NFTs can be considered subsets of crypto culture, wherein to buy and sell NFTs, one typically needs crypto. All you need is a crypto wallet, powered by Metamask, and a marketplace for NFTs, where you can buy and sell NFTs.
Cryptocurrencies and NFTs are not the same. Cryptocurrencies can be traded or one another. NFTs are not. This is why they are called non-fungible, i.e., not exchangeable. All NFTs are unique, so they can be used to prove identity, but this undermines the confidentiality which the blockchain is meant to provide.
Most NFT markets (where you will be selling and buying your NFTs) use cryptocurrencies as a means of exchange. Generally, you will buy an NFT using a cryptocurrency, such as Ether (Ethereum’s native cryptocurrency), though prices can also be listed in USD.
Users generally purchase tokens using cryptocurrency in the NFT markets, though some markets let you purchase NFTs using fiat currencies. You will probably have to purchase a few cryptos, such as Ether, depending on which currencies are accepted by the NFT providers. Anyone can buy and sell cryptos on decentralized exchanges, such as OpenSea (a platform that allows NFT purchases as well) and Binance.
You can buy things with cryptos, such as NFTs (which we will cover later), but many consider the currencies as a tool for trade and investing because of their volatile nature, and sometimes skyrocketing values.
Cryptocurrencies and NFTs Contrasted
Both cryptocurrency and NFTs rely on transactions in the blockchain to verify the authenticity of the cryptos and NFTs and record ownership; you need cryptocurrency in most cases to purchase an NFT. NFTs may only have one owner at a time, and the use of blockchain technology by NFTs makes it easier to confirm ownership and transfer tokens among owners.
NFTs are attached to a particular value by certificates of authenticity, meaning the digital assets cannot be traded or substituted for each other, as each NFT exists in a decentralized digital platform based on blockchain technology.
A blockchain is a living record of all transactions that include the token or coin, making it easier to authenticate an NFT or coin. Every transaction in the blockchain is written into the digital ledger, which publically records every single transaction of the NFT to prove who owned what. NFTs exist on the blockchain, which is a distributed public ledger that records transactions. NFTs are essentially digital tokens that carry data, stored on the immutable blockchain ledger.
NFTs are digital tokens that represent the ownership of unique items such as images, music, and video clips. A Non-fungible Token (NFT) is a unit of data stored in the Blockchain (digital ledger) that can represent a unique digital object, such as artwork. An NFT is a unit of digital data stored on the blockchain, but it is distinct from cryptocurrency, which is fungible and exchangeable (i.e., no single piece is different than another, just as every single dollar bill is not any different in value or value than any other dollar bill). Each NFT is unique, setting it apart from fungible tokens, like cryptocurrencies, that can be traded with each other.
NFTs and Crypto Compared
An NFT is bought and traded like any other Ethereum-based cryptocurrency, except that instead of buying some number of tokens, you purchase one. Most NFTs are part of Ethereum’s Blockchain, purchased using Ethereum’s native token, the Ether.
Both NFTs and cryptos are built on top of the blockchain, using similar innovations and similar standards. While both are built upon blockchain technology, this is where the similarities end.
NFTs are minting using the same type of Blockchain technology made famous by cryptocurrency. Also, even though NFTs are not the cryptocurrency type that Bitcoin is, they are in the same ballpark. NFTs are unique digital objects that could be interesting to own, or even beneficial to trade.
The main difference between these three is that unlike cryptocurrency and digital currencies, NFTs cannot be traded against one another, since they are unique manifestations of real-world assets. NFTs are safely recorded in the Blockchain — the same technology that underpins cryptocurrency — ensuring the assets are one-of-a-kind. Well, just like with cryptocurrency, NFTs are stored on digital wallets (though it is worth noting that wallets must indeed specifically be NFT-compatible).
NFTs create unique tokens that can prove ownership of, and transfer rights over, digital goods. NFTs can be created using a blockchain and an NFT-specific marketplace for digital assets encoding and tokenization. An NFT cannot be divided into smaller units, nor used the same way as a cryptocurrency with fungible conversions, like Bitcoin (BTC) or Ethereum.
Why the Fungibility Matters
This makes an NFT non-fungible from an economic standpoint, while cryptos like bitcoin and ETH are fungible (can be traded and have intrinsic value). Compared with cryptocurrencies, which are fungible, or interchangeable, their digital cousins that are tightly related are unique and distinct. NFTs, or Nonfungible Tokens, are a type of cryptocurrency created on smart-contract platforms like Ethereum. NFTs, or Non-fungible tokens, are digital assets that represent real-world items like music, art, memes, fashion, and more.
Artists, for instance, could use NFTs to distribute, monetize, or even sign their works–works that certain investors or collectors could then purchase with cryptocurrency. For instance, a crypto whale (someone who holds vast amounts of cryptocurrency) could purchase a lot of NFTs, and then sell them for millions of dollars to themselves (their other crypto addresses), artificially driving up prices.
Like crypto, blockchain technology makes it impossible for more than one person to hold a single NFT at any given time and makes it easier to verify ownership and move tokens from one owner to another. NFTs and crypto transactions are both tracked in the blockchain – a living, peer-to-peer digital ledger overseen by a system of computers working together to validate the information and generate new blocks of information. Ethereum is one type of cryptocurrency, similar to Bitcoin or Dogecoin, but Ethereum’s blockchain also supports the majority of NFTs.