Before we start, it's important to understand what fungibility is.

Discussion about fungibility

An asset that is fungible means that it can be interchanged with another asset of the same value. Fungible assets also have value when they are divided into parts. An example would be a brand new $1 US dollar bill or 1 Euro note. Those bank notes can be replaced with other equal valued, authentic brand new $1 US dollar bills or 1 Euro notes. The dollar and Euro can also be divided into cents, which also hold value.

Similarly, a newly mined Bitcoin Cash coin (1 BCH) is equivalent to another one stored in an individual's cold storage wallet. They are fungible assets that can be replaced with each other, have the same value, and their parts also hold value.

On the other hand, assets that are non-fungible are unique, and not equivalent to any others in the world. Because of this, they can have unique valuations. A real-world example of a non-fungible asset could be a concert ticket in a venue with no standing room. The ticket grants the owner access to a specific seat location, and the ticket has no value if it is divided into parts.

Applying the principle of non-fungibility to tokens

I discussed how blockchain tokens can have many use cases in a previous article. By applying what we have learned before with the explanation above, a non-fungible token (NFT) is a token that represents a unique asset. These can either be entirely digital assets or tokenized versions of real-world assets.

It’s worth noting that NFTs can’t be replicated or transferred without the owner’s permission – even by the issuer of the NFT, - Binance Academy

Melanie Kramer provides a bit more information in her article.

Non-fungible tokens contain identifying information recorded in their smart contracts. It’s this information that makes each different and as such, they cannot be directly replaced by another token, - Melanie Kramer

Use cases for NFTs include:

• Tickets for travel, or events such as concerts, conferences, etc.

  • Seat reservation

  • Degree and/or timing of access provided

  • Entitlement to specific services (refundable, transferrable, etc.)

• Digital identity

• Digital items (for gaming, gambling, and other industries)

• Crypto-collectibles

I was reflecting when writing this article, and I now believe that NFTs can be identified as a fourth type of token. My previous article will be updated to reflect this.

Please note that some of these NFTs listed above are not available for mainstream use at the moment! I'm simply predicting their prevalence and acceptance will increase dramatically over the next five years.

It's also worth remembering that some tokens meet the requirements to fall under more than one classification.

Related reading: Cryptocurrency FAQ - What are the different types of tokens?

Examples of crypto-collectibles

I feel that NFTs minted as crypto-collectibles will be an exciting part of the crypto ecosystem that will flourish within the next five years. There will be some that need to be purchased, but some of them can be acquired free (usually be completing tasks or by winning them in a contest). The following are a few examples of NFT collectibles.

CryptoKitties

This was a game built on the Ethereum blockchain that allows players to collect, breed, and exchange virtual cats known as CryptoKitties.

Each CryptoKitty can have a combination of several different properties, such as age, breed, or color. As such, each of them is unique, and they can’t be interchanged with each other. Also, they are indivisible, meaning that there’s no way to divide a CryptoKitty token to divisible parts, - Binance Academy

This game became infamous because the entire Ethereum network slowed to a crawl at the height of its popularity.

LAND

A LAND is a digital piece of real estate in The Sandbox metaverse, a persistent 3D voxel universe created by players and secured through blockchain technology to give players a virtual playground.

You can buy a LAND to populate it with ASSETS and GAMES, - Sandbox Games

NBA Moments

I have written an article about NBA Top Shot NFT collectibles previously, and I have a small collection of these NFTs already.

Is it simply human nature that compels many of us to collect things? Which collectible NFTs would be of interest to you? The Dr. Who franchise? Care Bears franchise?

Thanks for reading, and stay safe!

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Cover image by loufre (modified by the author) from Pixabay 

Graphic 1: Photo by Omid Armin on Unsplash

Graphic 2: CryptoKitties screen cap by CryptoKitties

Graphic 3: LAND screen cap by Sandbox Games

Graphic 4: NBA Top Shot screen cap by NBA Top Shot

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Resources:

https://academy.binance.com/en/articles/a-guide-to-crypto-collectibles-and-non-fungible-tokens-nfts

https://medium.com/sandbox-game/the-sandbox-tokens-lands-730b36217070

https://decrypt.co/resources/non-fungible-tokens-nfts-explained-guide-learn-blockchain