This guide introduces you to NFTs on the Sui blockchain. It walks you through how NFTs differ from fungible tokens in Sui’s object-centric model, where every asset is technically unique but can still achieve fungibility through standardization.

By the end, you’ll have a clear grasp of how NFTs work on Sui, how they differ from fungible tokens, and how they can represent any unique digital or physical asset with verifiable ownership and provenance.

Fungibility is the quality of an asset being interchangeable with other individual assets of the same type, where each unit has equal value and can be substituted without a loss of value or utility.

Fungible assets: These assets can be swapped for one of the same kind without any loss of value. For example, a dollar bill is interchangeable with any other dollar bill, and five one-dollar bills are equal to one five-dollar bill.

Non-fungible assets: These are unique and cannot be easily swapped for an identical item. For instance, a house, a specific piece of art, or a collectible item has its own unique characteristics and value, so one cannot be replaced by another.

Fungibility is about interchangeability, while liquidity is about how quickly an asset can be converted into cash without a significant loss of value. For example, a car is said to be liquid if it can be sold quickly, but it is not fungible because each car has unique features and value.

This is how Sui differs from other blockchains.

So because Sui is object-centric, everything on Sui is an object, and every object has their own globally unique identifier ID: UID, and every object has an owner.

This means that everything on Sui is distinguishable (therefore unique), and has an owner. And if you recall, Uniqueness is the defining characteristic of non-fungibility. So from this, we can now deduce that everything on Sui is non-fungible.

And if everything on Sui is non-fungible, then that also means that every fungible token is actually a non-fungible token.

But then how does this even make sense? Fungiblity is a very crucial feature in finance

I know why this might sound confusing, but you see, there's more to actually understand about Fungibility.
Fungibility is just a concept.

Fungibility at its core is a social and contractual property of an asset. This means that Fungibility is defined by a higher-level protocol and must be accepted by its users. The underlying technical structure of how it works doesn't really matter.

So now that means, despite the uniqueness of each object on Sui (the technical structure), objects can still achieve fungibility through standardization.

• Contractual agreement: The smart contract that governs the token standard defines what makes a coin "fungible". For Sui's standard Coin implementation, sui::coin_registry, the contract logic dictates that any unit of the same Coin<T> type is interchangeable with any other unit of that same type. And if you recall, Interchangeability is the defining characteristic of fungibility.

• Identical properties: A coin object's fungibility comes from the fact that its value is its only meaningful property. The smart contract also treats all coins of the same type and value identically.

  So for example, a coin object with the value 5 is functionally and economically identical to any other coin object with the value 5 of the same token type. Just like how a one-dollar bill is functionally and economically identical to any other one-dollar bill, and five one-dollar bills are equal to one five-dollar bill.

  The globally unique identifier is simply a feature that enables the system to track ownership and transactions, but that doesn't affect the token's value or utility. Just like how every dollar bill has a unique serial number, but that doesn't affect its value or utility.

• Automatic "coin smashing": When you make a transaction, Sui has a feature called "gas smashing" (part of Programmable Transaction Blocks). This automatically merges smaller coin objects into larger ones, effectively abstracting away the existence of individual coin objects with unique IDs from the user's perspective. It reinforces the perception that you hold a balance of a single fungible token, rather than a collection of unique, small objects.

Every physical dollar bill has a unique serial number. Technically, this makes each bill a unique, non-fungible physical object.

However, the bank, government, me, you, and all economic actors agree to treat these physical objects as fungible representations of a dollar. One dollar bill is worth exactly the same as another, regardless of its serial number. You don't get a discount for a brand new bill or a bonus for a rare one.

And when you check your bank account online, you just see a single balance. Whether the bank's system tracks your money in various internal objects with unique IDs or not, that complexity is hidden from you. You don't have to think about which specific dollar in circulation is being spent, because the system handles the abstraction of fungibility.

The presence of a globally unique identifier does make each coin object technically unique, but that technical uniqueness is irrelevant from the perspective of the token's economic properties.

The smart contract and the wider Sui ecosystem treat these technically unique objects as practically fungible. The critical point once again is that Fungibility is a social and contractual property of an asset, not just a technical property of its identifier.

NFTs represent a whole range of elements, anything from digital art, digital fashion items, collectible sports cards, virtual real estate, games skins and characters, music albums, ownership licenses and even physical assets, and many more.

Basically, NFTs can be used for any asset that needs to be differentiated from each other in order to prove their value, or scarcity.

For the buyers, NFTs provide a secure certificate of ownership over the asset it represents, protecting its value.

For the sellers, NFTs make it not only possible to sell something today, but also to keep earning from it in the future. Artists in particular have struggled to earn rewards if their work appreciates in value. NFTs can be programmed to allow the original creator to collect money each time the token moves hands.

NFTs help both parties by providing tamper-proof, transparent digital certificates of ownership and origin for both physical and digital items. By using blockchain technology, NFTs create a permanent and unalterable record that verifies authenticity, prevents counterfeiting, and tracks the history of an asset from its creation.

Like any other asset, supply and demand drives the price. Due to the scarce nature of NFTs, and the high demand for them, people are often willing to pay a lot of money for them.

Also, a lot of people see NFTs as an investment opportunity, because they can resell the NFT they bought for a higher price.

This is where you can buy and sell NFTs that represent all the things I mentioned above.

On Sui, the most popular NFT marketplace is Tradeport.

Continue learning more about Move and Sui smart contracts in the next guide in this series on my GitHub. Stay tuned for more hands-on examples that build directly on top of this one.

• The Official Sui Documentation

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