The world is slowly but surely moving away from physical money, so it could soon be a thing of the past. It’s true that even with technological advances, some aspects of cash can’t be replicated with bits, but it’s just a matter of time. Cryptocurrency offers a more efficient alternative to notes and coins, and there’s no system of payment that’s more convenient, reliable, or anonymous. The emergence of digital tokens such as Bitcoin has made people think twice about the future of money. Deutsche Bank, a global banking and financial services company, has predicted that crypto could replace physical money by 2030. We’ll just have to see what happens.
Owing to blockchain, decentralized ownership is becoming a reality. There’s no need for a third party to validate ownership of an asset, as you can do that yourself. That asset can either be a cryptocurrency or a non-fungible token (NFT). Both of them are built on the blockchain, so they use the same technology and principles, which explains why they tend to attract the same players. Recently, we’ve observed a tremendous surge in interest in NFTs, so it seems that the global community hasn’t been absent minded despite the ongoing geopolitical disputes. This rise in interest echoes the big question: How are NFTs and crypto different? Please continue reading if you want to know more about how they function.
The ABCs Of NFTs
As the name clearly suggests, an NFT is second to none and not fungible like cash, so it can’t be traded or exchanged like other assets, such as Bitcoin or Ethereum. An NTF is practically a token that you use to show ownership of unique items, whether artwork or real estate. Nonetheless, ownership is more complicated than it seems at first glance. The NFT might coincide with works eligible for copyright. Various use cases can be attributed to the NFT’s growing capacity for innovation and developing infrastructure. Some of the most common types of NFTs are:
- Trading cards
- Event tickets
- Domain names
By tokenizing an asset, you create a digital representation of that property using blockchain technology, which allows you to store and trade tokens without difficulty, as you would with cryptocurrencies. NFTs are typically held on the Ethereum platform, even if they can be found on other blockchains. Solana, for example, is an alternative to consider when trading NFTs because of its high throughput and low fees. It’s also worth mentioning Avalanche, where the primary driver of NFT sales is the P2E game Crabada. To trade NFTs on Avalanche, you need a MetaMask wallet, which besides Ether, supports ETH-based tokens, ERC-20 or ERC-721.
The ABCs of Crypto
A cryptocurrency is a digital-only token, meaning that it exists only in digital form and doesn’t use or need a central bank. It leverages cryptography to manage how many tokens are created, how they’re traded, and how secure they are. When you transfer coins, the transactions are recorded on the ledger, which maintains participants’ identities anonymous. The most valuable crypto coin is Bitcoin, yet the market is large, so different cryptocurrencies can be traded publicly. Digital tokens that aren’t Bitcoin are considered an “also ran”, which is why they’re referred to as altcoins. The most popular cryptocurrencies, according to their market cap, are:
- Ethereum (ETH)
- BNB (BNB)
- Tether (USDT)
- Cardano (ADA)
- USD Coin (USDC)
- Polkadot (DOT)
- Dogecoin (DOGE)
- XRP (XRP)
- Polygon (MATIC)
- Solana (SOL)
Purchasing is effortless if you’re curious to learn how to buy cryptocurrency. It only requires an account at an exchange. Popular exchanges are decentralized, which translates into the fact that they follow the law and require users to submit identifying documentation (e.g., pictures of your Social Security card or your driver’s license). Keeping your crypto outside the exchange is recommended if you want complete control over your funds. When researching your options, you’ll come across terms like “hot wallet” and “cold wallet”; the difference is that a hot wallet is online while a cold wallet is offline. Cold wallets tend to charge fees.
Cryptocurrencies can solve some of the issues of the current banking system, which is affected by mountains of paperwork, data breaches, and redundant processes, to name a few. Using blockchain can go a long way in addressing these issues. Nonetheless, this technology isn’t limited to the financial area, showing immense potential for real estate purchases, music streaming, verifying documents, and so forth. Developers, entrepreneurs, and programmers are busy trying to develop digital tokens that serve various needs and fix different problems. This explains why there are so many of them.
So, How Are NFTs and Crypto Different?
As mentioned in the beginning, NFTs and crypto are based on the same technology. Users generally use cryptocurrency to purchase NFTs, even if some marketplaces make it possible to acquire NFTs using fiat currency. Cryptocurrency is a currency, which means that it only has economic value and is fungible, and valuation is dependent on metrics retrieved from the total value locked. Millions have adopted digital tokens like Bitcoin, not to mention that it’s gaining institutional acceptance. If you purchase an NFT using crypto, and its value rises, the NFT’s value will certainly appreciate. However, nothing is certain.
While NFTs and crypto share many similarities, they couldn’t be more different. NFTs are purposefully designed to be unique, so they’re irreplaceable and can’t be exchanged, each one having an identifier, metadata, and a smart contract. If you plan to purchase copyrights or enter into a license related to an NFT, it would be best to consult a lawyer with knowledge of NFTs. For anyone interested in this area, it’s a very important concept to understand. Cryptos are stable and promising, particularly if you focus your attention on BTC. For the time being, the future of NFTs is unclear.
All in all, it’s critical that you invest safely, so do thorough research. Buy a small number of coins to become familiar with the mechanics using reliable exchanges and digital wallets. NFTs are a good way of putting your digital cash to work but be careful when buying or selling NFTs. It’s not a good idea to invest in just any asset because it’s tokenized.