Of the many branches created as a by-product of the ongoing cryptocurrency experiment, non-exchangeable tokens have proven to be among the most explosive. In just a few months, more than half a billion dollars of NFTs have been seized as celebrities have gathered (from A – القوائم Lists) to take advantage of the latest cryptocurrency craze.
But in the midst of the rush to join the cart, little has stopped appreciating the reliability of the terminology used in NFT. After all, why stop thinking about semantics when you can make millions of dollars with the click of a button?
But instead of the millions mentioned above, we decided to ask the question: Are these volatile tokens really full of mushrooms?
An asset or commodity is considered fungi if it can be substituted for another of the same kind of equal value. Thus, the US dollar is a fungus because one dollar can be exchanged for any other dollar. It’s the same with Bitcoin (BTC).
Perishability is one of the four pillars of the Aristotelian concept of “good money” and perhaps the most important for creating a currency that works. All cryptocurrencies are innate in nature.
Non-fungal assets are assets that cannot be trusted due to unique makeup differences. For example, while diamonds can be beneficial in exchange, slight differences in cut, shape, and quality prevent them from clashing with Aristotle’s appreciation for good money.
But when it comes to NFT, the peculiarities of the currency do not matter. The point is that each unit of assets can be varied, unique, exclusive, and rare. This is where most of the perceived value of NFT comes from – its immunity.
In the Ethereum blockchain, NFT is primarily built on a token standard known as ERC-1155. Tokens created with the ERC-1155 standard are guaranteed to be non-financial, and as such, they will be useless in forming the backbone of a regular coin.
The Ethereum standard tokens are designed according to the ERC-20 standard, which allows the issuance of mushroom tokens for use as real currency. For this reason, ERC-20 token tool to record something unique or rarely invalid.
But what about …?
But hypothetically, if someone had created 21 million ERC-1155 NFTs – which were all programmed to be identical to one another – and then distributed freely, wouldn’t the real coin form naturally?
What could prevent the tokens from being traded in the open market, each having the same value as the other? This concept is not an invention of Cointelegraph. “Fractional NFT” is a phenomenon that did emerge and quickly raised the ire of US Securities and Exchange Commissioner Hester Pierce.
Pearce, who is also referred to as a “cryptocurrency mom” because of his soft stance on cryptocurrency regulation, has warned that the use of segmented NFT skirts are dangerously close to violating securities laws at the SEC. Pearce, who said the reason NFTs are not securities is because they are unique and not exchangeable, noted that people have “become more resourceful about the types of NFTs they host there.”
The numbers game
On the contrary, the standard Ethereum ERC-20 token that many people will store in their wallet at some point is designed to be innate, but is that always the case?
The Ethereum developer who helped create the ERC-1155 token standard, Philip Castungway, recently posed a question to his Twitter followers who are researching this particular issue. We determined that ERC-20 tokens are replaceable, but can they be volatile?
Castonguai asked his successors, “Is the ERC-20 code with a fixed total supply of 1 NFT?”
46.8% answered in the affirmative, 36.4% said no, and 16.7% refused to make assumptions.
Castonguai also improved the definition and asked if the ERC-20 token is indivisible with a limited width of a single NFT token. Ultimately, the ERC-20 token is divisible by many (possibly infinite) decimal places, which means its usefulness as an NFT will disappear.
“Is the ERC-20 token, indivisible (0 decimal places), with a fixed maximum margin of 1 NFT?” Castonguay asked. This time, 72.1% answered in the affirmative, 15.4% – no, and 12.5% refused to answer.
Cointelegraph asked Castonguei to use the terms “fungibility” and “non-fungibility” when referring to cryptocurrency tokens. Is there really a big difference between them? Are we just talking about two different ways to light up a cat? Reply:
“In fact, mushrooms are cute, and the term NFT gives a nice binary idea of the situation!”