website]

👀 The ERC-721 token standard

In her book “Token Economy: How the Web3 reinvents the Internet” Shermin Voshmgir highlights the following:

“NFTs started to attract a lot of attention when the ERC-721 token standard was introduced, especially following the success of “Crypto Kitties,” a game on the Ethereum network where players can collect and breed digital cats, and where each cat’s unique digital “genetic code” is stored on Ethereum’s ledger.”

Compared to ERC-20 tokens, the technical standard for fungible tokens created using the Ethereum blockchain, ERC-721 tokens allow for detailed attributes. In other words, by using the ERC-721 token standard, more blockchain projects joined the development of NFT standards.

As a result, according to Shermin Voshmgir, the list of NFT standard categories contain:

→ Crypto-collectibles, which enable the tokenization of unique goods, including virtual collectibles or collectibles in the real world.

→ Asset tokens, which allow unique investments tied to a physical object, such as real estate, unique artwork, and securities.

→ Identity tokens, certificates, and reputation, tied to any type of ID or certificates, such as transcripts, diplomas, university degrees, software licenses, and more.

→ Access tokens that help manage any type of access right tied to a specific person, property, or event.

→ Transfer tokens, which involve the splitting of goods between multiple people when someone passes away. As Shermin Voshmgir notes: 

“While fractional ownership is possible today, transfer tokens managed by a distributed ledger would make the transfer of assets in the case of wills much more frictionless.”

📘 More Books about NFTs

If you want to learn more about NFTs, here’s a quick list of books you can check:

  • The Comprehensive Guide to NFTs, Digital Artwork, and Blockchain Technology by Mark Beckman [Amazon Link]
  • The NFT Handbook: How to Create, Sell and Buy Non-Fungible Tokens by Matt Fortnow and QuHarrison Terry [Amazon Link]
  • NFTs for Beginners: Making Money with Non-Fungible Tokens by Oliver J. Rich [Amazon Link]
  • NFTs For Dummies Book by Seoyoung Kim and Tiana Laurence [Amazon Link]

By reading these books, you’ll better understand NFTs, how they work, and how to make the most out of them.

That’s it from us today.

Talk to you next week and stay awesome,

The MagicWorks team