NFT and cryptocurrency seem to be the name of the game these days, especially ever since the COVID-19 pandemic all but forced most of everything to go digital.
Both seem to be lucrative markets too. You have probably seen news of people earning thousands or millions of dollars thanks to NFTs or headlines about cryptocurrency values changing and even crashing because of one Elon Musk tweet.
If you are unfamiliar with these two, it won’t be a surprise if you’ve wondered or assumed that NFTs and cryptocurrencies are one and the same. But are they really?
The answer? NFTs and cryptocurrency share some similarities but no, they are not really the same thing.
Before diving deep into the similarities of NFT and cryptocurrency, let’s first define what these two are. By defining them, you will actually be able to see their differences early on.
NFT: What is it?
(Photo : Screenshot taken from Benyamin Ahmed’s Twitter)
NFT is an acronym that stands for non-fungible token. Something is considered non-fungible when “it’s unique and can’t be replaced with something else,” according to an article by The Verge. According to Forbes, an NFT token has “a unique value and cannot be exchanged for another of equal value.”
Per The Verge’s article, NFTs can be anything digital, though most of them have been digital art these days. A 12-year-old boy recently made more than $160,000 selling an NFT collection inspired by a stock photo of an 8-bit blue whale.
Celebrities and popular brands have gotten into NFTs as well, such as singer Katy Perry, football player Tom Brady, Tesla and SpaceX CEO Elon Musk, and luxury fashion brand Dolce & Gabbana.
According to rumors, even Instagram is developing an NFT platform.
Related Article: NFT: How to Create and Sell Designs
What is Cryptocurrency?
(Photo : Karolina Grabowska from Pexels)
Cryptocurrency, on the other hand, is defined by an article by Asia One as “virtual currency that uses cryptography to secure and verify transactions as well as to manage and control the creation of new currency units.”
Examples of cryptocurrencies include Bitcoin, Bitcoin Cash, Cardano, Ethereum, Polkadot, and XRP.
Cryptocurrency is fungible, meaning a Bitcoin, which is considered the first ever cryptocurrency, can be traded for another Bitcoin. A USD Coin can be traded for another USD Coin.
There are several types of cryptocurrencies available in the market aside from Bitcoin. There is the Binance Coin, which is the payment cryptocurrency used in the Binance Exchange. Binance Exchange is regarded as one of the most widely used in the world.
There is also Ethereum, considered as the second largest cryptocurrency market after Bitcoin.
Other cryptocurrencies available include Cardano, Polkadot, Teher, USD Coin, and XRP.
How NFTs and Cryptocurrencies Similar
NFTs and cryptocurrencies are similar in a sense that they both have stored digital records on a blockchain, defined as a digital ledger of transactions. The Ethereum blockchain, for example, can support NFTs. As Forbes points out, however, the similarity between the two generally ends there.
If you want to dive a little deeper into other possible similarities, it can also be said that both NFTs and cryptos remain unregulated by governments and central banks, though there have been efforts to try and do so.
Both NFT and cryptocurrency likewise have unstable volatility. Where they differ, however, is from where their values are determined. An NFT’s value depends on asset value, while the value of cryptos is dependent on market fluctuation.
NFT vs Cryptocurrency: So Which One is Better?
Now that you know more about NFT and cryptocurrency, you might be wondering which one is a better option for a newbie trader. As mentioned, both NFT and cryptocurrency have unstable volatility. So which one is the better option?
Cryptocurrencies, in particular, are considered high risk, which crypto critics and regulators have repeatedly pointed out in their criticism of cryptocurrency. But, as they say, high risk, high reward.
There are cryptocurrencies that have been designed to be more stable than others. These cryptocurrencies are called stablecoins, whose main feature is its reduced volatility compared to others like Bitcoin and Ethereum. Examples of stablecoins include Tether and USD Coin. Their value is tied to the value of the US dollar.
Now if you happen to be artistically-inclined and would like to earn from your digital art, NFTs are something you can consider. The creative, artistic side of NFT has encouraged artists and traders alike to try out the market. On the flipside, it can discourage those who find designing NFTs too daunting, complicated, or too much of a hassle.
So what is the answer to which of the two is the better option? It depends on the trader’s interest and willingness to risk.
Also Read: How to Make a Crypto Wallet or NFT Wallet
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Written by Isabella James
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