Being “fungible” means that something is functionally equivalent with something else.
For example even though every dollar bill is unique (they have unique serial numbers), they are all fungible. If you deposit $100 in the bank, then withdraw $100 later, you are not getting the same bills, maybe not even the same denominations, but you don’t care because it doesn’t matter.
In the digital world copies are cheap and perfect. There is literally no way to tell a copy of an image from “the original”. So in the digital world all copies of something are fungible, and originals don’t meaningfully exist.
NFTs try to introduce artificial scarcity to the digital space by creating a distinction between “the original” of something and the copies, by introducing a sort of chain of custody tracking system.
Just want to add to that, NFTs aren’t inherently about artificial scarcity, they could also be used to track ownership of rights or real life items without a central authority that everybody needs to trust.
Of course, cryptobros immediately went to pushing them as an investment scheme, and the actual implementations are slow, inefficient, and downright expensive to use. I don’t think anybody has managed to make NFTs actually useful, but I imagine the original creators weren’t looking to create… Whatever this is.
If something is fungible, it is essentially swappable with anything that is identical to it. Let’s say you and I both have our own dollar bills. We trade bills. We both still have $1, because the value of the bill isn’t related to the individual note, but rather the fact that you have a note. I don’t care which bill I have, because it is fungible. Sure they have serial numbers, but I’m not tracking those in regular usage. Functionally, the cash is fungible; If I loaned you $50 for a week, I’m not expecting to get back the exact same $50 bill that I handed to you last week.
Cash is just one example of a fungible item, but it could really be anything that is traded in lots or bulk. Maybe you buy a 50 pound bag of sand. You’re not buying each individual grain of sand, and tracking them all individually. Those grains of sand are fungible, because you only care that you got 50 pounds of them total. Hell, even the bags of sand could be fungible, as long as they’re all identical enough that you don’t care which bag is yours. It could be pounds of rice, or gallons of water, cans of soda in a vending machine, etc… All that matters is that the quality is similar enough between two items that you wouldn’t notice a difference between two, and you don’t care which specific item is yours. That’s what makes them fungible.
A non-fungible item is something that you do care about individually. A deck of playing cards may be fungible to a casino that buys 5000 of them per year… They don’t care which specific deck is in use at a poker table, because they’re all functionally the same. But each individual card is non-fungible to the poker players who care a lot about which specific cards they were dealt. A car dealership may have 20 identical cars parked in a lot just like yours, but one of them specifically is yours.
In the digital world, basically everything is fungible. Copies are easy to make, and are functionally identical to each other. If I make a gif and someone else reposts it, their repost isn’t functionally different than mine. NFTs were an attempt to create a sort of ownership ledger for digital items. A way of saying “you can copy this, but this one specifically is mine.” Technically, an NFT could point to anything, because all it is doing is attaching a unique identifier to the digital item, then entering it into the blockchain (essentially a ledger) so it can be tracked. If it exchanges hands, the blockchain will reflect that. But importantly, making a copy won’t enter a new copy into the blockchain, because you can’t copy the unique identifier.
It has a few potential practical uses. For instance, maybe digital IDs could be secured, as it would allow people to verify that their digital ID is the original and not a copy. Essentially, they’d show that they own the NFT for their ID, the blockchain would confirm that, and their ID would be verified.
But instead, techbros immediately turned it into a pump-and-dump and/or pyramid scheme.
Me neither. Please explain. Something with mushrooms, surely.
Being “fungible” means that something is functionally equivalent with something else.
For example even though every dollar bill is unique (they have unique serial numbers), they are all fungible. If you deposit $100 in the bank, then withdraw $100 later, you are not getting the same bills, maybe not even the same denominations, but you don’t care because it doesn’t matter.
In the digital world copies are cheap and perfect. There is literally no way to tell a copy of an image from “the original”. So in the digital world all copies of something are fungible, and originals don’t meaningfully exist.
NFTs try to introduce artificial scarcity to the digital space by creating a distinction between “the original” of something and the copies, by introducing a sort of chain of custody tracking system.
Just want to add to that, NFTs aren’t inherently about artificial scarcity, they could also be used to track ownership of rights or real life items without a central authority that everybody needs to trust.
Of course, cryptobros immediately went to pushing them as an investment scheme, and the actual implementations are slow, inefficient, and downright expensive to use. I don’t think anybody has managed to make NFTs actually useful, but I imagine the original creators weren’t looking to create… Whatever this is.
If something is fungible, it is essentially swappable with anything that is identical to it. Let’s say you and I both have our own dollar bills. We trade bills. We both still have $1, because the value of the bill isn’t related to the individual note, but rather the fact that you have a note. I don’t care which bill I have, because it is fungible. Sure they have serial numbers, but I’m not tracking those in regular usage. Functionally, the cash is fungible; If I loaned you $50 for a week, I’m not expecting to get back the exact same $50 bill that I handed to you last week.
Cash is just one example of a fungible item, but it could really be anything that is traded in lots or bulk. Maybe you buy a 50 pound bag of sand. You’re not buying each individual grain of sand, and tracking them all individually. Those grains of sand are fungible, because you only care that you got 50 pounds of them total. Hell, even the bags of sand could be fungible, as long as they’re all identical enough that you don’t care which bag is yours. It could be pounds of rice, or gallons of water, cans of soda in a vending machine, etc… All that matters is that the quality is similar enough between two items that you wouldn’t notice a difference between two, and you don’t care which specific item is yours. That’s what makes them fungible.
A non-fungible item is something that you do care about individually. A deck of playing cards may be fungible to a casino that buys 5000 of them per year… They don’t care which specific deck is in use at a poker table, because they’re all functionally the same. But each individual card is non-fungible to the poker players who care a lot about which specific cards they were dealt. A car dealership may have 20 identical cars parked in a lot just like yours, but one of them specifically is yours.
In the digital world, basically everything is fungible. Copies are easy to make, and are functionally identical to each other. If I make a gif and someone else reposts it, their repost isn’t functionally different than mine. NFTs were an attempt to create a sort of ownership ledger for digital items. A way of saying “you can copy this, but this one specifically is mine.” Technically, an NFT could point to anything, because all it is doing is attaching a unique identifier to the digital item, then entering it into the blockchain (essentially a ledger) so it can be tracked. If it exchanges hands, the blockchain will reflect that. But importantly, making a copy won’t enter a new copy into the blockchain, because you can’t copy the unique identifier.
It has a few potential practical uses. For instance, maybe digital IDs could be secured, as it would allow people to verify that their digital ID is the original and not a copy. Essentially, they’d show that they own the NFT for their ID, the blockchain would confirm that, and their ID would be verified.
But instead, techbros immediately turned it into a pump-and-dump and/or pyramid scheme.