Cryptocurrency and NFTs are two of the most significant blockchain-based technologies that have emerged, and many are still a bit uncertain about them. The waters are split, a lot of information is going around, and most people still don’t really understand what they are all about.
So, to bring some clarity, we’ve come up with a short guide on the difference between crypto and NFTs. Hopefully, it’ll help you understand what NFTs and cryptocurrencies are, how they differ, and what value they bring to the table.
Let’s dive in!
Cryptocurrency vs. NFTs
Before we deep dive into the differences between crypto and NFTs, let’s first understand what they are.
A cryptocurrency is a digital currency based on blockchain technology —that is, a distributed and secure record of transactions that ensures data fidelity, transparency, and immutability.
In friendlier terms, a cryptocurrency is a digital currency that is recorded on a highly secure system that cannot be tampered with. And that’s what makes crypto so great: since transactions are recorded on a blockchain, cryptos are nearly impossible to counterfeit and are decentralized, meaning that they are not issued by any central authority or government.
Also, crypto transactions are completely trustless: you don’t need intermediaries involved because the blockchain is secure enough to guarantee their success.
What’s an NFT?
NFTs, or non-fungible tokens, are tokens recorded on a blockchain with unique traits and metadata that are linked to physical or digital assets. As they are recorded on a blockchain, NFTs are immutable and cannot be altered. But unlike cryptocurrencies, they are one-of-a-kind.
The key is in the name: NFTs are non-fungible, meaning that an NFT cannot be replaced or exchanged by another at parity.
But more on this later.
Are NFTs And Crypto Similar?
NFTs and cryptocurrency are related but not the same. In general, you need to use cryptocurrency to purchase NFTs, so it makes sense to see people getting these concepts mixed up.
On top of that, they do have some similarities that add to the confusion:
- NFTs and cryptocurrencies are both tokens, that is, digital, cryptographic representations of value, rights, or assets.
- NFTs and cryptocurrencies are both based on blockchain technology, which ensures their transparency, immutability, and security.
- NFTs and cryptocurrencies can both be stored on digital wallets, that is, software or devices capable of storing digital blockchain-based tokens.
- NFTs and cryptocurrencies are both tradeable, meaning that they are capable of being bought and sold.
And that’s pretty much where the similarities end.
What’s the Difference between NFTs and Crypto?
There are three key differences between NFTs and cryptocurrencies:
The main defining feature of NFTs is that they are non-fungible. Cryptocurrencies, in turn, are fungible.
This means that cryptocurrencies are mutually interchangeable at parity, but NFTs are not. For instance, a bitcoin will always equal a bitcoin. If you exchange one bitcoin with your best friend, neither of you gains nor loses anything. It’s like exchanging a dollar for a dollar.
That’s not the case with NFTs. Non-fungible tokens are unique and rely on blockchain technology to validate that uniqueness. So, fungibility —the ability to be traded or exchanged for one another— is one of the main distinctions between cryptocurrency and NFTs.
To illustrate these concepts with a more down-to-earth example, we could say that cryptocurrency is like the US dollar, the euro, or the pound, while NFTs are like trading cards, collectible items, or unique works of art that you can buy with those currencies.
2) Use cases
The applications for cryptocurrencies and NFTs are also different.
Cryptocurrencies are mostly related to the financial world. So, although a lot is being discussed and proposed, crypto use cases mainly involve monetary transactions, investments, and banking.
In turn, with NFTs, possibilities seem endless. NFTs can be applied across all industries for a variety of different purposes. They can be used to safeguard the copyrights of artists and musicians, grant access to events, represent ownership of all sorts of assets, and even validate the identity of individuals.
NFTs are even making waves in the healthcare industry —where companies are starting to use them to guarantee the fidelity and integrity of medical records— and in education —where institutions use them as proof of accomplishments and skills.
Compared to crypto, NFTs have a massive range of use cases that only seems to be expanding. And this leads us to our next point: value.
3) Non-economic value
Last but not least, another key difference between cryptocurrencies and NFTs is their value.
Cryptocurrency is exactly that: a currency. And like every other currency, it has only economic value and serves solely as a means of exchange or as an investment vehicle.
On the other hand, NFTs have value beyond economics. Their value is truly determined by several factors: their rarity, the bundle of rights they convey to holders, whether they enable income generation, and so on. On top of that, they offer more value in the sense that most of them have some utility or real-life use that makes them more appealing to people.
The community built around each NFT project is also a source of value for most holders, as they are part of a group of like-minded individuals with whom to share their thoughts and discuss their experiences.
Last Words of Wisdom
The blockchain-driven digital world is full of new technologies to explore, but crypto and NFTs are probably the most significant ones at the moment. If you want to enter the blockchain space, it’s essential to have a good handle on these concepts before diving into uncharted territory —especially considering that these new technologies are in constant development.
So, put on your learning hat and dig deeper into this exciting world!
And if you want to enter the blockchain arena with your company, but this is all a bit too overwhelming for you, hit us up. We’re always happy to help.
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