Cryptocurrency and non-fungible tokens (NFTs) are alternative forms of investment that have excited young buyers, sellers, and collectors. Both are built on blockchain, use the same technology, and adhere to the same principles, but they are worlds away from each other.
If you are looking for an alternative investment option or want to learn more about the digital assets, keep reading to find out how NFTs differ from cryptocurrency.
What are Cryptocurrencies?
Cryptocurrency and NFTs are both digital assets that emerged during the late 2010s. As the public learned about them at the same time, many people have confused the two over the years, but they are different from each other.
To understand NFTs, you first need to learn about cryptocurrency, a digital currency secured via cryptography. For this reason, it is almost impossible to counterfeit or double-spend the currency.
Cryptographic methods will vary, but they use encryption algorithms and cryptographic technics to prevent outside manipulation. The decentralized networks are built on blockchain technology and maintained on an extensive network of computers. As they are immune from government interference, they have become a sought-after investment option with the public.
What are NFTs?
NFTs, permit the private ownership of digital products, such as music, video clips, images, and more. In most cases, you will need to use cryptocurrency to buy NFTs. Unlike fungible cryptocurrencies, NFTs are non-fungible, meaning their value is unique, which is similar to artwork, antiques, or jewelry.
The system of ownership and tradability allows people to unlock the value of one or more digital items. If a digital asset isn’t an NFT, it is simple to share with others but harder to own the rights.
For example, you might be free to copy a digital image as many times as you like (similar to the most expensive works of art), but the value will remain with the original product. Many celebrities have realized the value and have released unique art, mementos, music, or experiences as NFTs. Other famous figures have even started to buy NFTs, such as Eminem who purchased a Bored Ape Yacht Club NFT for $452,000.
Also, NFTs are minted using the same blockchain technology as cryptocurrency, as they are often stored on the Ethereum platform. Due to the technology, it isn’t possible for more than one person to own a specific NFT. For this reason, it is simple to verify ownership or transfer a token to a new owner.
Cryptocurrency and NFTs have many similarities, as they require the same blockchain transactions to record owners and validate authenticity. Yet, cryptocurrency is merely a digital currency or an investment option. NFTs have both non-economic and economic value for their owners. For instance, a musician or band may create, distribute, autograph, and monetize their works using NFTs, which an investor, fan, or collector will need to buy using cryptocurrency.
Cryptocurrency is fungible, and NFTs are non-fungible, hence the name. For instance, one bitcoin has the same value as another bitcoin, but one NFT doesn’t have the same value as another NFT, as it is a digital product and not a currency.