NFTs and Crypto tokens in clear terms

Hello awesome person, in this post, I'll show you how to make $1,000,000 by mintin....No! this is not yet another NFT-is-the-new-heaven post to tell you how many millions of dollars an NFT was sold, how minting your soul as NFT could make you $$$, or how creating your own ERC20 token (without utility) will make you a boss.

NFTs and crypto tokens generally are quite profitable and the idea, revolutionary. Just that the way it's been portrayed on the internet have made a lot of people tie the whole idea to JUST colorful pictures of apes and kitties, buying low and selling high and a lots of money.

This post is my attempt to give more meanings to fungible tokens and NFTs (Non fungible tokens), I hope it sheds some light on what is possible with these tokens apart from trading and minting them. Let's get into it already...

FIRST, WHAT IS AN ASSET

An asset is something that contains value. An asset can exist physically or digitally, E.g money, skills, phone, car, buildings, lands, diamond, photos, audio, PDFs etc.

An asset can benefit you in one way or the other that's why it's valuable. E.g your car can benefit you by serving as means of transportation, so you value it.

FUNGIBLE ASSETS

Fungible means exchangeable.
A fungible asset is an asset that can be exchanged with another asset of the same kind, with no change in value.

A Dollar bill is an example of a fungible asset because it can be exchanged with another dollar bill and still have the same value.

Five $1 dollar bills can be exchanged with one $5 bill and they'll still have the same value and offer the same benefits.

A bottle of Pepsi is a fungible commodity because it can be exchanged with another bottle of Pepsi with no change in value.

NON FUNGIBLE ASSET

Non fungible or non exchangeable assets are assets that cannot be exchanged with another of the same kind without value loss or gain because each of the asset, even though are of the same kind, has unique qualities that add or subtract value.

An example of a non-fungible asset is a land. Even though you have two same-sized lands, they can never have the exact same qualities - one may be tougher or richer in soil than the other so lands are non-fungible.

Another example is a diamond, you cannot have two diamonds that are same in all aspects. They must differ in either shape, size, weight, quality, etc.

Another example is a piece of physical or digital art. Arts are very unique, two pieces of art can never have the same value. So are non fungible assets.

WHAT IS A TOKEN?

A token is a representation of something which can be priced. Put simply, the representation of an asset.

A token and/or what it represents can be physical or digital, tangible or intangible, fungible or non-fungible. For example a tangible dollar bill represents an intangible currency. An intangible "thank you" message on Facebook can represent an intangible appreciation.

For example, when you give someone flower as a token of appreciation, what you intend to give the person is appreciation, but it's intangible so you choose to represent it with a flower (tangible token) which should be valued also. You can represent that appreciation with something else like labor, hug, or treat.

If a token represents an asset which is valuable, the token automatically becomes as valuable as the asset as soon as it can be verified and agreed that it actually represents the actual asset. Take fiat money for example, since it's generally accepted as money, it automatically gains as much value as the currency it represents.

WHAT ABOUT DIGITAL TOKENS?

A digital token is a digital representation of an item. A Digital token exists digitally in any digital format e.g symbol, codes, sound, cryptographic hash, fingerprint, etc but can represent something digital or physical, tangible or intangible, fungible or non-fungible.

That means you can create a digital token to represent a fungible item like an event ticket, or a non-fungible item like a piece of artwork. Yes! they're just representatives.

A digital token can represent anything like skills of a game character, lottery ticket, fiat currency, reputation points, an art, ...name it.

Digitally Tokenizing (creating a digital token to represent) a fungible or non-fungible asset makes the asset easy to be bought, sold, and/or traded.

For example if you tokenize an artwork, it'll be easier, more efficient and secured to buy or sell the artwork online since buying the token automatically grants you ownership of the artwork.

In Ethereum, which is the most popular development blockchain platform, these digital tokens are created as computer codes, and with the help of cryptography and are called smart contracts. The smart contract facilitates the trading and ownership of the asset it represents. E.g. A smart contract which implements/is an NFT, facilitates the trading and ownership of the NFT and thus the asset it represents, all in a secured, trusted, decentralized and transparent way - because of the backing platform Ethereum blockchain.

FUNGIBLE CRYPTO TOKEN

Fungible tokens are tokens which represents fungible assets like event tickets, currencies, subscription plan of an app, etc.

You can create a fungible crypto token on the blockchain to represent anything fungible, but for the token to be valuable, it has to represent something that's valuable as well, like Drake's live event ticket .

Utility has to be given to a crypto token for it to gain value, otherwise people won't want to buy a token that won't benefit them in any way . For example, the SHIB crypto token can be used to buy lands in SHIB metaverse.

NON-FUNGIBLE CRYPTO TOKENS

Non-fungible tokens are crypto tokens which represents non-fungible assets like a pic of you and your cat in Hawaii , audios, PDFs, digital artworks, real estate, physical artworks, physical lands, lands in the metaverse, etc.

Because NFTs represent non-fungible items which are unique, they're also unique across the blockchain. So for example if you buy an NFT of a digital art, the ownership of the digital art is automatically transferred to you, and the token which you bought is uniquely identifiable across the blockchain. Then with ownership of the token, you can claim ownership of the underlying asset - the digital art.

As an example, With the power of NFTs, Next Earth is building a platform for users to purchase, develop, and sell virtual land mapped onto the Earth .

Summary

I crafted this post as a note while learning about NFTs and ERC20 tokens. Again it's my attempt to shed more light on crypto tokens, NFTs, and their possibilities for anyone who might be confused by the hype, complexity, and/or big grammars.

As usual, this post is open for discussions and correction. Thanks for stopping by