Following cryptocurrency, the world has witnessed the upcoming blockchain evolution in the form of NFT. But what is the difference between NFT and cryptocurrency? Read our blog to understand the difference.
Blockchain has emerged as the path-breaking technology in the 21st century. One of the main objectives of blockchain was to eliminate the hegemony of the banking system. The concept of a decentralized network soon grabbed the attention of the people and enterprises. Over the past decade, the market value of blockchain reached $4.9 billion.
Cryptocurrency and NFT are the two most discussed topics these days. Both are viewed as a great way to generate passive income. Before diving into the topic of NFT vs. crypto, let’s first understand what is NFT and cryptocurrency?
What is cryptocurrency?
Cryptocurrency is the form of digital or virtual currency that is created and held on a computer. Unlike physical currency like U.S. dollars, and European Euros where records of transactions are maintained by banks and other government organizations, cryptographic transactions are maintained in a public ledger to which all users have access. It is based on blockchain technology and is secured by cryptography. What makes it more alluring is that these virtual coins are not controlled by any legal authority in the world.
The immutable, fast, and secure digital transaction allows the users to transfer hefty amounts of cryptocurrency like Bitcoin and Ethereum without worry. Furthermore, there is a limited supply of particular cryptocurrencies which is why people compare them to gold. At times of high inflation, they may be considered as attractive investments.
What are NFTs?
Non-Fungible Tokens or NFTs are unique virtual assets representing certifiable objects like NBA cards, digital avatars, anime characters, real estate, and so on. All these real-world objects can be in the form of video files, audio files, or images. Each NFT token is different from the other, making them unique and irreplaceable. They are encoded with similar underlying software as that of cryptocurrency. This makes transactions fast and secure.
They are called non-fungible tokens because they cannot be replaced or exchanged with other items. They are non-interchangeable and cannot be exchanged for equivalence with other articles. The tokenization of digital art helps art collectors trade more efficiently, thereby eliminating the risk of fraud. Furthermore, a decentralized network makes the transaction process transparent because all transaction records are included in the public ledger.
NFT vs Cryptocurrency
Both cryptocurrency and NFTs are created on the blockchain, using similar technology, the properties and principles are equally the same. Although there are some parallels between cryptocurrencies and NFTs, they are different kinds of commodities. The principles tend to attract similar kinds of players in both markets. So what makes them different from each other?
We have listed some of the factors that will help you to understand the difference between NFTs and crypto.
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Trade
NFTs are unique cryptographic assets that address real-world objects like digital art, avatars, anime characters, etc., which is why they cannot be readily traded for another item. For example, instead of buying the physical pictures, the buyer receives an original digital file and he pays for it with money.
Whereas cryptocurrencies can be exchanged for each other without losing their original value. The peer-to-peer trading system assists the buyer and seller to exchange any cryptocurrency value by any form of cryptocurrency or virtual currency.
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Purpose
NFTs are non-fungible tokens, meaning they are non-exchangeable and irreplaceable tokens. An NFT serves as proof of ownership indicating that the token is distinct from other NFTs. This is why one cannot steal or alter an NFT.
On the other hand, cryptocurrencies are similar to traditional currencies as they both serve as a medium of exchange. Cryptocurrencies resolve the problem of traditional currencies as the transaction is quick, secure, and decentralized. Plus, one can also buy or sell goods and services in exchange for cryptocurrencies.
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Volatility
Although both NFT and cryptocurrency are volatile, NFTs are comparatively less volatile. Both the buyer and the seller exchange NFT, because they have the same interest in the creative and artistic aspects. Plus, the uniqueness and creativity of digital art cannot be copied by another individual.
Cryptocurrencies, on the other hand, are regarded as a high- risk investments. Crypto regulators and critics often condemn the use of the cryptocurrencies like fiat currencies. Plus, the decentralized structure is questioned by the governmental and other official organizations. However, some cryptocurrencies like Bitcoin and Ethereum are designed to be more stable than others.
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Uses and marketplaces
NFTs are used for investment and collaterals, gaming items, domain names, digital content, etc. Some of the largest NFT marketplaces are OpenSea, Rarible, and Foundation. If you want to purchase and sell NFT artworks, you need to register your account on one of these platforms.
Whereas, cryptocurrencies are used for ethical business practices, wealth management, low-cost money transfers, etc. Some of the largest crypto marketplaces include eToro, Binance, Coinbase, and the Kraken.
How you can start
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