Digital currency has become so famous nowadays that everyone wants to own one. Digital currency is just like any other money, currency or valuable asset That is stored, managed and exchanged digitally on the internet.
Digital currencies are traded just like traditional currency. But the difference is that they are not present in reality or physical form. Digital currencies are virtual, so they can be transferred easily without any cost. It is owned privately and is not considered legal. Types of digital currency are NFTs, cryptocurrency, virtual currency etc.
NFT vs Cryptocurrency
The main difference between NFT and Cryptocurrency is that NFT stands for Non-fungible token and it cannot be replaced or interchanged. While cryptocurrency is a virtual currency that can be exchanged online to buy something else.NFT represents all the digital assets present on the internet like games, collectables, art pieces etc. Cryptocurrency works on blockchain technology that can be exchanged to buy goods online. NFTs can be owned by a particular person, and they need to be verified. Whereas cryptocurrency can be bought by anyone without any paperwork at a very low cost.
NFT or Non-fungible token is the virtual token that is stored on the blockchain and is used as a digital ledger. It is a non-interchangeable unit. NFT can be owned by a person who has a certificate of authenticity of the product or proof of its ownership. But it can be used to share and copy digital files. It can be reproduced again and again in the form of audio, videos, photos etc. As it cannot be interchanged or exchanged, NFT are very much different from cryptocurrency. NFT can be considered as an investment in art forms.
Cryptocurrencies are designed in such a way that they can be used as an exchange for something. Cryptos works on blockchain technology. Cryptography is used to store the data of a digital ledger in a computerised database. Ownership of the individual coins are stored in secure transactions records and are also prevented from making additional coins. Cryptocurrency doesn’t exist in reality. It is present in virtual form. It is not issued by any legal authority. Cryptos are used in a decentralised manner making use of the blockchain as the public financial transaction database.
Comparison Table Between NFT and Cryptocurrency
| Parameters of Comparison | NFT | Cryptocurrency |
| Origin | 2014 | 2009 |
| Trade | It cannot be traded for another. | It can be exchanged and traded. |
| Purpose | Creates a unique digital signature. | Quick, transparent and secured transactions. |
| Volatility | Less volatile | Unstable |
| Uses | Gaming, collaterals, investment, domain names, digital content etc. | Wealth management, money transfers, business practises etc. |
| Marketplaces | OpenSea, Rarible, Foundation | Coinbase, eToro, Kraken etc. |
What is NFT?
Quantum was the first NFT that was created by Anil Dash and Kevin McCoy in 2014. It was launched in New york. They were called monetized graphics by the creators. NFT were just opposite to counterparty. A non-fungible token that cannot be interchanged but can be traded on blockchain explicitly as a work of art.NFT is data that is stored. It can be related to a physical asset. NFT are considered a status symbol. There is always informal trading regarding the ownership of an asset.
NFTs function very much like cryptos. But they are fungible. They do not hold the same value as Bitcoin or Etherum. Every asset in NFT has a different value.NFTs are stored on the blockchain so that a record can be created regarding the previous owner of assets. So with each asset or transaction, a unique digital authentication is provided to the owner to track it. However, it is not always safe can be rotted. NFTs also leave a carbon footprint that is not considered good for the environment.
NFT doesn’t transfer copyrights to the person who may purchase it. Copyright of work is provided to the original owner, and NFT allow them to make more copies of it. NFT can be used as digital art in high profile auction sales. It can be used in the games where digital assets of the games can be owned by the years and not developers. Music, films, memes, tickets, patents etc., can be used as a digital token in the form of NFT.
What is Cryptocurrency?
In 1983, for the first time, anonymous cryptocurrencies were received by David Chaum, who called it ecash. In the year 2009, the first decentralised cryptocurrency was created by an anonymous Satoshi Nakamoto. Cryptocurrency is not maintained by any central authority or government. It is controlled by different people, and the state keeps an eye on the units sold, exchanged or purchased and the ownership. The system is responsible for determining whether new cryptos can be created. If created, who will get the ownership. All the information and transactions are done cryptographically.
Decentralized cryptocurrencies are known publicly. It is not controlled by the government or backed. Mostly 1800 to 2000 cryptocurrencies can be found in the market. It is managed and controlled by the miners. Because of its virtuality, it is very difficult to enforce laws on cryptocurrencies. Cryptos are maintained by the blockchain, which keeps them secure in computing systems with transaction data and a timestamp. Nodes play an important role in connecting the network of cryptocurrency.
Cryptocurrency wallets are also available that is used to store public and private keys. Bitcoin is an anonymous cryptocurrency that has more than one key. Owners of the bitcoin are not identifiable, but the transactions that happen in blockchain are public. The transaction fee of cryptocurrency depends upon the network and the demand for the currency.
Main Differences Between NFT and Cryptocurrency
- The origin of NFT was in 2014. The origin of cryptocurrency was by an anonymous person in 2009.
- NFT cannot be traded or interchanged for another asset. Cryptocurrencies can be exchanged and traded as all of them are equal.
- The purpose of NFT is to create a unique digital signature that gives an owner a unique identity. The purpose of cryptocurrency is quick, transparent and secured transactions.
- NFT are less volatile and very complicated. Cryptocurrencies are unstable and highly risky.
- Uses of NFT include gaming, collaterals, investment, domain names, digital content etc. Uses of Cryptocurrency are wealth management, money transfers, business practises etc.
- The marketplace of NFT includes OpenSea, Rarible, Foundation etc. The marketplace of Cryptocurrency includes Coinbase, eToro, Kraken etc.
Conclusion
Both NFT and Cryptocurrency runs on blockchain technologies. Both are digital token that is purchased on the internet. NFT are considered best for those who are inclined towards the art. Because NFT involves the trading of assets, it is not interchangeable. Because in NFT, every asset has a different value. Whereas cryptocurrency can be traded and exchanged at the same time. It has the same value for each currency.
Both are not managed by the central authority. Both have different owners that are kept private. Transactions done via NFT are kept private. Whereas transactions in cryptocurrency are public. Cryptos are very much unstable. Both are less volatile and pose a risk.
References
- https://www.sciencedirect.com/science/article/pii/S1544612321001781
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3861106