There are plenty of terms confusing for newcomers when it comes to cryptocurrencies. One word, for instance, often misunderstood is “fungible.” Many people think that all cryptocurrencies are fungible, but this is not the case. This blog post will define the term “semi-fungible” and explain how it applies to cryptocurrencies. We will also discuss why semi-fungible tokens are becoming more popular and why they can change the way we use blockchain technology.
Fungible’ Crypto Token
A cryptocurrency is fungible if every unit of the currency is interchangeable. For example, if you have one bitcoin and someone else has another bitcoin, both are worth the same amount. Therefore, they can be exchanged for each other without any penalty. Conversely, a cryptocurrency is non-fungible if every unit of the currency is not interchangeable. An example of a non-fungible cryptocurrency would be Bitcoin Cash (BCH). If you have one BCH and someone else has another BCH, they are not worth the same amount. They may even be worth different amounts on different exchanges.
Semi-Fungible’ Crypto Token
A semi-fungible crypto token is a digital asset that is fungible in some ways and non-fungible in others. For example, let’s say you have a semi-fungible token called CryptoKitty. Each CryptoKitty has an ID number, making it unique. This means that if you have one CryptoKitty with the ID number “12345” and another CryptoKitty with the same ID number belonging to someone else, they are not interchangeable, as they both share the same attributes (e.g., color). However, these two tokens may still be worth different amounts due to market demand or scarcity of supply at any given time, making them fungible in terms of value but non-fungible in terms of attributes.
Why Use a Semi-Fungible Crypto Token?
Two top reasons to use a semi-fungible crypto token:
- They can go into creating digital scarcity, which is currently lacking in the world of cryptocurrency. For example, let’s say you have a new cryptocurrency only available in limited quantities. You could create a semi-fungible token representing this currency and assign a limited number of tokens to each currency unit. This would create artificial scarcity for the cryptocurrency and increase its value.
- Semi-fungible tokens can also be used to represent assets that are not fungible. For example, you could use a semi-fungible token to represent an item in a video game that is unique and cannot be replaced by another identical item with the same attributes (e.g., color).
The Future of Semi-Fungible Tokens
Semi-fungible tokens are still relatively new, but they have the potential to change the way we use blockchain technology. For example, these tokens get famous. A time comes when all cryptocurrencies are semi-fungible because each unit of currency will have its unique digital asset on a distributed ledger like Ethereum or EOSio.
This makes it easier to exchange cryptocurrencies for goods and services, leading to new decentralized applications that use blockchain technology.