NFTs and Cryptos have been the standout innovations in the art and financial worlds in the recent past. A single NFT can be sold for millions, adding value to its appeal as an innovation. Many investors and artists are actively seeking opportunities to invest and trade crypto assets like NFTs. These new assets and their properties can be daunting to new investors who are unfamiliar. This article will help you understand the differences between NFTs and crypto coins.
What is a blockchain?
Blockchain is the technology that powers NFTs and crypto coins. It is vital to know how this technology functions.
Blockchain is a decentralized ledger that stores and shares transaction data. This system enables anonymity and transparency in transactions. Blocks are the fundamental units of a blockchain. It is a set of transactions bunched together, and each block is encrypted based on the previous block, forming a chain.
Blockchains run on many computers based all over the world and are not confined to a single physical location. This feature allows them to be accessible to users worldwide and makes them highly secure. Users do not need to give out their personal information to use a blockchain, enabling them to be completely anonymous on the blockchain network.
What is crypto?
Crypto coins are digital assets secured by cryptography. This digital asset is impossible to counterfeit. Blockchain powers crypto coins and is used to verify their transactions.
There is no central group or authority controlling crypto coins, unlike fiat currencies. Mining or staking processes are used to create new crypto coins. These processes are regulated through code. Blockchain verifies transactions without using third parties, unlike fiat currencies who verify with the help of banks.
Today, Bitcoin and Ethereum are the most popular crypto coins. Each has its different purpose. Bitcoin is used for worldwide transactions, whereas Ethereum enables applications with innovative functionality like dApps and smart contracts.
What are NFTs?
Non-fungible tokens, or NFTs, are crypto assets that come in various forms, such as music, images, videos, or documents. NFTs serve as certificates of ownership and prove that the digital asset is unique. The ownership history of NFTs can be transferred and tracked from one owner to another as it is a digital token.
NFTs are usually used as collectibles. Artists convert their physical art to NFTs to ensure its safety. Other digital artists create an entire collection of NFT art.
Difference between NFT and crypto
Fungibility
One of the vital differences between NFTs and crypto is that NFTs are non-fungible, whereas crypto is fungible. For example, you can exchange one Rs. 100 note for another because its value does not change. After all, they are identical or ‘fungible’. But, the value differs from one painting to another-exchanging one painting for another is not the same. There is value in the authenticity of an item.
Divisibility
Crypto coins are a divisible entity. One bitcoin can be divided up to eight decimal places, and a Satoshi is the smallest division of a bitcoin. This feature enables ease of transactions, and users are not limited to paying in whole crypto tokens.
NFTs are not divisible, so each NFT is a unique token on a blockchain. NFTs track the ownership and authenticity of a digital asset. They cannot be divided, as they will not be able to authenticate ownership on a blockchain.
Use case
Crypto coins are mainly used for global money transfers, investments, payments, and anonymous spending. It is ideal for international transactions with features like fast transaction speed and global reach.
NFTs can be used as digital items, art, and even for virtual real estate. Any physical item converted to a digital version can be secured through NFTs.
Cost of Investment
Crypto coins are an easy investment option. There are many crypto exchanges, both decentralized and centralized, on which you can choose to trade crypto tokens. Investing in crypto coins does not need to be expensive, as they are divisible. Crypto coins can be purchased for as little as Rs. 100.
Buying an NFT can be expensive as they are unique and cannot be freely traded. Additionally, average NFT prices can be a few hundreds of dollars. NFTs on the Ethereum blockchain come with high gas fees, which can be a deterrent for many users.
Final Thoughts
So are NFTs the same as crypto? NFTs and crypto coins are not the same, even though they use the same technology. Crypto is mainly used for payments, while NFTs are used to secure digital assets on the blockchain. These innovations are changing the way we understand art and finance and aim to leave a lasting impact.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.
