Tokens and especially NFTs are some of the hot topics of the digital world. Using tokens has been one significant factor for the success of Blockchain technology. TEO-the energy origin explains in 2 minutes what exactly is a token, what kinds of tokens are there, how do they work and what can they be used for.
1) What is a token
The most basic definition of a token is that it constitutes a unit of value issued by an organization that can be bought, traded, resold or collected without the need from 3rd party intervention. Tokens are stored on Blockchain in the form of data, therefore, they can’t be duplicated, or transferred twice.
Tokens can be distinguished into 3 categories:
Fungible tokens: every fungible token is the same as the next and can be exchanged for any other token of the same type without changing anything. For example, Bitcoin is a fungible token: one Bitcoin has the same value as one other Bitcoin, there is no value distinction between any two. More generally, cryptocurrencies belong to the fungible token category.
Non fungible tokens or NFTs: one-of-a-kind blockchain-based digital assets, with embedded proof of ownership. It is a digital representation of a real-world tangible or non-tangible item. Because each item has a distinct value based on inherent characteristics like who created it or how rare it is, it means NFTs cannot be interchangeable. For example, an NFT representing music track from the Beatles cannot be exchanged by one of a painting of Van Gogh because it doesn’t have the same value or characteristics.
Semi fungible tokens or SFTs start off fungible and become non-fungible. Once they’re redeemed, the fungible tokens lose their face value. That loss of exchangeable value makes the expired tokens non-fungible. We can take the example of a voucher that has an expiration date; it can be exchanged with any other identical voucher before the expiration date but once the date is reached, the voucher cannot be exchanged for a valid voucher.