We live in a time, where the world is slowly shifting from traditional money to digital currencies. Today, we have different types and forms of digital currencies existing in the market. Therefore, it becomes important to know the difference between the different forms of currency.
Crypto is a non-physical currency used by a private system. It is decentralised, and is run on blockchain technology. Unlike traditional currency, it is not controlled by governing authorities. On the other hand, NFTs or Non-Fungible Tokens can be defined as digital assets that denote real-world items like art, music, memes, etc. You can use NFTs to monetize any skill. For example, gamers have NFT Games to play and earn.
In this article, we will discuss the difference between NFTs and cryptocurrency in detail. If this intrigues you, then you should give this article a read.
What is NFT?
NFT stands for non-fungible tokens. It is a one-of-a-kind digital asset that represents real-world items like art, music, games, fashion, memes, etc.
The most important thing about NFTs is that they are not interchangeable. This is where they differ from cryptocurrencies which are fungible or interchangeable tokens. To put it in simple words, you cannot trade NFTs the way you can trade cryptocurrencies. You should also know that NFTs are managed by a digital ledger and all transactions take place online.
What is cryptocurrency?
Cryptocurrency is a currency based on blockchain technology that records and stores transactions made in a public ledger. This public ledger can be accessed by anyone.
The first thing to know about cryptocurrency is that it is a decentralised system, which means it is free from any centralised regulation. All transactions are recorded in a decentralised ledger that can be accessed by the public to see. This eliminates the need for a central authority. The best thing about cryptocurrency is that it is protected by strong encryption.
Read Also; The Most Traded Currencies
What is the difference between the two?
Now that you know what NFT and cryptocurrency are, it will be easier for you to understand the difference between the two.
The primary difference between cryptocurrency and NFT is that the latter cannot be traded for each other. This is because it represents unique real-world assets. On the other hand, cryptocurrencies can be easily traded for each other with no loss of value.
The common thing about NFTs and cryptocurrency is that they are decentralised and are free of government control. They are rather controlled by communities and therefore, free of taxation.
Both NFT and cryptocurrency can be accessed through a digital public ledger that records and stores all transactions data.
But there is a difference in their purpose. For example, if you want to buy cryptocurrency, you will have to exchange currencies as you do at the money changer. Like buying 1 Ethereum today for ~S$2850. You would then sell it in the future for a higher price to gain a profit off the exchange rate.
On the other hand, when you buy an NFT, it is like purchasing a laptop or a mobile phone, but in a digital form. Every laptop or mobile phone has unique specs and features. It is because of this reason that NFT is treated as an asset, instead of a currency. Unlike cryptocurrency, it is not interchangeable.
Both cryptocurrency and NFT are slowly moving up in the market. These are new forms of currency that are expected to take over in the future. Now that you understand the difference between the two, it should be easier for you to decide which one is for you. NFT users mainly generate income from NFT games.