In 2021, we saw the rise of NFT. When XCopy’s A Coin for the Ferryman NFT sold for $6.034m on November 4, 2021. But still there are a lot of people who are unaware of what NFT is and how it is different from crypto. Or if cryptocurrency and NFTs are the same things. If you do have similar types of questions in your head, then I am here to help you out. If you are interested in tokenization as part of your business model, talk to an experienced Web 3 lawyer.
In this article, I am going to talk about the difference between NFT and cryptocurrency. So let’s jump into the topic right away:
What are NFTs?
NFT stands for Non Fungible Token. NFTs are basically digital art that represents real world objects like art, music, videos, or in-game items.
NFTs are purchased and sold online frequently with cryptocurrency. Also, they are generally encoded with the same underlying software as many cryptocurrencies do.
However, NFTs are not a new thing. They have existed since 2014, but recently only they are getting a lot of fame.
Using NFTs, one can represent their ownership of unique items. You can collect tokenized things like art, collectibles, even real estate. Also, they can only have one official owner at a time, and they are secured by a blockchain.
As a result, no one can modify the records or ownership of NFTs. The thing that makes NFTs truly unique is their fungibility.
NFTs are non fungible, meaning they are not interchangeable for other items as they do have unique properties. Unlike fungible tokens which can be exchanged because their value defines them rather than their unique properties.
Why are people investing in NFTs?
Through NFTs, one can have ownership of digital products. This creates a system of ownership and tradability. This way, users get to unlock value from their digital items.
Without NFTs, digital assets are easy to share but hard to own. Since you can create digital art and post it on the internet. But when you do so, your art becomes the property of that platform. Along with that, other people can also copy your artwork and share it on their channels.
This way, you won’t really own your artwork. But with NFTs, you are the true owner of your art. Although NFTs can still get copied, they won’t really own the artwork.
But with NFT, you will enjoy unique ownership of your artwork, and no matter how many times it gets copied, you will still be the owner.
“NFTs help your own ownership of a piece of artwork or any digital object. This allows the users to sell and buy them freely, creating new value.” says Sudhir from The Money Mongers, a crypto research firm. He further adds “Moreover, NFTs are limited in number. So they do have a huge demand and interest, and this is what drives the price of NFT.”
NFTs can be created or minted on the blockchain, and they can represent either tangible or intangible items.
What can NFTs do?
Initially, NFTs were used for giving true ownership of digital assets to the users. But NFT has more use cases. NFT allows creators to continue to earn royalties when their art is resold when it is not possible with the physical form of paintings.
There are celebrities that are releasing their unique mementos, art and experiences as NFTs. Also, NFTs remove the middleman from digital publishing. This allows artists of all types to sell directly to their supporters and enables fans to act as patrons.
With NFTs, it is also possible to invest money in a rising artist. But also, you can buy their early work and then resell it when the artist becomes popular.
Moreover, NFTS can also include collectibles like ticket stubs from concerts. You can use NFTs to own virtual real estate in the metaverse or own digital pets..
What is cryptocurrency?
Cryptocurrency is the encrypted form of digital currency. Cryptocurrencies are decentralized in nature, meaning it doesn’t depend on financial institutions to verify transactions. Instead, cryptocurrency is stored in a digital wallet.
Cryptocurrencies run on a peer to peer or P2P system, which is backed by blockchain technology. This allows anyone to easily send and receive payments. Also, when you make a crypto transaction, the transaction gets recorded in a public ledger.
There are several organizations that issued their own cryptocurrencies also known as tokens. This allows people to trade specifically for the product or service that a company provides. Also, an individual needs to exchange real currency for cryptocurrency to make a purchase of the product or service.
There are thousands of cryptocurrencies out there. However, here are examples of some of the well know crypto coins:
Bitcoin: It is the first cryptocurrency launched back in 2009. You can use Bitcoin for money transactions. Also, it can be used for buying and selling different cryptocurrencies at a crypto exchange.
Ethereum: It is one of the popular cryptocurrencies out there. ETH is a blockchain-based software platform that enables developers to create smart contracts and distributed applications. The cryptocurrency of the Ethereum network is ether.
Litecoin: This one is an open source peer to peer cryptocurrency that allows people to transact payments without a bank or third party.
Tether: It is a stablecoin whose price is directly pegged to the value of the fiat currency it represents. For instance, USDT is tied with the US dollar. As a result, its price fluctuates based on the value of USD. Also, its price doesn’t fluctuate like the price of Bitcoin does.
Why are people investing in Cryptocurrencies?
Cryptocurrencies have a lot of benefits that drive their value and make them a good investment instrument.
The primary benefit of crypto is that you can transact money at a lower cost compared to banks or other centralized authorities. Using your smartphone, you can easily transact cryptocurrencies at a rapid speed and lower cost.
Also, cryptocurrencies are based on cryptography and blockchain security, and decentralized cryptocurrencies tend to make for secure forms of payment. This might be one of the most certain benefits of cryptocurrency.
Moreover, the cryptocurrency industry has been growing rapidly. There are different coins like Bitcoin, which was priced less than $1 back in 2009 it is now priced at more than $30,000. And the same thing we get to see with many other cryptocurrencies.
Also, as the world gets more open about cryptocurrencies. It will drive the price of crypto tokens. As a result, investing in them allows you to enjoy high returns.
NFT vs Cryptocurrency: What’s the difference
Both Cryptocurrency and NFTs are built on the blockchain. They use the same technology and are based on the same principles. Hence, many people consider NFTs and cryptocurrencies to be the same thing.
However, NFTs can be considered as a subset of the crypto culture. As you mostly need crypto to buy and sell NFTs, and they use digital wallets.
But the primary difference between both of them is that Cryptocurrency is a currency like any other currency. As a result, they only have economic value and are fungible in nature.
This means that within a particular cryptocurrency, it doesn’t matter which crypto token you have, it has the same value as the other coin. 1 ETH = 1 ETH.
But this is not the same case with NFTs. Each NFT is different and non-fungible. They do have different values and go way beyond economics.
So that was a quick explanation of the differences between NFT and cryptocurrency. I hope this has helped you to get enough idea about both the terms. In case, If you have any specific questions to ask, then drop a comment below.
© 2023 The Havok Journal