With the advent of blockchain and related technologies, the world witnessed a huge change. Among these changes, cryptocurrencies and NFTs (Non-Fungible Tokens) are unknown. People are still trying to understand what they actually mean.
NFT vs Crypto is the most common question right now, making it easy to understand. We are here with a simpler explanation about what they are, how they are different, and also pointing out their similarities.
Before we move towards cryptocurrencies and NFTs, it’s necessary to understand a bit about the technology on which they exist. Blockchain technology is the core of both NFTs and crypto. Blockchain is a data-sharing and management system where users and not some high-level companies store and handle every block of data. Blockchain aims to bring in the wave of decentralization in the world.
Now it’s time to dive into the answers to the differences between NFT and Crypto.
Cryptocurrencies are nothing but digital currencies. The cryptography process secures crypto tokens. This makes them extremely secure and nearly impossible to counterfeit. In simple terms, cryptocurrencies are a digital form of money.
Currently, the market consists of thousands of cryptocurrencies, with Bitcoin (BTC) and Ethereum (ETH) being the most popular ones. There are separate blockchain systems for these crypto tokens.
Anyone on the internet can buy or sell cryptocurrencies through decentralized exchanges. Before buying them, you will have to set up a crypto wallet to store them securely. People treat cryptocurrencies as an excellent investment option because of their high volatility and soaring values.
The best thing about cryptocurrencies is that a digital ledger is managed with complete transparency for all users. Every transaction of cryptocurrencies on the blockchain is recorded in the ledger.
NFTs stand for non-fungible tokens. People refer to them as digital assets. NFTs also exist on the blockchain network, but the main thing over here is that they are unique (non-fungible). It is easy to comprehend the term with a simple instance below.
Imagine that you own some items like a painting, a book, or any collection. If there is only one item in existence that you own of that kind, then it’s considered to be highly valuable in the market. If you own a baseball camp with a famous player’s autograph from the old days, then it’s highly valuable in the market right now.
Now, consider this in a virtual scenario. If you own a digital copy of some ebook signed by an author and the author had published only 5 signed copies, then you have got yourself an NFT. NFTs can be anything like JPEG, audio files, video files, documents, or anything. Anything that’s digital and unique can be turned into an NFT, and they hold different monetary value.
|– Fractionalize ownership of digital assets|
– Addition of another investment source
– Improves market efficiency
– Technology behind NFTs preserving information in an unhackable way is extremely safe
|– Highly volatile and illiquid|
– Harmful to the environment
– High chances of fraud
Both NFTs and Crypto exist on the blockchain system and work on the same principles. This is why a majority of people that are involved in the crypto market also have a look at NFTs.
The main difference between NFTs and crypto is visible in the name itself. Crypto is a digital currency that is not unique and has the same economic value. So, it won’t matter if you and your friend have which token of a particular cryptocurrency, as it will have the same value.
On the other hand, NFTs are non-fungible tokens. NFTs possess both economic and non-economic values. An artist can monetize an NFT by signing their item, which someone will then buy through cryptocurrency.
Another major difference is in the circulation of both crypto and NFTs. Crypto tokens are mined, while NFTs are minted. Mining is a complicated procedure where miners perform an accounting function on the blockchain to create another block of tokens.
Minting an NFT is the complete process of turning a digital asset or file into a token that can be used on the blockchain system. The blockchain network will verify the authenticity of the NFT and charge some fees for the same.
There are both similarities and differences when it comes to NFT and crypto. Both of them are digital assets and rely on the same technology, security, and network.
The users of the blockchain system use different cryptocurrencies to purchase NFTs from NFT marketplaces. Some marketplaces might allow you to purchase even with fiat currencies, but this is what a majority of users prefer.
If you purchase an NFT with a particular cryptocurrency and the value of that crypto token surges, then you will see the value of your NFT also increasing.
NFT vs Crypto isn’t something unknown now. Both are interconnected in some way or another as they have to rely on the same blockchain system. The best thing about NFTs and crypto is that they opened up a new avenue for investors.
1. Is NFT safer than crypto?
NFTs are considered to be riskier than crypto because you never know the intrinsic value of the digital item, and no concrete factors are driving its price. If you are into artwork or have a lot of spare money, then you can invest in NFTs.
2. How does an NFT make money?
The most popular way to make money through NFTs is to buy them at a low price and sell them for a high price in the market. You can even make money from NFTs if you mint them yourself, stake them, or win them in P2E games.
3. Which is better, invest in crypto or NFT?
Investing in crypto is a better option than NFTs because crypto’s value is purely economic and the value will vary based on its utility as an investment or currency. You can rely on it by performing certain fundamental research.
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