Understanding the difference between cryptos and NFT
Reports suggest that more than $174 million has been spent on NFTs since November 2017. The numbers will only continue to grow due to the exponential popularity of NFTs in recent years.
What are NFTs?
The term NFT is an abbreviation for Non-fungible tokens – a digital asset representing a unique object like an artwork, video game skin, or music. These NFTs exist only in the blockchain network. People like you can buy, sell, or mint NFTs using compatible marketplaces.
Non-fungible essentially means that these assets are interchangeable. You cannot replace an NFT with something similar or identical because each token has a unique code and data. There is a lot of potential in the NFT space, which we will cover in the next section.
Why should you invest in an NFT?
There are many reasons to invest in NFTs. Predominantly, an NFT gives you private ownership over a piece of art or memorabilia. You get reliable ownership and tradeability with this system.
Imagine this – you create a piece of digital art and upload it on Instagram. Then, it becomes the platform’s property unless there is an inherent deal in place. Moreover, anyone can copy that artwork and make their own.
This is less likely to happen with NFTs. You will have complete control over the ownership of your artwork, allowing you to sell them with maximum value. It also means that you can reliably prove the ownership of a particular digital asset anywhere.
What are cryptos?
Cryptocurrencies are basically digital currencies but with encryption. They don’t have a central authority to determine the value or verify transactions. This decentralized system makes cryptocurrencies appealing to many individuals and business sectors.
You can exchange cryptocurrencies for goods and services. The most popular examples of cryptocurrency are Bitcoin and Ethereum.
Why should you invest in cryptos?
To buy or sell, you need a cryptowallet. It is an online app that will hold your currency. You can also transfer real money to invest in cryptos with this app. Cryptocurrencies are highly renowned for high liquidity, which means you can buy and sell cryptos with ease. And most of the investments often lead to high returns. However, you will need an effective risk management strategy to mitigate losses because cryptos are highly volatile.
Difference between NFTs and Cryptos
Both NFTs and Cryptos are similar in nature – they are built on the same blockchain technology, but they are different entities. The primary difference between cryptos and NFTs is that cryptos are fungible – they can be exchanged or traded. NFTs literally mean non-fungible. Thus, it is impossible for you to exchange one NFT for another.
Additionally, all cryptocurrencies hold the same value, depending on their type. For instance, all bitcoin currencies have the same value. Market condition and demand determine the value of each NFT.
An NFT worth millions of dollars might drop to zero in a matter of seconds if there is no demand. And the demand mostly arises from the identity of the owner. NFTs from famous artists or brands will have a stronghold on their value.
Which is better?
Now, you might be wondering which is better – NFT or cryptos? The answer is subjective in many aspects.
Cryptocurrencies are highly volatile, but there is an equal opportunity for rewards as well. Even though you can find stable cryptos called stable coins, the associated fiat money determines their value.
NFTs are suitable for people who are more artistically inclined. They can showcase their creative side by minting NFTs and getting complete ownership. You can also earn royalty from your digital art without any hassles.
The bottom line
NFTs are a launchpad for artists and collectors to trade digital assets while earning returns from them. You can invest in an NFT and wait until it reaches the maximum value for better rewards.
Instead of being another tech bubble, NFTs are deemed to become the next big thing in the digital ecosystem. It could join the ranks of electronic fund transfer and cryptocurrencies to collectively create a metaverse ecosystem. In short, this is a trend that is worth your attention and interest.