If somebody talks about fungible money, do you know what this means? If not, you’re not alone. Although the term is an old one in economics, it’s not a street-level term.
Fungible assets have two particular features that define them. First, they are divisible. For example, you can break the US dollar into different units.
Secondly, fungible assets aren’t unique. You can use a US dollar in Charlotte or Boston, and it’s worth the same in both cities.
Once you understand the fungible definition, you can comprehend fungible cryptocurrencies. In this guide, we’ll explore the differences between fungible and non-fungible crypto options.
Bitcoin Fungible Assets
People often consider blockchain technology to be the perfect technology for managing any digital asset. It offers decentralization, security, and immutability. These features make it ideal for hedging value and making anonymous trades.
However, different types of tokens make it difficult for blockchain to be perfect. Fungible tokens ensure that each fraction of an asset is of equal value to any other fraction.
The most famous fungible cryptocurrency is Bitcoin. Each Bitcoin token is equal to others, which makes it interchangeable and divisible. These tokens are more akin to the money you use each day.
Because of their similarity to fiat currencies, fungible tokens are a much more comfortable crypto asset for people to use. However, there are other types of cryptocurrency that differ from fiat currencies.
These types of assets are called non-fungible tokens. We’ll explore one of the most common non-fungible assets in the next section.
Ethereum Non-Fungible Assets
As we’ve explained in the sections above, fungible assets are non-unique. Each token is identical in value to its fellow tokens. Non-fungible assets (NFT), however, are unique.
What does this mean? Each non-fungible cryptocurrency token has a unique value. Furthermore, you cannot divide non-fungible assets.
So, how does an NFT differ from an asset like Bitcoin? First, they allow you to turn items like art, collectibles, and real estate into tokens.
As you can imagine, these items only have a single official owner at one time. Nobody can modify this record of ownership thanks to a single asset: the Ethereum blockchain.
Ethereum works as both a fungible crypto token and as a blockchain for other tokens. The Ethereum token exists through the Ethereum blockchain, which also allows people to create a non-fungible cryptocurrency.
Ethereum also differs from Bitcoin in that it allows people to build their fungible tokens on their own. For these reasons, Ethereum is the second most valuable cryptocurrency asset on the market.
Fungible vs. Non-Fungible: Which To Use
When you understand non-fungible and fungible definitions, you have access to a wide world of crypto assets. From there, all you have to do is decide which of these assets best suits your purpose.
If you want to make everyday transactions, fungible cryptocurrencies are a better option. However, if you wish to store valuable assets safely, non-fungible crypto is best for you.
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