We live in an era that’s moving past traditional technologies. Day in and day out, a new technology is introduced. We live in a time when innovations occur at the speed of light. Is this ending anytime soon? I doubt it would. The best bet is the introduction of newer technologies. We’d welcome more emerging and novel innovations and technologies in the coming years. If you think the innovations around us now are the best technology has to offer, then you need to rethink and prepare for the times ahead.
Technology is revolutionizing every sector, and the finance system is included. We gradually see a transition from traditional finance, a clamor for decentralization, as against the regular central finance system, where there’s a third party between individuals and their financial transactions. Web 3.0 and its host, the blockchain, are perhaps at the center of this revolution.
Perhaps, you are new to the crypto space, or you even know so much about it, and you’re asking–What’s the difference between cryptocurrency and NFTs? Terms like Nfts, cryptocurrency, bitcoin, Ethereum, and metaverse, are only products of web 3.0 and the blockchain. These innovations would continually be in our faces, at least for now, until there’s a new technology to discuss. Here’s the piece to see to the end.
The best visual analysis you’d ever get about cryptocurrency is to consider it the digital form of your traditional currency. However, in this case, it cannot be seen or touched. Simply put, cryptocurrencies are digital currencies hosted on a blockchain. Although, with its downsides of volatility, one perk about cryptocurrencies is their many advantages over traditional currency known as fiat. In fact, crypto transactions are transparent and quicker, with the database almost impossible to breach. The idea behind cryptocurrency is decentralization, which is the focal point of web 3.0.
The blockchain is the foundation of cryptocurrencies. It acts as a distributed ledger shared by a network of computers. It’s a decentralized network, making it immune from government interference. Another way to view cryptocurrencies is to see them as interrelated “blocks” of data in a “chain” across several connected servers. When creating a new block, each node on the network has a new set of verification before transactions are confirmed.
For the records, bitcoin was the first cryptocurrency introduced in 2009 by satoshi Nakamoto, and if you’ve been looking out for where to get some in your bag, here is how to buy bitcoin on moonpay. Following bitcoin’s release, other notable coins like Litecoin (LTC), Dogecoin (DOGE), Polkadot (DOT), and Cardano (ADA) followed suit. As of now, there will be over 9,000 active cryptocurrencies in 2023.
The security of cryptocurrency is further heightened by its cryptographic nature. Cryptography involves algorithms such as curve encryption, hashing functions, and public-private key pairs that safeguard it from external manipulations, making security challenging to boycott by hackers.
Since the bitcoin boom, cryptocurrencies have become investment and trading instruments for both large and small investors. You can either buy or sell on specialist exchanges or brokers. You could mine them with computers or specialized computing hardware. It is worth noting that with the tight security of the blockchain, the wallets and exchanges used to hold and exchange some popular cryptocurrencies have fallen prey to hackers, resulting in millions of dollars worth of stolen crypto coins.
NFTs– A quick dive
Source: shutter stock
Non-fungible tokens (NFTs) are a type of digital record of ownership used uniquely. Due to their authenticity and uniqueness, they can serve as an intellectual property certificate. NFTs have been used in different markets and for several purposes, including games, arts, music, sports, fashion, and other use cases. Interestingly, due to their individual specifications, NFTs cannot be exchanged. Each NFT has a unique identifier code that distinguishes it from another.
Here is the gist of how NFTs work–rather than buy a physical object, you could buy a digital version. You’d also be privy to exclusive ownership rights because NFTs can only be assigned to one owner at a time. Moreso, when you involve in the NFT transaction, there’s some sort of record to show who owns them. That’s where blockchain technology comes in. Each time there’s a new NFT to create or transfer, the action gets a permanent record on the blockchain. Not only that, but it’s also timestamped so that anyone can track and trace it back to its original source.
The first launch of an NFT was in 2012 and has gone through diverse refining stages. Although there are a variety of blockchains, NFTs can be minted. However, the most commonly used is the ERC-721 token standard, which operates on the Ethereum network. For instance, the Bored Ape Yacht Club (BAYC), Moonbirds, and CryptoPunks NFT collections, among many others, are ERC-721 NFTs on the Ethereum blockchain. There is also the latest ERC-1155 standard designed for video games, and it comes with more flexibility.
