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NFT for Dummies: Understanding Fungible vs. Non-Fungible Tokens

8min Read

Get a thorough understanding of the differences between fungible and non-fungible tokens (NFTs) with our beginner-friendly guide. Learn about the unique properties and use cases of the two.

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In the world of digital asset management, new opportunities are emerging daily, and with reasonable investment decisions, one can unlock endless possibilities and earn profits. Revolutionary blockchain-based digital assets, such as Non-Fungible Tokens (NFTs), are among the best investments in this digital world. 

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NFTs are revolutionizing the way real-world assets are tokenized, and they offer more efficient and secure transactions, bringing about digital asset revolution possibilities. Unlike traditional assets, these digital tokens are unique, and they can be securely stored, tracked, and exchanged on the blockchain. If you’re new to NFTs and want to learn more about fungible vs non-fungible tokens, you’ve come to the right place.

What are NFTs?

NFTs and tokens are digital assets that have been gaining much attention in the modern world. NFTs are unique and non-interchangeable assets, meaning each NFT is one-of-a-kind and can’t be exchanged for another. Tokens are fungible and interchangeable, which means you can exchange them for another token of equal value.

NFTs are immutably safe because they are stored on the blockchain. Unlike traditional investments, each NFT has its own unique identity and characteristics that distinguish it from other NFTs. This uniqueness is encoded into the NFT, giving it a distinctive identity and enabling simple identification on the blockchain. NFTs are revolutionizing how digital art, gaming, and collectibles are bought, sold, and traded.

NFTs and their purpose – Image via Pixabay

Importance of fungible vs. non-fungible tokens

Non-fungible tokens are digital tokens that are unique and can’t be replaced by another token. They are stored on the blockchain, and, similar to other digital tokens, they also represent ownership of specific digital or physical assets. 

These tokens can represent various items, from virtual artwork to real estate or collectible items. NFTs are used to create digital identities and digital collectibles. Also, they represent ownership of a digital item, purchase, or service.

Fungible tokens

Fungible tokens are digital assets that are interchangeable and divisible. They are a form of digital currency that helps users to purchase goods and services, invest, or trade.

Examples of fungible tokens

Examples of fungible tokens are Bitcoin, Ethereum, and other cryptocurrencies. Tokens allow users to transact securely, quickly, and anonymously, making them an attractive option for investors looking to diversify their portfolios. They are highly secure, giving users peace of mind when making transactions. 

Bitcoin is the most famous example of a fungible token, and Ethereum is also a good example of a fungible token.

Advantages and disadvantages of fungible tokens

Fungible tokens offer a range of advantages and disadvantages that must be considered before investing. On the plus side, fungible tokens are highly liquid, decentralized, and secure. However, they are also subject to high levels of volatility, are not backed by any physical asset, and are not regulated by any government or central bank. 

If you are considering investing in fungible tokens, weighing up all the pros and cons before making a decision is essential.

Examples of non-fungible tokens

Digital collectibles, music, film, gaming, real estate, and art are a few examples of NFTs. One of the most well-liked NFTs is digital art, which enables creators to sell their work as an original, one-of-a-kind creation that cannot be copied or recreated.

To make limited-edition records or sell concert tickets, musicians and record labels are increasingly embracing music NFTs.

NFTs can also be used in the gaming industry to buy and trade virtual goods like clothes or weaponry, enhancing the gaming experience.

The ownership of virtual real estate, which is becoming increasingly common in virtual worlds, can likewise be represented by NFTs. Last but not least, collectibles like sports cards or trading cards can be digitalized and sold as NFTs, enabling collectors to bolster their collections with one-of-a-kind objects.

Advantages and disadvantages of non-fungible tokens

Non-Fungible Tokens provide several advantages. NFTs are highly secure when stored on the blockchain, and they resist censorship. They are also unique and ideal for digital art, music, and collectibles. 

However, Non-Fungible Tokens also have some disadvantages. Fungible Tokens are more liquid than Non-Fungible Tokens, making it difficult to exchange them for other currencies, goods, and services.

Fungible vs. non-fungible tokens

The difference between fungible and non-fungible tokens is essential when considering their use cases. Fungible tokens, such as Bitcoin, are interchangeable and divisible. This means that one bitcoin is the same as any other bitcoin and can be divided into smaller units. 

On the other hand, NFTs are not interchangeable and cannot be divided. Each token has unique properties, making it distinct from other tokens.

