Note the Differences between NFTs and Cryptocurrencies

NFT
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NFTs are more secure, easier to manage and cheaper to pass along in businesses than commodities like coffee and cocoa. Although a bit of a mouthful, NFTs are an essential piece of the financial puzzle in developing countries with low levels of financial access. Open an account and register to start your Bitcoin trading experience. The platform has features like high compatibility with all devices, a massive range of trading tools, and many more.

NFT is an acronym for “Non-Fungible Token”, meaning that all tokens within that group will differ, unlike your stocks on the stock market. NFTs are unique as they can simultaneously have different values, functions and owners. People can trade them for other fungible tokens or fungible cryptocurrencies like Bitcoin.

NFTs currently have a massive range of uses, from being used as collectables to vouchers and coupons. So far, some big-name companies that have spoken in favour of NFTs are the Walt Disney Company and Overstock.com; both have seen their businesses grow through the use of NFTs.

Differences between NFTs and Cryptocurrencies:

With NFTs, the blockchain is the token, meaning tokenization is the core technology behind it. The difference between NFTs and cryptocurrencies comes from their uses and how they are created (i.e. through mining).

NFTs are created through a process known as “tokenization”, which involves mapping a physical asset such as a car, house or diamond to its underlying data history. Users can then use them for other things, such as coupons, vouchers and exchanges for other goods or services. More than just making the transfer of ownership easier and faster, these tokens are more secure, as they can’t be changed or forged.

In contrast, cryptocurrencies are created through computational power (usually in the form of an ASIC computer) and used to pay for goods and services on various cryptocurrency exchanges. It means they’re more difficult to forge than NFTs (because they don’t exist unless the transaction has been verified).

NFTs have formed their currency markets, whereas cryptocurrencies use multiple currencies. Corporations invest in cryptocurrencies because they can quickly transfer between wallets and blockchains. Let’s explore the differences between NFTs and cryptocurrencies in detail.

1. Fungibility and Non Fungibility:

Cryptocurrencies are fungible because they are digital, which means they can be used as a medium of exchange. Fungibility represents the notion that all units of a given currency should be equivalent.

Due to their properties as cryptographic tokens (and digital coins), cryptocurrencies, such as Bitcoin and Ether, are all identical, meaning that the user cannot distinguish one Bitcoin from another Bitcoin — they’re all the same in every way.

The fungibility of Bitcoin and Ether can be attributed to the fact that they are both used as a means of exchange (and form of payment); they are constantly used in transactions, and as such, there is a constant need for them.

However, some altcoins aren’t fungible because they’re not based on blockchain technology. As a result, those altcoins could be banned by government bodies and even wholly erased from existence if developers stop developing that cryptocurrency altogether.

Cryptocurrencies have a common goal of replacing fiat currency (i.e., fiat money backed by issuing authority) because they enable more efficient online transactions through unique peer-to-peer networks — a technology that NFTs do not offer.

NFTs are non-fungible because no two NFTs are precisely alike in ownership, value, features or features. Each NFT has its unique history, and there isn’t necessarily a need for a fungible type of currency.

2. Secure and Non-secure:

Cryptocurrencies use blockchain technology to safeguard their units, allowing them to be transferred across networks without being tampered with by hackers. As a result, users can process these secure transactions faster and more efficiently than other methods of transferring money across borders and within the banking system.

Undeniably NFTs correspondingly utilize the same technology, but many cryptocurrency supporters have questioned the protection of ownership in NFTs.

3. Exclusiveness:

Cryptocurrencies are entirely exclusive to one blockchain, whereas NFTs are exclusive to the contracts that back them. Cryptocurrencies have a public ledger system, which means anyone can track the flow and amount of cryptocurrencies in any given wallet.

All cryptocurrencies are publicly visible to see all transactions between wallets. However, with NFTs, the ownership of a single token cannot be determined by the user from the public ledger (a feature known as non-fungibility). The owner of an NFT is only known by its contract address; therefore, it’s impossible to know who owns what.

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Paschal Okafor is NaijaTechGuide Team Lead. The article Note the Differences between NFTs and Cryptocurrencies was written by NaijaTechGuide Team. The article was last modified: November 29th, 2022
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