When it comes to the discussion on what could pass as an NFT, any type of digital file can. In the past, most marketplaces started out with digital artworks. Interestingly, more marketplaces now support videos, GIFs, music, game assets, and physical items. Adidas, patron and gap are some of the notable brands incorporating physical NFTs in their brand. Beeple’s artwork is one of the most expensive NFTs ever sold. It sold for more than $69 million.
What’s the difference between cryptocurrency and NFTs?
Undoubtedly, you’d have seen the differences between cryptocurrencies and NFTs. However, there is a need to establish a proper distinction between the two concepts. One thing is sure—cryptocurrencies and NFTs are related but not the same. Below are some notable differences:
Simply put, as stated previously, cryptocurrency is a currency and, therefore, fungible. On the other hand, NFTs are non-fungible tokens. For instance, if you exchange a 5 USD note for another, its value does not change because it’s still the same note with the same value. It means the note in question can be replaced by another note of the same value. That’s fungibility.
However, when you think of exchanging a piece of art for another, you’d never get a similar artwork. There are elements you’d find in one artwork that you would only find in the other one if they’re the same. That’s where the authenticity and uniqueness of NFTs come from. They cannot be replaceable, and that’s Non-fungibility.
NFTs are unique digital assets. They serve as a use case for digital items, cosmetics, or virtual real estate. You can convert any item to a digital version, which is perfect for an NFT. Meanwhile, cryptocurrencies are the digital money you need to purchase assets. For the most part, crypto tokens are helpful for payments and money transfers. They are instrumental because they’re relatively secure, eliminating middlemen. Furthermore, they’re fast and suitable for international payments.
Cryptocurrencies are volatile. You cannot predict them. This is so because cryptos are subjected to the dictates of market forces and trends. During the bear market, the coins’ value depreciates, and investors record losses. The same goes for the bull run– the coins are pumping, and massive profits are recorded.
NFTs, on the other hand, are stable. They are not subject to the same market forces as cryptocurrencies. Primarily, they are valued based on their own merits, with relatively stable prices. They are not likely to be affected by the changes in the market.
Another difference between cryptocurrency and NFTs is that cryptocurrency tokens can be broken into smaller parts. Most importantly, it ensures ease in transactions because you cannot pay in whole tokens. To further clarify things, a bitcoin can be divided into 8 decimal places, where a “satoshi” is the most minor division of a bitcoin.
NFTs, on the other hand, are neither divisible nor breakable. Each NFT is a unique token on a blockchain that monitors if the asset is genuine and owned by the rightful person.
You’d need to DYOR–Do your own research. With over 9,000 crypto tokens in the blockchain space and newer coins being launched daily, it is easy to find a crypto token to invest in. Whether the token in question is suitable for investment or otherwise would be determined by you. There are also several cryptocurrency exchanges, both centralized and decentralized. However, since they are divisible, you should not invest a fortune. Most times, it’s better to risk an amount you can afford to lose.
Purchasing NFTs, on the other hand, could be costly. Each NFT is unique and distinct and cannot be freely traded. Additionally, the price can come to tens of thousands of dollars. More so, the NFTs hosted on the Ethereum blockchain are without a high gas fee.
To rap up, and put things in proper perspective, it is essential to note that the blockchain space is rapidly developing. Cryptocurrencies and NFTs have a place in this rapid development. It’s great to see them function on the same blockchain technology.
In the simplest form, once you have an evening walk with your friends and are asked what the difference between cryptocurrency and NFT is, you’d simply say- one serves the purpose of payments. The other helps to secure and trace digital assets anywhere on the blockchain.
Source: Shutter stock
Author’s Bio
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Ale Oluwatobi Emmanuel is a freelance SEO content writer for SaaS and web 3 brands. With several published by-lines in notable tech websites, he’s passionate about tech, and the innovations that come with it. In his leisure, he listens to music and plays classical piano. Reach Ale via aleoluwatobiemmanuel@gmail.com
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