Fungible Tokens

This section explains fungible tokens in CIS-2 and compares them to Layer-1 blockchain coins, cryptocurrencies, and traditional money.

What are Fungible Tokens?

Fungible Tokens are tokens that can be exchanged interchangeably without affecting the owner's account. This term is not only for cryptocurrencies or tokens but also accurate for fiat money as well. To better understand what fungible tokens are, look at the following example.

For instance, suppose you have a â‚Ŧ100 banknote. You could trade it for two â‚Ŧ50 notes without affecting your account balance. That's because the total value would remain the same, meaning that they're fungible: each unit is identical and interchangeable with others of the same type.

The same applies to fungible tokens in CIS-2. Each token is like a digital euro within the system, holding a specific value. You can trade, transfer, or divide them like cash, and each token remains identical to others of the same type.

Examples of Fungible Tokens

Fungible tokens aren't limited to representing currency. They can also represent shares of digital assets like:

  • Virtual items in games.

  • Ownership rights in digital art.

  • Access to specific services within the CIS-2 ecosystem.

Note: Understanding the fungibility (or interchangeability) of Layer-1 blockchain coins provides valuable insights into the nature and utility of fungible tokens within the CIS-2 ecosystem.

Overview of Layer-1 Blockchain Coins

Similarly to fungible tokens, such as fiat money, Layer-1 blockchain coins like BTC (Bitcoin), ETH (Ethereum), or CCD (Concordium) exist as examples of fungible cryptocurrencies. These coins operate on Layer-1 blockchains and share characteristics with fungible tokens.

Owners can divide them into smaller parts, transfer them, trade them, and exchange them, all without affecting their fundamental properties.

For instance, 1 CCD will always equal 1 CCD, as each fungible token within the CIS-2 ecosystem maintains its value and function.

Layer-1 blockchain coins play a crucial role in facilitating monetary transactions, covering transaction costs such as fees, and rewarding participants in the network.

Next, let's discuss the similarities between tokens and Layer-1 blockchain coins, particularly in terms of their fungibility and interchangeability.

Comparing fungible tokens and Layer-1 blockchain coins

A token is a digital certificate for ownership or access to assets like shares, game items, or physical goods on existing blockchains. Tokens can be fungible, like money, or unique with varying values.

They maintain consistency within their system. Coins, conversely, are specific to their native blockchain used for transactions within that network.

Although this token represents ownership and can be traded like money, it isn't native to the Concordium blockchain. It operates as a distinct entity on the Concordium platform, utilizing its technology.

Note: This distinction is important for understanding how it differs from Concordium's native coin and how it functions within the CIS-2 token framework.

Next, you'll learn about non-fungible tokens (NFTs).

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