NFTs and Cryptocurrency: What’s the Difference?

NFTs and cryptocurrencies are in the midst of a battle for the future of blockchain. Both have originated to facilitate the widespread use and adoption of cryptocurrencies. However, NFTs and cryptos have diverged in their individual strengths and weaknesses with different philosophies. 

What is a Cryptocurrency?

Cryptocurrencies are digital currencies that exist in a decentralized autonomous organization (DAO). It’s decentralized because they operate without a middleman (e.g., the central bank). It is an independent system where transactions in these platforms are only accredited by miners or nodes who verify and record information about new transactions for other users to see in an immutable ledger.s. The network of these individuals is known as a decentralized peer-to-peer (P2P) network.  

What are NFTs?

NFTs (Non-Fungible Tokens) are digital goods, or assets, that are unique to the blockchain. They are non-fungible because each is unique and distinguishable from one another. Unlike traditional goods and assets, NFTs can have a digital history attached to them. They also have digital scarcity because only a certain number of them exist. Users can purchase NFTs directly from the developers or service providers who created them. But since it does not have a fixed, predetermined token value that does not exist within the blockchain network, investors cannot use the token to transact with a third party, and it has no real-world value.

How do NFTs and Cryptocurrencies Differ?

In the battle for the future of money, NFTs and cryptocurrencies are the frontrunners. However, while both of them have the same goal of facilitating the adoption of cryptocurrencies in a way that can be widely used and adopted, they differ in their application.

Trading

Trading is the main difference between NFTs and cryptocurrencies.  It refers to the act of exchanging one good asset for another. 

NFTs

In NFTs, trading is buying and selling between users. NFTs are not tradeable since they are bought and sold online and held in a digital ledger. NFTs are created within blockchain networks. Furthermore, tokens are often used as the underlying asset value. Meanwhile, the consumer gets an original digital file of Monalisa. 

Cryptocurrencies

Cryptocurrencies are tokens created on the blockchain and can be used for digital transactions. It may be swapped or traded without losing any value. The peer-to-peer system, which uses blockchain technology, allows anyone to send and receive payments in any digital currency or cryptocurrency.

Volatility

Volatility is another crucial difference between NFTs and cryptocurrencies, and it is the consistent and extreme fluctuation in the price of a cryptocurrency. An individual can lose money if the value of their asset drops rapidly and more than it was initially purchased for in previous transactions.

NFTs

NFTs are thought to be less volatile than cryptocurrencies. By design, NFTs cannot be over-inflated or hyper-inflated by a central entity.  Since there is no main body governing the supply of tokens, it will always remain constant with no surprises. Artists and traders alike have been drawn to NFT because of its creative, artistic appeal. However, it may inhibit those who find the work of creating NFTs to be too challenging, complex, or cumbersome.

Cryptocurrencies

As crypto opponents and authorities have often declared in their criticism of cryptocurrencies, they are viewed as high-risk investments. Cryptocurrencies are not stable and are highly volatile because there is no centralized authority controlling them. Specific cryptocurrencies, such as Tether, have been designed to be more stable than others. Also, if prices suddenly go down, a crypto selloff might occur. 

Purpose

There is no difference in the purposes of NFT and cryptocurrencies when it comes to implementing blockchain technology. However, there is a difference in how they were designed to develop these systems.

NFTs

NFTs were designed to alternative traditional financial markets for digital creations such as Monalisa. Users can purchase these assets online, sell them on websites such as Webkinz World and then play with them on their computer or phone. Each non-fungible token is an authentication certificate, demonstrating that a digital asset is one-of-a-kind and cannot be duplicated. In addition, because of the cryptographic principles of the blockchain, an NFT can never be modified, updated, or stolen.

Cryptocurrencies

Cryptocurrencies were created to serve as digital money independent of a bank. You can even transfer value without this money being backed by any central bank. 

It’s a means of exchange meant to exchange digital information while avoiding the issues that exist with current currencies. It facilitates the purchase and payment of products and services in a rapid, safe, and decentralized manner.

Uses and Market Place

Uses and marketplace are another significant difference between NFTs and cryptocurrencies. 

NFTs

NFTs may be utilized for a range of things, such as digital material, gaming products, investments and collateral, domain domains, etc. Rarible, OpenSea, and Foundation are the three major NFT markets. 

Cryptocurrencies

Cryptocurrency is utilized for various purposes, including low-cost money transactions, asset management, and ethical business practices. The three major cryptocurrency exchanges are Binance, Coinbase, Kraken, and eToro.

What is Crypto Selloff?

Crypto selloff is a term used to describe the panic selling of cryptocurrencies when they have fallen in value. This type of selling usually occurs when investors are convinced that a bitcoin crash is imminent. Crypto Selloff is caused by the “duck and cover” phenomenon. The “duck and cover” phenomenon is a natural reaction when there are warning signs of a financial crisis. 

Conclusion

If you prefer something with a fixed supply and is secure, then cryptocurrency is for you. But if you want something with a different purpose and uses, then NFTs are for you. Overall, NFTs and cryptocurrencies are two separate digital assets with other purposes. They can coexist to make blockchain technology more practical and adopted.