Welcome to Hard Fork Basics, a collection of tips, tricks, guides, and advice to keep you up to date in the cryptocurrency and blockchain world.

In the world of cryptocurrency, tokens are king. It’s certainly true that they can be effectively grouped into three distinct categories , but this is (mostly) for government watchdogs to decide the best regulatory measures taken to control their issuance and exchange.

If we zoom out to see how tokens are built, rather than just how they should be regulated , it becomes obvious there are actually two flavors of cryptographic token: fungible, and non-fungible.

Confused? Yeah, okay. Fair enough. Don’t worry, the differences really simple, and better yet – quick to explain.

Bitcoin is fungible

Fungible cryptocurrencies represent the overwhelming majority of tokens on the market. Fungible tokens are digital assets built so that each individual token (or fraction of a token) is equivalent to the next.

For example, fiat money is fungible as $20 notes are interchangeable with all other (real) $20 notes. Similarly, one Bitcoin is equal to one Bitcoin, and it’s equal to all other Bitcoins.

This makes fungibility completely essential to the concept of currency, whether they be crypto or otherwise.

Another defining factor of fungibility is the ability to change that $20 note into smaller denominations and still retain the same overall value. I mean, I can swap my $20 note for two $10s and not have lost any money along the way. Neat.

Using Bitcoin as an example, I can swap half a Bitcoin for anyone else’s half a Bitcoin, feeling confident that our Bitcoin halves hold the same value, despite being halves of different coins.

CryptoKitties are non-fungible tokens

Non-fungible tokens are designed to be special . It’s best to think of these kinds of tokens as representing unique, collectible items.

Consider precious gems. Diamonds, for example, come in all different sizes, grades, and cuts.

This makes it difficult to determine if any two diamonds hold the same value. More than likely, a single diamond is treated as a unique gem, unable to be valued equally to all the others.

CryptoKitties are the similarly non-fungible. They’re perhaps the most well-known example of collectible, non-fungible tokens.

Every CryptoKitty is unique, and depending on its style and pedigree, might actually be worth lots of money .

As no two CryptoKitties are the same, this makes their value vary dramatically. This makes it impossible to divide a CryptoKitty into smaller parts, trade them for others, and reassemble them to create a new, equally valuable CryptoKitty, as is possible with fungible assets like Bitcoin, or gold.

By the way: Cassidy Robertson, Product Owner at CryptoKitties, is speaking at our Hard Fork Decentralized event. We’re also giving away free tickets !

Join us in London on December 12-14, and you could be rubbing shoulders with industry leaders as they come together to explore blockchain, cryptocurrency, and everything in between.

A crypto savings account delivers huge interest — but at what cost?

Leading crypto banks such as BlockFi and Nexo are attracting a lot of attention. Customers can earn an APY (annual percentage yield) of up to 12% , dwarfing high-street savings accounts, whose interest rates are sub-1% . But before you rush to transfer your hard-earned savings, there’s some important things to be aware of.

First, you need to realize what these banks are offering interest on. Apart from Nexo, which pays up to 12% interest on pounds, US dollars, and euros, most crypto banks only allow customers to save in cryptocurrencies such as bitcoinand ethereum, or stablecoins like Tether or USDC which trade one for one with the US dollar.

Their highest rates are paid on stablecoins: for example, Nexo pays up to 12% on USDC and Tether but 8% on bitcoin, while BlockFi pays 8.6% on USDC, 9.3% on Tether, and 5% on bitcoin. In other words, you could change US$1,000 (£720) into USDC1,000, leave it in a BlockFi account for a year, then theoretically withdraw US$1,086.

Because most crypto banks only deal in cryptocurrencies or stablecoins, you must first transfer your money into this form. This can be done via a crypto exchange such as Coinbase or Binance, or in a more limited way via a crypto bank: for example, you can transfer US dollars to BlockFi and they automatically convert them into another stablecoin called Gemini USD (also paying 8.6% APR).

Most crypto banks offer the opportunity to trade your money within their platform – for example from Gemini USD to bitcoin. But despite boasting of zero fees for this facility, the rates are not necessarily the best. BlockFi notes that its cost of purchasing crypto may be 1% higher than the market price.

If you save in cryptocurrencies, the interest rates also drop significantly the more you hold. On BlockFi, for example, the 5% bitcoin rate is only for deposits up to 0.5 bitcoin. For higher amounts it falls to 2%, and ultimately 0.5%.

Some crypto banks also offer their best rates for interest payments in their own cryptocurrency. For example, the 12% APR for Tether and USDC from Nexo is only for those being paid in Nexo tokens. Nexo tokens are not stablecoins, and go up and down in value. For interest payments in Tether or USDC, the rate is 10%.