Fungible tokens are like a handful of coins; each one is identical and interchangeable with another. They are liquid assets that can be easily traded, exchanged, and used as currency. 

In contrast, NFTs are unique. They represent digital assets like digital artwork, collectible cards, or rare items in video games. Non-fungible tokens represent ownership of a unique asset.

How NFTs work

Blockchain technology is used to construct NFTs, making them distinct and non-transferable digital assets. Each NFT is given a special identification number that is recorded on the blockchain and makes it difficult to copy or alter. The blockchain records the ownership and transfer of NFTs, assuring security and transparency.

How NFTs work

How NFTs are created and stored on the blockchain

Non-fungible tokens are created using sophisticated smart contracts on the blockchain. This smart contract contains the specific rules and conditions of the asset, such as its ownership, transferability, and other pertinent details. After the smart contract is created, it is publicly visible and securely stored on the blockchain. 

The NFT itself is a digital asset stored on the blockchain and represented as a unique token containing asset data. When an NFT is created, it is assigned a unique identifier stored on the blockchain, making it easy to identify and track the NFT on the blockchain.

What gives NFTs value

NFTs have value due to their scarcity, uniqueness, and usability. For example, a CryptoKitty is a scarce digital asset with a unique appearance and can be used to breed, collect, and trade digital cats. This gives it value, as users are willing to pay for it.

How NFTs are bought and sold

NFTs can be bought and sold in the same way as other digital assets, such as cryptocurrencies. They can be traded on online exchanges, peer-to-peer marketplaces, or individual sellers. Buying and selling NFTs is usually completed through an Ethereum-based blockchain network, such as the Ethereum Virtual Machine or the ERC-721 protocol.

Buyers can purchase NFTs with cryptocurrency, fiat currency, or other forms of digital payment, such as PayPal or Apple Pay. When selling an NFT, owners can set their prices and list their tokens on the same exchanges or marketplaces they used to purchase.

Popular uses of NFTs


NFTs are revolutionizing the art industry. Artists can now tokenize their artwork and sell it to collectors on the blockchain, which makes it easy for artists to monetize their artwork, and also for collectors to easily buy and sell digital artwork.


Musicians are also using NFTs to monetize their music. They can tokenize their pieces and sell them to fans on the blockchain, making it easy for musicians to get paid for their work and for fans to access music easily.


NFTs are being used in the gaming industry as well. Game developers use NFTs to create digital items that can be bought, sold, and traded on the blockchain, making it easy for gamers to quickly buy and sell virtual items.


NFTs are also being used to create digital collectibles, making it easy for users to collect and trade digital items.

Popular uses of NFTs – Image via Pixabay

What is the future of NFTs?

The future of NFTs looks bright. As more people become aware of their potential, use cases will continue to grow and become mainstream. NFTs will open up new opportunities for artists, creators, and entrepreneurs to monetize their digital assets in innovative ways. 

Additionally, NFTs will continue to be used to transfer ownership of digital assets on the blockchain securely. As technology continues to improve, NFTs could eventually become a more secure and efficient way to buy, sell, and trade digital assets.

Recap of key points

-Non-fungible tokens are the leading asset of the modern world.

-They are non-fungible, meaning they are not interchangeable and cannot be divided.

-Examples of NFTs include digital art, music, gaming items, real estate assets, and collectibles.

-They are created and stored on the blockchain, making them highly secure and resistant to censorship.

-They have value due to their uniqueness and usability.


The world of digital asset management is rapidly evolving, and Non-Fungible Tokens are at the forefront of this change. NFTs are unique and non-interchangeable digital assets that are stored securely on the blockchain. They offer several advantages, such as high security and immutability, making them an ideal investment for digital art, music, and collectibles. 

While fungible tokens like Bitcoin and Ethereum are highly liquid and secure, they lack the unique properties of NFTs. The widespread use of NFTs in various industries, such as art, gaming, and collectibles, demonstrates their value and potential. Therefore, it is essential to consider investing in NFTs and weigh up their pros and cons before making any investment decisions.


Shaheen is the Head of Blogs at AMBCrypto. With over seven years of experience as a journalist, editorial specialist, and content marketer, she has produced content for broadcast, print, and digital news mediums. Her major focus lies in tech, crypto, esports and gaming, business, and digital marketing. Superpower? Metamorphosing words into currency.
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