NFT Labs: Differences between NFT and FT

Differences between NFT and FT

While reaching here, you must have noticed the constant mention of terms “fungible,” non-fungible tokens. This chapter will help you if you're unsure what they mean.

First, to understand non-fungible tokens, let us clarify the difference between Fungible Token (FT) and Non-Fungible Token.

Fungible Token

Most of the encrypted assets that have been trading for a long time, such as BTC and ETH, are fungible tokens. To simply it, a fungible item or token is interchangeable with another unit of the same item for all intents and purposes. For example, one bitcoin equals another bitcoin, just like one dollar equals another dollar. Dollars can be exchanged easily; even if the serial number is different, it does not affect the replacement, and if the value is the same, the banknote denomination makes no difference to the holder.

The same is true for fungible tokens. There is no difference between one bitcoin and another bitcoin, the specifications are the same, and there is unity. In a transaction, we pay attention to the number of tokens handed over, its value may vary according to the time interval of the exchange, but its essence does not change. A fungible token is a token that can be replaced, unified, and can be split infinitely.

Fungible tokens are very convenient to use, but things that have real value in real life cannot be replaced, such as a contract, property rights, works of art, birth certificates, etc. Therefore, non-fungible tokens were born with that.

Non-fungible Token

Unlike fungible items, non-fungible items or tokens are not interchangeable, and they are fundamentally different even if they look similar.

Collectible games such as CryptoKitties use new non-fungible tokens. Non-fungible tokens contain identifying information recorded in their smart contracts. This information makes each token unique and, therefore, cannot be directly replaced by another token. They cannot be exchanged because there are no two NFTs that are the same. In addition, the vast majority of non-fungible tokens are also designated, just like a part of a concert ticket that cannot be given to others; it is neither valuable nor redeemable.

The unique nature of non-fungible tokens makes them often tied to specific assets. They can be used to prove ownership of digital items, such as game skins, or even physical assets, mainly in games and crypto collectibles.

A significant difference between FT and NFT is that they use different contract connectors. The token protocol used by the former is ERC-20, and the latter is ERC-721.