NFT vs. Crypto: What Is the Difference?


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If you know someone who deals with non-fungible tokens, that person is likely to change cryptocurrencies as well. Both crypto and NFT are based on the same software and technology, both entered the public consciousness at the same time, and both represent an alternative class of risky, exciting, and dominated by new buyers, sellers, and traders.

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Still, non-fungible tokens are not a type of cryptocurrency, even when the cryptocurrency is considered a token instead of a coin. Although they have a lot in common, cryptographic and NFT are separate worlds.

Here’s what you need to know.

First, the Similarities

Cryptocurrencies and NFTs are not the same thing, but major investors can be forgiven for combining the two.

Both are digital assets; and although crypto was the first, the general public began to hear about both at the same time in the late 2010s. According to Forbes, NFTs are usually bought and sold with crypto, and both tend to attract the same players: NFT world started from the cryptographic culture. Both are built using the same programming and coded with the same underlying software, and both are protected in digital wallets, but that’s where the similarities end.

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The ABC of Crypto

Cryptocurrencies like Bitcoin are decentralized, encrypted digital payment systems that are not issued by banks or backed by a central authority such as a government. There are more than 19,000 of them, according to Forbes.

The value of the traditional currency is based on trust: trust in the bank, trust in the government, trust in FDIC insurance. The value of cryptography, on the other hand, comes from the cryptographic proof of transactions that are verified and recorded in a special type of database called a blockchain.

Some people use cryptocurrencies in the same way they use dollars: as a medium of exchange to buy things or receive payment for a service or product. Most people, however, invest in cryptocurrency as stocks would do, such as a commodity or security that they expect to increase in value over time.

However, cryptocurrencies are much more volatile than stocks. They can gain or lose hundreds, thousands, and even tens of thousands of percentage points in a short period of time.

What about NFT?

NFTs are digital tokens that represent ownership of unique items such as images, music, and video clips. You can copy a digital image an infinite number of times, just like a Picasso; but, with both NFT and oil paintings, all the value remains with the irreplaceable original.

NFTs are digital files that can represent ownership of anything; for example, Twitter founder Jack Dorsey sold an NFT of his first tweet for more than $ 2.9 million.

They are coined using the same type of blockchain technology that cryptocurrency has made famous. They are usually maintained on the Ethereum platform, although they can also be found on other blockchains, according to Forbes.

Like crypto, blockchain technology makes it impossible for more than one person to own an NFT at a time and makes it easy to verify ownership and transfer tokens from one owner to another.

The “F” in “NFT”

Cryptocurrencies are fungible, meaning they are mutually interchangeable.

If two people each have a Bitcoin, neither party gains or loses anything if they trade, just like they exchanged a dollar or an ounce of gold.

Each NFT, on the other hand, is unique. NFTs use blockchain technology to validate the authenticity of that uniqueness. Like baseball cards and caps, NFTs are not fungible. They are worth what someone is willing to pay for them based on intangibles like desirability.

Collectors spend millions on demanded ETFs regardless of what they represent, for the same reason that art collectors spend millions on Picassos, whether they like the painting itself or not. This is the status of owning the original.

Fungibility, the ability to exchange with each other, is what makes cryptocurrency a reliable means of conducting blockchain transactions.

Because each NFT is unique, NFTs could never be used as a means of purchase or as a reward for blockchain mining.

Related, but different

Both cryptocurrencies and NFTs rely on blockchain transactions to validate their authenticity and register their ownership; in most cases, you need crypto to buy NFT.

The big difference is that the value of cryptocurrency is purely economic: its value comes from its usefulness as a currency or investment. NFTs, on the other hand, have economic and non-economic value. Artists, for example, can use NFT to distribute, monetize, and even autograph their work, which some investor or collector might buy using cryptocurrency.

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About the author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was previously one of the youngest columnists distributed nationwide for the nation’s largest newspaper union, the Gannett News Service. He worked as the editor of the business section of New York, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of the Wall Street investing community in New York City.



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