What Does Non-Fungible Mean?

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March 13, 2021

Chances are that you’ve come across the term non-fungible a few times in the past few
days. From online talk of nonfungible tokens to artists getting upset over nonfungible art –
fungibility (and nonfungibility) have become words charged with revolution and energy.
But what does non-fungible mean exactly? And why should a regular Joe/Jane care
about it? Here’s everything you need to know.

Definition of Non-Fungible
To understand what makes a thing non-fungible, it’s good to understand what the root
word ‘fungible’ means. Fungibility refers to the interchangeability of an asset. Anything
fungible is replaceable with something that is of an equal value. For simplicity, associate
fungible with replaceable (or interchangeable). A basic example of something fungible is
money. A $10 note is fungible as it can easily be replaced with ten $1 coins (or other
denominations of equal value).

Now, anything that cannot be so easily replaced is nonfungible. Real word objects that
cannot be replaced with other items are nonfungible. Your old telecaster guitar, an
autographed book, baseball cards, or other such collectibles are said to be nonfungible.
Even your collection of coins that are no longer in circulation are nonfungible. Basically,
nonfungible is just a high-brow word for something that is unique and thereby defies easy
interchangeability.

Related: Nerdschalk Explains: What is NFT Crypto?

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What makes something Non-Fungible?
The nonfungibility of an asset (or a thing) depends on a variety of factors. First of all, by
definition, the thing has to be unique and non-exchangeable. It has to be one of its kind.
Now, in the real-world (as in the digital), there are usually multiple copies of a thing. So
what makes something unique? Among other things, time.

A thing takes on a non-specific value when it has stayed in possession for a period of
time. Though there may be many copies of your Marvel comics collection, after some
time, they all amass a unique characteristic that makes them – you guessed it –
nonfungible. Exactly how nonfungible they are will also depend on their condition,
packaging, and other such things.

Even if your friend has the same comics, the two may not be interchangeable like to like,
simply because they may be in different conditions and may have aged differently.
Because it is so hard to put a value on such things, their nonfungibility will attract bids in a
wide range, should you ever want to sell them.

Related: Best NFT Marketplace Websites Online and How to Buy

Fungible vs. Non-Fungible tokens

Contrary to popular belief, most things cannot be easily pigeonholed into neat little
‘fungible’ and ‘nonfungible’ asset categories. There’s a fine line between the two.

For instance, gold is a fungible asset. Every single ounce of gold is equivalent to every
other ounce of gold. But if you apply a token (or a serial number) to a fungible thing, like a
bar of gold, you distinguish it from every other gold bar, thereby making it nonfungible.
After all, nonfungibility is the uniqueness of a thing, and here, it is the token that is making
it unique.

For purposes of identity management, non-fungible tokens or NFTs (or niftys) are
excellent. Just like a physical passport that you need to produce at the point of entry and
exit, digital things can be given a unique identity as well. What’s more – digital things can
have multiple owners as well, with each owner responsible for a fraction of the whole.
Such an arrangement can increase the worth of the digital asset, such as a painting, or a
piece of music.

Related: How to Make NFT Art

How Non-Fungible tokens could change creative industries

NFTs have the potential to create new markets out of thin air and increase investment
opportunities. Lately, Kings of Leon have become the first band to release their album
titled When You See Yourself as an NFT, unlocking limited-edition vinyls and front row
seats to their concerts to all fractioned owners. The owners will get the assurance of
owning a unique asset, along with the rights to brag about it.

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 On Friday, Kings of Leon will release their new album, titled When You See
Yourself, in the form of a non-fungible token (NFT) — becoming the first band to
ever do so. https://t.co/drSINP99Kf

— Rolling Stone (@RollingStone) March 3, 2021

Operating on publically accessible and transparent networks of a blockchain, NFTs can

revolutionize the market for some, but it can also upend some other forms of industries.
Though there is the argument that NFTs are actually good for artists as it gets them paid
for their work, the reality is slightly different.

NFTs don’t really guarantee that the money will go to the artists. In fact, it is not that hard
to link a token to someone else’s work and profiting from it. NFT proponents say that
tokenizing a piece of work will remove the middlemen who control distribution and
promotion. But like most things linked to cryptocurrencies, they may not live up to the
expectations.

Considering the fact that there are now for you for profit just shows that the reality hasn’t
changed much, only the middlemen have changed.

Will drop some of this on some #NFT pieces! Want me to look at your piece?

1. Drop me a follow.
2. RT this + tag a fellow creator.
3. Comment your piece + info. #nftcollectors #NFTCommunity #nftart
-CS pic.twitter.com/2bemjez8kr

— CS (@CitizenSeperate) March 11, 2021

Either way, it’s still too early to tell whether ‘nifty’ is here to stay or is it just another bubble
waiting to burst. It would appear, the artists are still going to starve, while their work gets
tokenized, sold, resold at higher prices, with no end in sight. If you want an artwork, the
age-old suggestion still stands – commission the artist.

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