Think of this information as a certificate of authenticity. NFTs have a permanent information tab that records their uniqueness.

Unique – This is perhaps the most significant characteristic of them all.

You either purchase the entire amount of, say, a digital art piece, or purchase no art at all.

Indivisible – Although not set in stone, most non-fungible tokens are indivisible into smaller units.

Although NFT developers can create any amount of non-fungible tokens, they often limit the tokens to increase rarity.

Rare – The value of NFTs comes from their scarcity.

In the above example, Bitcoin is a fungible token because it has the same value regardless of its owner or history. What Are Fungible Tokens?įungible tokens are tokens that are tradable for each other, and their value remains constant. Individual characteristics dictate their uniqueness, hence, they are non-fungible, much like real-world assets like rare stones, works of art and collector luxury items. An NFT crypto token has a distinct value from any other similar token. However, the game changes when we cross over to non-fungible tokens. In the cryptocurrency sector, one BTC has the same value as any other BTC.

As such, when you borrow a $10 dollar bill from someone, you don't have to return the exact same note, since another of its kind has the same value. Fungibility also defines an asset's characteristics, such as divisibility and value.įor example, one $10 dollar bill is identical to another $10 dollar bill in terms of value.

Fungibility refers to an asset's ability to be exchanged with a similar asset without sacrificing its value.

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