Cryptocurrencies and NFTs are both built on the blockchain, so how are they different?
A non-fungible token consists of a unique digital asset addressing certifiable data items, such as photos, music and videos. They are stored in digital ledgers and traded online. So, instead of buying an original photo to display on a divider, the purchaser instead gets a unique digital file. A digital asset, for example, a piece of collectible advanced characters, virtual land, or unique online media posts, can be created and bought as an NFT.
Nonfungible means that NFTs cannot be interchanged. NFTs are unique and cannot be traded like fungible tokens, such as cryptocurrencies. NFTs are backed by explicit qualities with certificates of authenticity. This means the digital assets cannot be traded or exchanged since each NFT is on a decentralized platform that relies on blockchain technology.
What is cryptocurrency?
It is a digital monetary unit protected by cryptography, which makes counterfeiting and double-spending nearly impossible. Blockchain technology is the foundation of many cryptocurrencies, a distributed ledger enforced by a diverse group of computers. The unique feature of cryptocurrencies is that they are generally not issued by any central authority, so they are theoretically immune to government interference or manipulation.
What makes NFTs different from cryptocurrencies?
A NFT and a cryptocurrency are both based on blockchain and rely on similar technologies and standards. Consequently, they will often attract similar players. It is generally considered that NFTs are a subset of cryptoculture, and you require cryptographic forms of money to trade them.
However, the main difference can be seen in the name. Cryptocurrency is a form of currency. Its value is purely economic, and it has fungibility. In a particular cryptocurrency, it doesn’t matter which crypto tokens you own; each one has the same value, so 1 $ETH equals 1 $ETH. NFTs, however, are non-fungible, and their value is far beyond economics.
In simple terms,
Both physical money and cryptocurrencies are fungible, meaning they can be traded or exchanged for one another. One dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin. The fungibility of crypto makes it a trusted method for conducting blockchain transactions.
NFTs are unique. NFTs have a digital signature that makes it impossible for them to be exchanged for or equal to one another (therefore, non-fungible). In fact, one NFT isn’t even necessarily equal to another.