What Are Non-fungible Assets?
Fungibility refers to the interchangeability of assets, whether they can be exchanged on a one-to-one basis because they have the same value and properties.
Non-fungible assets (NFAs) are unique and cannot be exchanged like-for-like.
Their Unique Value
In the context of the crypto space, the term “non-fungible” is commonly associated with non-fungible tokens (NFTs).
NFTs represent a specific type of non-fungible asset.
Unlike other tokens, where the term “token” refers to the digital asset or contract, in the case of NFTs, “token” refers to the indivisible digital item itself.
Each NFT has its unique characteristics, metadata, and ownership record stored on a blockchain.
This uniqueness sets NFTs apart from fungible tokens like cryptocurrencies, which are interchangeable.
Non-fungible assets differ from NFTs in a couple of important ways:
- Only a single entity, besides the issuer, is allowed to hold units of the asset. This means that the ownership of the NFA is exclusive to one authorized entity.
- The identity of the entity associated with the asset cannot be changed. There is an unbreakable bond between the asset and the entity for which it has been issued.
NFAs have various applications and can offer unique advantages in specific business scenarios.
For example, NFAs can issue storage certificates securely, preventing manipulation or tampering.
They can also serve as accounting tokens or enable correspondence banking on a blockchain, ensuring safe and compliant value transfers between customer accounts.