Tokens & NFTs

Chapter 6 introduced Ethereum's Contract Accounts — accounts controlled by code instead of a private key. This chapter looks at the single most common thing that code is actually used for: creating tokens, both the everyday fungible kind and the unique, non-fungible kind (NFTs) that made real, worldwide headlines in 2021.

Fungible vs. Non-Fungible, Precisely

Fungible means interchangeable: any one unit is identical in value and function to any other unit of the same type. A £10 note is fungible — you don't care which specific £10 note you receive in change, since they're all equally good. ETH and BTC are both fungible in exactly this sense: 1 ETH is always worth exactly 1 ETH, regardless of which specific 1 ETH it is.

Non-fungible means the opposite: each unit is unique and not directly interchangeable with another, even of the "same" type. A specific house, a specific piece of original art, or a specific collectible card is non-fungible — substituting a different one, even a similar-looking one, genuinely isn't the same thing.

ERC-20: The Real Standard Behind Fungible Tokens

A "token" on Ethereum isn't some separate kind of blockchain object — it's simply a smart contract (Chapter 6) that keeps track of balances internally and implements a shared, standardized set of functions so every wallet, exchange, and application can interact with it the same way. The real, foundational standard for fungible tokens is ERC-20, proposed by Fabian Vogelsteller in November 2015.

ERC-20 defines a common interface — functions like checking an account's token balance, transferring tokens between accounts, and reporting the token's total supply — that any compliant contract implements. Because the interface is standardized, a wallet or exchange only has to understand ERC-20 once to work with literally thousands of genuinely different tokens built on top of it, from stablecoins to governance tokens issued by decentralized projects. This single, shared standard is a large part of why Ethereum's own token ecosystem grew as large and interoperable as it did.

ERC-721: The Real Standard Behind NFTs

Non-fungible tokens needed a genuinely different standard, since ERC-20's whole design assumes every unit is identical and interchangeable. ERC-721, authored by William Entriken, Dieter Shirley, Jacob Evans, and Nastassia Sachs, was formally published in 2018, though its development began in 2017 — directly motivated by one specific, real, and genuinely famous project.

What an NFT Actually Stores On-Chain

A genuinely common misconception is that an NFT is the digital image, video, or other media itself, stored directly on the blockchain. In practice, this usually isn't true. What an ERC-721 contract actually stores on-chain, per token, is:

• a unique token ID;
• the current owner's address; and
• typically a URI — essentially a link — pointing to off-chain metadata describing the token, which usually includes a further link to the actual media file itself.

A Real, Concrete Landmark: Beeple at Christie's

NFTs moved from a niche, technical curiosity to mainstream global news in March 2021, when digital artist Beeple's work "Everydays: The First 5000 Days" sold at Christie's — one of the world's oldest and most established fine art auction houses — for a real, documented $69.3 million, paid in 42,329 ETH. This remains, at time of writing, the most expensive NFT sale ever recorded, and a genuinely significant real moment for NFTs entering mainstream cultural and financial conversation far beyond the crypto community itself.

Hands-On Exercises

Three exercises reinforcing the fungible/non-fungible distinction and what an NFT actually stores, before Chapter 9 turns to the scaling problem CryptoKitties itself first exposed at real, network-wide scale.