NFTs, Cryptocurrencies, Web 3.0, Bitcoin or even Ethereum, the crypto world might appear complex, confusing and outwardly weird to someone who has never personally engaged with these things before.
The introduction of Blockchain and the technologies it enables represents a paradigm shift on par with the introduction of the internet itself. People’s reactions to Blockchain-based technologies today are similar to how they responded to the early days of the internet, which included skepticism, enthusiasm and downright terror.
The two most significant unknowns in technology manifest as Cryptocurrencies and NFTs. Therefore, you must understand what they are and how they are entirely different from each other.
What are Cryptocurrencies?
Cryptocurrencies are digital currencies. The name “crypto” refers to the fact that these currencies (also known as digital tokens) are secured via a technique known as cryptography, which means they are highly secure and impossible to double-spend or duplicate.
This security is achieved through various mechanisms (including public-private key pairs, encryption algorithms and more), each of which has controversy. Still, for this explainer, it’s enough to know that cryptocurrencies are essentially a digital form of money — which is why digital tokens are frequently referred to as “X-coin.”
Ethereum (ETH) and Bitcoin (BTC) are the most well-known cryptocurrencies, each operating within their Blockchain system, although hundreds of other cryptocurrencies exist across dozens of Blockchain platforms.
What’s an NFT?
NFT stands for non-fungible token. They are digital tokens, similar to cryptocurrencies but unlike fungible. They are cryptographic assets that live on the Blockchain.
The most common comparison here is between physical money and distinct physical items people buy because they are unique. We talked about how cryptocurrencies are fungible, which means that the same amount of ETH in your digital wallet and ETH in someone else’s wallet has the same value and function.
Consider a tangible thing that is unique to you and exists just once. This could be a portrait you bought, a collectible like a playing card or a stamp or a signed copy of the first edition of a book you love.
These things can’t be changed. If someone asked you to trade your signed copy of the first edition of a book for a signed copy of the fifth edition, we hope you would say no. Even though they both have the exact words, they are not identical and can’t be changed.
What’s the Major Difference?
The most significant difference is that cryptocurrencies can be exchanged with each other, while NFTs are all different and have different values.
How crypto coins are put into circulation is another difference. NFTs are made, while coins are “mined”. It’s a complicated process, but in a nutshell, a miner is a computer that does accounting work on the Blockchain and gets paid in new coins.
To “mine” an NFT, you must turn a file into a token that can be used on a Blockchain. The Blockchain checks the transaction and adds a fee to it.
Which One is Really Better?
Both have various uses and can’t be compared with each other. NFTs and Cryptocurrencies are built on Blockchain and employ the same technology and ideas. They thus frequently attract others of similar backgrounds. However, they are entirely unlike in terms of their identities and ways of working.
Since NFTs are bought and exchanged online and kept in a digital ledger, they cannot be traded. Instead of purchasing a tangible image to place on the wall, the buyer receives an original digital file.
Cryptocurrencies may be traded or swapped without losing any value. Based on Blockchain technology, their peer-to-peer system allows anybody to make and receive payments in any digital cash or cryptocurrency.
Each non-fungible token shows that a digital asset is unique and can’t be traded with anything else. Due to the cryptographic principles of the Blockchain, an NFT can never be modified, edited, or stolen.
Like traditional currencies, it is a means of exchanging digital information while avoiding existing currency difficulties. It enables speedy, safe & decentralized transactions and the purchase & payment of products & services.
NFTs are claimed to be less volatile than cryptocurrencies. The creative, aesthetic side of NFTs has drawn both artists and traders. However, it may prevent people who find the work of creating NFTs too challenging, complex or cumbersome.
As crypto opponents and authorities have often indicated in their criticism of cryptocurrencies, in particular, are viewed as high-risk investments. Specific cryptocurrencies, such as Bitcoin, have been designed to be more stable than others.
The Final Verdict?
NFTs are now a good choice for artistic people who want to make money from their digital work. Because of the market’s creative, artistic component, artists and traders have been drawn to it. Cryptocurrency, on the other hand, is a bit surprising. It is used for trading, on the other hand some cryptocurrencies were intentionally built to be more stable than others. Stablecoins are cryptocurrencies with lower volatility than others, such as Bitcoin and Ethereum.