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NFT vs. Crypto
The two are often lumped together, but it’s important to know how they differ.
Cryptocurrencies — often shortened to just crypto — are not the same as nonfungible tokens (NFTs). But they’re close cousins.
NFTs are nonfungible, while cryptocurrencies are fungible. The term fungible is a fancy way of saying interchangeable. You could trade your NFT for another, but since all NFTs are unique, you could stand to lose or gain value.
A crypto coin, say one Bitcoin, has the same value as all other Bitcoins. Additionally, crypto coins can be swapped for one another and have an exchange rate — Bitcoin for Litecoin, for example.
NFTs and crypto transactions are both tracked on a blockchain — a living, peer-to-peer digital ledger that’s overseen by a system of computers working together to verify information and create new blocks of information.
That’s just the tip of the iceberg. Let’s break it down further.
What are NFTs?
An NFT is a unique digital file that’s been tokenized on a blockchain. To tokenize something means to put it into circulation by converting the file into a digital token so that it’s usable on blockchain applications, such as NFT marketplaces or blockchain games.
Each NFT has unique identifiers, history and value. The determining factors of an NFT’s value are typically rarity, utility and consumer interest. The most popular NFTs are art, trading cards and blockchain game items.
NFTs are nifty, but their values are volatile. Similar to collecting tangible art, it’s difficult to nail down the exact value of any NFT.
However, artists and creators could earn by tokenizing their art on the blockchain through smart contracts. Smart contracts are self-executing contracts stored on a blockchain, and they’re how NFT creators earn royalties from subsequent sales of their NFTs.
What is crypto?
Cryptocurrency, or crypto, is a digital currency. All transactions involving cryptocurrency are recorded on a blockchain. The biggest crypto coin is Bitcoin, and all other cryptocurrencies are called altcoins.
There are well over 18,000 cryptocurrencies in existence as of March 2022, according to Investopedia. Some popular coins include:
- Litecoin (LTC)
- Dogecoin (DOGE)
- Bitcoin Cash (BCH)
- Polkadot (DOT)
- Cardano (ADA)
The biggest advantage to cryptocurrencies over fiat currencies is that crypto is known for quick and easy money transfers, crypto is hard to hack and is managed by decentralized systems. However, crypto has volatility. Any coin, at any given time, could increase or decrease in value — largely impacted by consumer interest — so there’s no guarantee that you’ll earn money if you invest in crypto.
NFT vs. crypto: Snapshot comparison
Quickly compare use cases, where to buy and more.
|Where to buy?||NFT marketplaces and blockchain applications.||Cryptocurrency exchanges and brokers.|
|Use case||Art collecting, trading cards, game items, real estate, tickets, avatar wearables, collateral for loans and more.||Paying for goods and services, buying NFTs, investing, peer-to-peer transactions, international payments, supply chain management, collateral for loans and more.|
|What is worth based on?||Scarcity, utility, consumer interest, accessibility, ownership history, unique attributes.||Supply and demand, regulation, blockchain, accessibility, consumer interest, use case.|
|Where to store||Blockchain applications and crypto wallets.||Blockchain applications and crypto wallets.|
NFTs vs. crypto: The differences
The biggest difference is the fungibility aspect — NFTs are all unique with varying values while crypto coins are fungible, or mutually interchangeable.
Another difference is how crypto coins are brought into circulation. Coins are “mined” and NFTs are “minted.” It’s a complicated process but in a nutshell, a miner is a computer that performs an accounting function on the blockchain and they’re paid in new coins.
Minting an NFT means converting a file into a token so it’s usable on a blockchain. The blockchain verifies the transaction, and charges a transaction fee.
NFTs vs. crypto: The similarities
Tokens and coins are both digital assets that can be bought and sold, and live on blockchains. The blockchain records all transactions involving a token or coin, making it easy to verify an NFT’s or coin’s authenticity.
NFTs vs. crypto: Uses
NFTs can have many unique uses, whereas coins are largely limited to being a currency, but a few use cases overlap.
NFT use cases include:
- Creating, collecting and selling NFTs.
- Using them as trading cards in a blockchain game.
- Representing in-game items, like wearables, weapons and more.
- Representing virtual real estate in metaverses.
- Using them as collateral for loans.
Some uses for crypto include:
- Paying for goods, such as NFTs.
- Buying and holding with hopes to earn.
- Covering peer-to-peer transactions.
- Making international payments.
- Putting up as collateral for loans.
How do NFTs and crypto work together?
Users typically use cryptocurrency to purchase tokens on NFT marketplaces, although some marketplaces allow you to buy NFTs using fiat currency.
Additionally, if you buy an NFT using cryptocurrency, and the value of the crypto rises, then your NFT’s value has essentially appreciated. But, take note that value can depreciate in the same way.
NFTs vs. crypto: Where to buy?
Users can buy and sell NFTs on marketplaces built on blockchains. Most NFT marketplaces are built on the Ethereum blockchain, and some are built on EOS, Solana, GateChain or other blockchains.
It’s worth noting that since so many NFT marketplaces are on Ethereum, you’re likely to need Ethereum’s native asset, Ether (ETH) to buy an NFT. And many NFTs are ERC-20 tokens.
Cryptocurrency is bought through brokers or at crypto exchanges. There are over 300 crypto exchanges in the US at the time of writing, but be aware of state regulations that apply based on where you live. Before you buy crypto, make sure the exchange you choose can do business in your state.
Start trading crypto with: Crypto.com App
- Priorities security with a $750 million insurance fund
- User-friendly user interface
- Long list of features such as lending, borrowing, staking and crypto debit cards
- Poorly rated customer service
- Certain cryptocurrency support is geographically restricted
- High withdrawal fees
Fees for trading are competitive, though can be high when withdrawing to an external wallet from the exchange.
There is a detailed knowledge base available on how features work, as well as Crypto.com university that teaches about various assets.
The company prioritizes security, marketing and design, but reviews suggest that customer service is lacking.
|Deposit Methods||Bank transfer
|Withdrawal Fees||Cryptocurrency: Fees vary|
|Trading Fees||Maker - 0-0.075%
Taker - 0.05-0.075%
Compare NFT marketplaces
NFTs and crypto: Benefits and drawbacks
These digital assets come with a long list of benefits and drawbacks.
Crypto and NFTs are closely related, but they’re far from the same thing. Both may live on a blockchain, but they have different use cases, benefits and drawbacks. At their core, crypto is money and NFTs are digital goods.
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