ERC-721 is a free, open standard that describes how to build NFTs (unique, non-fungible tokens) on the Ethereum blockchain.
While most of the tokens are fungible in nature, all ERC721 tokens are unique and work perfectly as collectibles.
What are tokens?
A “token” can be defined as a representation of any fungible good which can be traded for like currency, frequent flyer points, gold certificates and more. Blockchain or Ethereum is not the first platform to use tokens as a part of their design. A token is really an abstraction that represents who owns the underlying tradeable asset.
Crypto Tokens reside on their own blockchain network and represent an asset or utility. Think of them as being special virtual currency tokens. For eg, one can own a crypto token that represents their ownership of 50,000 frequent flyer points on a blockchain which is managed by an airline.
There can be another token which allows accessing 200 podcasts on a specific podcast network. Such crypto tokens on blockchain platforms like Ethereum that are created using standard templates often serve as the transaction units on the blockchain.
There are various types of tokens being used across the cryptocurrency industry and there are different ways to differentiate between tokens. Some of them are outlined below:
Usage Tokens: Required to be used as a service for Bitcoin and Ether.
Work Tokens: Gives users the right to contribute work to a decentralized network and receive benefits based on their contribution.
Intrinsic, Native or Built-in Tokens: These types of tokens are exclusive to one blockchain and used to serve as validation tools.
Application Tokens: These tokens are created on the application layer itself using smart contracts.
Asset-backed Tokens: These tokens are issued against real assets onto a blockchain for later redemption.
Collectible items have always attracted Humans. From the era of literally collecting rare coins to our time of Pokemon cards and Tamagotchi.
Similarly, ERC721 token power rare, collectible items in the form of Ethereum. Ethereum Request Comments 721 or ERC721 allows smart contracts to be traded in the form of tokens.
What does fungible mean?
Being fungible means something (such as money or a commodity) of that be replaced by another equal part or quantity in paying a debt or settling an account. Source: Merriam-Webster
For example, if you go to a convenience store with $10 in your hand, you can buy a soda and some chocolates. The $10 note has a nominal value which can be used at the convenience store to buy products of the same or lesser value. On the other side if you carry a collectible basketball card to the same store it won’t be accepted by the owner. This is because the dollar and the basketball card have different characteristics value which is different for different people.
ERC721 tokens can be used in any exchange exercise but their value is different from each other. Their value is defined by the uniqueness and rareness associated with each token.