NFTs are singular and unique and not interchangeable like cryptocurrencies
NFTs and crypto are confusing buzzwords for anyone unsure about precisely what blockchain technologies are. So what exactly are the differences?
Despite the decentralized network being around since 2011, many are still unsure about the logistics behind blockchain, NFTs and crypto.
So, let’s dig into the blockchain and the contrasting technicalities between cryptocurrencies and NFTs:
WHAT IS THE BLOCKCHAIN?
First and foremost, the blockchain (otherwise known as Web3) is a data-sharing and management platform that records the data of transactions, similar to a public ledger. Although, differently, all data transactions are stored in blocks on-chain to assist toward safe and secure decentralized payments. Computers securing the system (nodes) then decide whether or not the transaction is safe enough to be successful.
To add significantly to security, all parties involved in the verification process must accept the content of the ledger, making it a complicated system to hack due to many computers gaining control of the blockchain rather than one.
The two primary data transactions that blockchain uses are NFTs and crypto. While both are similar in many ways, they have contrasting requirements and abilities.
CRYPTO – THE ‘MUST-KNOWS’
Cryptocurrencies, which also go under the name crypto or digital tokens, are digital currencies secured by cryptography—a highly protected and complicated process to copy and overwrite.
However, the most important takeaway is understanding cryptocurrencies. Firstly, there are numerous of these digital currencies held on the blockchain with different requirements. Despite thousands existing across multiple blockchain platforms, Bitcoin and Ethereum are the most favored.
Bitcoin is typically a tremendous digital currency as a peer-to-peer transaction system, whereas Ethereum is fantastic for creating and building distributed applications and smart contracts. Thus, curators usually hold their NFTs on the Ethereum network.
Anyone and everyone can sell such currencies on crypto marketplaces, like OpenSea and Binance. Although to acquire crypto, a crypto wallet, like Metamask, will need to be set up to make transactions happen. You can then use crypto to purchase crypto goods like NFTs.
The best thing about crypto is that it exists on the decentralized blockchain. This means that no bank intermediaries are needed, nor are governmental interferences. Thus, crypto allows financial freedom like never before.
The downfall of cryptocurrency is that if a transaction was to take a turn for the worst, there’s no one to back you up. Although many crypto enthusiasts continuously overlook such issues and work towards fixing everyday problems.
NFTS AND CRYPTO – THE DIFFERENCES
NFTs—the abbreviation for non-fungible-tokens—are digital currencies that are digital tokens, otherwise known as digital assets.
Like cryptocurrencies, they live on the blockchain and are cryptographic assets. Although, differently, NFTs are singular and unique and not fungible nor interchangeable like cryptocurrencies.
That being the case, the amount of crypto in your digital wallet is the same in value and function as the same amount of crypto in someone else’s wallet. Whereas you can trade NFTs at higher prices, thus, they can be great for investment purposes.
Despite many people arguing that anyone can own an NFT by screenshotting it and claiming it as their own, all NFT buyers own a record of certification on-chain.
It’s vital to note that you must buy crypto to purchase one. But after purchase, collectors can then do what they wish with their NFT—whether to trade at higher prices, keep for pure enjoyment or show off in their crypto wallets.
NFTs are beneficial to many creative industries. More musicians and artists are publishing new tracks/artwork through NFTs to keep hold of all profits and royalties made and create intimate experiences with fans. Depending on the market and project, they can also be a tremendous investment.
On the other hand, crypto is worth purchasing if you are skeptical of traditional banking systems, want to join a decentralized world, and are interested in buying NFTs.
Subscribe to the NFT Lately newsletter to receive news covering the latest NFT-related drops, releases, reviews and more.