Of the many branches that were created as a binary product for an ongoing cryptocurrency experiment, non-perishable tokens have proven to be some of the most explosive. In just a few months, the NFTs have been changed by over half a billion dollars as celebrities (A to Z lists) demand to take advantage of the latest cryptocurrency craze.
But in a hurry to get into the carriage, several people stopped to assess the validity of the terminology used on the NFT. After all, why stop thinking about semantics when you can make millions of dollars with a single click?
But instead of the aforementioned millions, we decided to ask the following questions: is it still possible to replace the irreplaceable icons a bit?
An asset or commodity is considered to be exchangeable if it can be replaced by another of the same type of equal value. Therefore, the US dollar can be exchanged because any dollar can be exchanged for any other dollar. It’s the same with Bitcoin (BTC).
Fungicide is one of the four pillars of the Aristotelian concept of “good money” and perhaps the most important in the creation of a business currency. All cryptocurrencies are fungal in nature.
Non-fungal assets are assets that cannot be trusted, as they have the same value due to unique differences in composition. While diamonds, for example, can be lucrative in exchange, small differences in cut, shape and quality preclude them from meeting Aristotle’s assessment of good money.
But when it comes to NFT, the specifications for the currency do not matter. The point is that each unit of assets can be diverse, unique, exclusive and rare. This is why much of NFT’s perceived value stems from its susceptibility to fungi.
In the Ethereum blockchain, NFT is mainly built on a token standard known as ERC-1155. The tokens created with ERC-1155 ensure that they are not perishable, and as such they will be useless when setting up the base of a regular coin.
Standard Ethereum tokens are generated in accordance with the ERC-20 standard, which allows the issuance of identical interchangeable tokens for use as physical currency. It is for this reason that the use of an ERC-20 token to register something unique or rare is considered invalid.
But what about …?
But hypothetically, if 21 million ERC-1155 NFTs were created – all programmed to be identical to each other – and then distributed as a free download, wouldn’t the actual currency work well?
What can prevent trading in tokens on the open market, each of which has the same value, identical to the other? This concept is not an invention of Cointelegraph. “Fragmented NFTs” are an already emerging phenomenon that quickly upset US Securities and Exchange Commissioner Hester Pierce.
Pierce, also known as “Crypto Mom” because of his condescending attitude to cryptocurrency regulation, warned that the use of NFT-segmented skirts is dangerously close to violating the SEC Securities Act. Pearce notes that the main reason NFTs are not securities is because they are unique and indestructible, as he said that people “have become so inventive with the types of NFTs that they already exist.”
In contrast, the standard Ethereum ERC-20 token, which many people will store in their wallet at some point, is designed to be fungal, but is it always the case?
The Ethereum developer who helped create the ERC-1155 token standard, Philippe Castonguai, posed a question to his Twitter followers who investigated this issue. We have proven that ERC-20 tokens are interchangeable, but can they not be perishable?
Castonguai asked the successors with the question: “Is it an ERC-20 token with a total sustained supply of 1 and NFT?”
Approximately 46.8% answered in the affirmative, 36.4% answered in the negative, and 16.7% rejected this assumption.
Further refining the definition, Castonguay asked for an indivisible ERC-20 token with a single NFT comb strain. Finally, the ERC-20 token can be divided into many (possibly infinite) decimals, which means that its usefulness as an NFT will disappear.
“Is the ERC-20 token indivisible (0 decimal places) with a maximum grant of 1 for NFT?” Castonguay asked. This time, 72.1% answered in the affirmative, 15.4% – no, and 12.5% refused to answer.
The Cointelegraph asked Castonguei to use the terms “fungus” and “non-fungicide” when referring to cryptocurrency tokens. Is there a big difference between them? Are we just talking about two different methods of shining a cat? He answered:
“In fact, fungus is a spectrum, and the term NFT gives a completely binary representation of the situation!”