What is NFT?
Blockchain technology has spawned a whole new industry. Bitcoin, which was the first cryptocurrency, is based on this Blockchainx. Its characteristics allow a product —in the case of Bitcoin it is money or a means of payment, since that is its purpose— to be decentralized. This is sustained thanks to a computing power distributed in a network of computers. No one is in charge but all nodes contribute. On this basis, the rest of the cryptocurrencies were born and the NFTs have also been created .
An NFT is a token registered on the blockchain . The technology makes it possible for these crypto assets to function as a certification of authenticity and a guarantee of who owns a certain digital file.
What are cryptocurrencies?
A cryptocurrency is a digital asset that uses cryptographic encryption to guarantee its ownership and ensure the integrity of transactions, and control the creation of additional units, that is, preventing someone from making copies as we would, for example, with a photo. These coins do not exist in physical form: they are stored in a digital wallet.
The main distinction between the two is: cryptocurrencies are fungible while NFTs are non-fungible, which means that NFTs cannot be replaced by others. NFTs are unique digital assets backed and verified on the blockchain, while cryptocurrencies are decentralized digital currencies with transactions recorded on the blockchain.
There are many differences between the two; however, it is crucial that one understands the main differences. Blockchain technology has a promising future and the use cases are no secret as many of the world's most valuable companies are investing heavily in this emerging technology. As an illustrative example, we look at activity in just one major vertical: airlines. Learn more about how blockchain is being implemented here. Although both NFTs and cryptocurrencies are based on the blockchain, they serve substantially different purposes.
Do NFTs use cryptocurrencies?
NFTs and cryptocurrencies are based on the same digital ledger but are different. Not all NFTs are fungible, Crypto Token Migration while cryptocurrencies are fungible. NFTs are usually purchased with cryptocurrencies and are usually purchased with that native blockchain token (i.e. Ethereum -based NFTs are purchased with $ETH).
NFT projects can even create their own native cryptocurrency. This is a common way for NFT projects to raise additional capital while providing investors with a way to indirectly invest in NFTs. One of the main NFT projects, Bored Ape Yacht Club, has created its own cryptocurrency called $APE coin.
Bored Ape Yacht Club's NFT collection has a starting price of about $200,000, which is a very high price for its cheapest NFT. Ape coin ($APE) is a cheaper way to indirectly invest in the project.
Do cryptocurrencies use NFT?
NFTs and cryptocurrencies are based on the blockchain, which begs the question: do cryptocurrencies use NFTs?
Simply put, cryptocurrencies do not use NFTs. They use the same underlying technology but are completely different functions of the blockchain.
NFT projects have developed their own related cryptocurrencies, but an NFT is not a cryptocurrency and vice versa.
The reason cryptocurrencies are not NFTs is that they would defeat the purpose of being a currency. Currencies must be liquid and fungible, which is not possible with NFTs.
Are NFTs better than cryptocurrencies?
There is a variety of digital assets to invest in, with over 14,000 cryptocurrencies and thousands of NFTs. So are NFTs better than cryptocurrencies?
It is a challenge to say that NFTs and cryptocurrencies are difficult to compare. Despite being built on the same underlying software and technology, they are materially different functions of blockchain technology.
NFTs are often unique works of art. Since they are backed and verified on the blockchain, they are unique. This makes them comparable to some alternative assets, such as collectibles like rare baseball cards or an abstract Wassily Kandinsky painting. The situation is complicated. A closer examination of Kandinsky's work is illuminating; Some people wouldn't hang this colorful artist's abstract work, even if it were free, while others find it so compelling that they're willing to pay upwards of $40 million for a piece. Art-based NFTs have similar characteristics: there is a lot of subjective assessment of a piece's value.
Distinguish between NFT and Cryptocurrency.
What distinguishes an NFT from a cryptocurrency?
Cryptocurrencies and NFTs are significantly different from each other. Being built on top of the blockchain network, the similarities end there.
Cryptocurrency is a type of fungible or exchangeable money. For example, if you hold a crypto token, such as Ethereum, the next Ethereum you hold will have the same value. However, NFTs are not fungible, which means that one NFT does not have the same value as another. Each work of art is different from the others, so it is not expendable and is unique.
NFTs and cryptocurrencies are based on the blockchain and use comparable innovations and standards. As a result, they will often attract similar players. NFTs are a subset of crypto culture, and you will almost certainly need crypto forms of money to trade them.
