Introduction:
Two main types of cryptographic assets on blockchain are NFTs (Non-fungible tokens) and cryptocurrencies (fungible tokens). Cryptocurrencies are fungible assets because each token or unit of a particular cryptocurrency is equal in value and characteristic to other tokens of the same cryptocurrency. For example, one Bitcoin has always equal value to another Bitcoin. This fungibility characteristic of cryptocurrencies just like physical money, makes them suitable for secure transaction in digital economy.
While on the other hand, unlike cryptocurrency, NFTs are non-fungible tokens with unique and non-transferable identities that distinguishes them from each other and therefore cannot be replicated. This non-fungibility characteristic leads an NFT to have its own value irrespective of other NFTs.
Non-fungibility of NFTs:
The non-fungibility characteristic of NFTs has the potential for several use cases. They can be used to:
- Represent real-world items like artworks, real-estate and more.
- Represent peoples’ identities, property rights etc.
- Represent physical assets.
- Remove intermediaries and connect artists with audiences or for identity management.
- Simplify transactions and create new markets.
NFTs are also extensible where two NFTs can be combined to breed a third unique NFT.
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Also read Blockchain and Cryptocurrency
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