Finally, no crypto-bank interest rates are guaranteed for any length of time. So while quoting an annual rate, it can fluctuate from day to day.

The business model

Nonetheless, the rates are very high. So how do these banks do it?

A crypto bank’s basic model is to borrow capital at the interest rate it pays depositors, and then to lend it at a higher rate. Crypto banks seek to safeguard their position in two key ways. First, by lending out less than they have in deposits. Second, they make borrowers put up collateral for their loan. This involves a loan-to-value (LTV) calculation for working out how much collateral is required to secure a loan. For example, BlockFi reserves the right to liquidate collateral as soon as it reaches 80% LTV.

To borrow US$5,000 from BlockFi, you currently need to put up BTC0.25, which is currently valued at US$9,448. If that bitcoin value fell to US$6,250, the bank would sell some of your collateral to return the LTV to a healthy level.

In good times, this is a business model that can bring significant revenue. No doubt high-street banks could offer higher savings rates too, but they use some of that saving to be more competitive on their lending rates instead.

But as far as the crypto banks are concerned, it is unclear what would happen if either there was a sudden and prolonged crash in the crypto market such that these banks’ deposits were worth significantly less than what they had lent out, or if borrowing dried up.

If one of the above scenarios were to play out, then unlike with your savings account at a high street bank, your crypto savings are not insured. BlockFi for instance is based in the US, and is not insured by the Federal Deposit Insurance Corporation (FDIC) nor the Securities Investor Protection Corporation (SIPC), meaning recovering funds is much more difficult if the bank becomes insolvent.

BlockFi also notes in its terms of service that where it or third-party partners experience cyber-attacks, extreme market conditions, or other operational or technical difficulties, they may immediately halt transfers or withdrawals of cryptocurrency either temporarily or permanently.

They will also not be liable for any loss or damage incurred as a result. This is particularly troublesome as it gives wide discretion for a crypto bank to not return your funds on demand, holding on to them where market conditions dictate (it should be said that BlockFi depositor funds are held in cold storage by major exchange Gemini and should at least be relatively safe from hacks). Other operators such as Celsius and Nexo don’t have such terms, but this just leaves their stance on such positions unclear.

There has also been some controversy around some stablecoins. For example, there have been questions about to what extent Tether’s operators have US dollar reserves to ensure the one-for-one rate holds. This makes it concerning that customers are being induced into holding such coins to access the highest interest rates. Aside from doomsday scenarios, there are also limits around withdrawals in terms of volume and regularity, with fees paid for transacting beyond these confines.

As with the wider crypto market, it seems willingness to engage in this area is dependent on an individual’s risk appetite. If you’re willing to hand over your crypto to a bank for a profit, then you open yourself up to losing it for good. If you are prepared to accept that risk and are willing to hold your funds and not treat this as a current account, then a crypto-bank savings account might be for you.

This article by Matthew Shillito , Lecturer in Law, University of Liverpool is republished from The Conversation under a Creative Commons license. Read the original article .

Christie’s auctioneers record record $318M in art sales on blockchain

Major auction house Christie’s has made history by tracking $317.8 million worth of art auctions via blockchain, as one of the greatest privately owned collections of American Modernist art went under the hammer overnight.

In a record-breaking slew of auctions, 42 pieces were sold, with details of the auctions recorded on a permissioned (private) implementation of the Ethereum blockchain managed by software company Artory.

A Christie’s press release (spotted by Artlyst ) noted the event marks the first time an art auction at this price level has been written to a blockchain.

Bidders hailing from 23 countries competed to own a prestigious collection curated by Barney A. Ebsworth, featuring artists such as Georgia O’Keeffee, Edward Hopper, Charles Demuth, Jackson Pollock, and Willem de Kooning.

The Edward Hopper piece, Chop Suey , sold for an eye-watering $91,875,000. Jackson Pollock’s Composition with Red Strokes garnered a whopping $55,437,500 all on it’s own.

Artory’s distributed ledger system records significant events (like going under auction) in the lifecycle of artworks and collectibles in a blockchain it calls The Registry.

The blockchain stores encrypted data related to item titles, descriptions, auction dates, and final prices, but not the identities of owners, which keeps all parties strictly anonymous.

Art-buyers are also provided a secure digital record of the history of each artwork, with digital certificates generated every time it gets sold. The idea is that this provides the greater art market with a certain confidence in an artworks’ ongoing provenance.

This Thursday, a further 49 works from the Ebsworth collection is set for auction, with those sales being written into a blockchain as well. According to Christie’s, the running total for this auction season currently sits at just under $650 million.