The token as a digital asset

The token as a digital asset

Strange as it seems, I don’t think non-fungible tokens have much to do with mushrooms. But, given Silky Road, perhaps the fungible token was better meant to be used with mushrooms.

What are these fungible and non-fungible things? And what are tokens?

Margaret Raden, a legal scholar of property theory differentiated the first two of these ideas in her research.

She described the fungible as anything that could willy nilly be replaced, like, you guessed it a coin, or a brick.

Nonfungibles are irreplaceable. They are very personal in that sense, because the most irreplaceable ‘thing’ we have is ourselves. From the admiration they cause, artwork might also be irreplaceable. But so too is real estate property, because each property is unique in the universe.

While I have drawn your attention to the fungible and the nonfungible what does it mean to be a tokenized? This is the most important idea of this article, because a digital token is a code which represents the holder’s rights.

Tokens identifiers can represent anything in Ethereum, the open source project holding a group of technologies that rose up beside bitcoin. But that doesn’t really explain them.

Perhaps it is better to say that the process of minting currency tokens across the industry led to a basical technical standard for these tokens. They all shared traits, and it was with these traits in mind that Ethereum created a standard that others could use to create their own fungible tokens. This standard is called ERC20.

ERC20 stipulates that the point of tokens is

• to be able to transfer them from one account to another • to get the account balance of tokens • to get the total supply of tokens on the network • to approve whether an token from an account can be spent by a third party account.

As blockchain innovations developed, the token was extended from just the humble fungible token to the nonfungible token.

Another standard was suggested in 2018 called ERC721 which lays out a template for nonfungible tokens, where each token is unique.

ERC721 is more complex than ERC20. It has many optional extensions and it is split across a number of contracts. OpenZeppelin contracts give flexibility to combine them.

Once again ERC72 implementations give this functionality:

• to be able to transfer tokens between accounts • to get the current token balance of an account • to get the owner of a specific token • to get the total supply of the token available on the network • functionality to approve an amount of token can be moved by a third party account

Additionally, an ERC72 NFT Contract is a smart contract that implements a given set of methods and events which when deployed are responsible for keeping track of tokens on Ethereum.

For the ERC721 NFT contract to interact with the ERC721 token a contract application binary interface (ABI) is needed

It is not just fungible and nonfungible tokens that exist. There are others out there.

There are utility tokens, tokenized securities, asset backed tokens, and reward tokens.