Token: fungible or not fungible?

It is a while that the focus is on the NFT, Non Fungible Token, applied to art. The acronym turned trend topic on the main social networks due to the selling price of some pieces (of art) recently sold.

First a step back, starting from the beginning and from the most known blockchain for this environment: Ethereum.

Ethereum is a blockchain, his coin is named Ether and it allows to generate smart contracts, software working deterministically on an Ethereum Virtual Machine. These same software generate effects if boosted with “gas”, namely Ether.

Within this framework and facing the necessary path for new proposals, the developers land to ERC, Ethereum Requests for Comments, that everybody can generate, on condition that purpose is clear and the usage is promoted within the community.

There are several and different ERC, the most known are:

  • ERC-20; 
  • ERC-721; 
  • ERC-1155. 

Among them, the ERC-20 is the oldest as it was created 19.11.2015 directly from Ethereum’s father, Butalik. It allowed to create “a standard front-end that allows any token available on Ethereum to be used from other apps: from the wallet to the decentralized exchanges”. Long story short, ERC-20 is a standard for fungible tokens, meaning that different parts of an ERC-20 token are interchangeable and do not have unique features.

The ERC-721 was created on 24.11.2012 and it is the milestone  of the Non Fungible Tokens (NFT) for Ethereum. Since the beginning its taeget was the implementation of a standard API for NFT within smart contracts. This standard gives basic functionality to track and transfer NFT and can represent the ownership of digital or physical resources. For instance: the same two coins within my wallet are fungible tokens, because I can pay my debt no matter what token I will choose given their joint nature. The NFT are totally different one from the other and they can include different info: an image, debt and credit reasons, etc.

The last one, ERC-1155, born on 17.06.2018, to be a standard interface for those contracts that manage more than one token: a single contract can contain whatever combination of token – fungible, not fungible or other configurations (for instance: partially fungible).

NFT has been boosted with CryptoKitties, simply a game where anybody can create his own cat and then sell it at the chosen price, as long as somebody is open to buy. One case worth mentioning is a cyrptokitten sold for 172.000 USD.

NFT aren’t just a tool for Ethereum blockchain, but also for others, like Flow, Algorand (with a SIAE agreement in place from 2019) and Cardano

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