NFT Vs. Crypto – What Are The Differences? - The Coin Republic

NFT Vs. Crypto – What Are The Differences? – The Coin Republic

NFT vs. Crypto

As our company, Creative Tim, made the transition in 2022 from Web 2.0 to Web 3.0 by launching our very own NFT collection for Developers, Designers, Creators, and NFTs Fans – NF-Tim by Creative Tim – we noticed that there are still many people, even in the tech industry, who are unfamiliar with NFTs and the differences between them and cryptocurrency.

This realization prompted us to write this article, with the aim of shedding light on the subject and educating our readers on the unique characteristics and potential of NFTs in comparison to traditional cryptocurrency.

So, whether you’re a tech enthusiast or just curious about this new frontier, read on to learn more about NFTs and how they differ from crypto.

What are NFTs?

NFT stands for a non-fungible token, and it is understandable why the full form of the term still does not explain everything at once. Non-fungible simply means unique and irreplaceable while fungible means replaceable. For example, one dollar is fungible. You can exchange it for another dollar whose value will remain the same.

However, if you are an avid collector of Pokemon cards, and have a unique Pokemon card, then it is a non-fungible card. If you trade it with something else, you don’t get the same value.

So how does this make sense in the aspect of an NFT?

NFTs are mostly tokenized versions of real-world artistic/or not objects. They can be art, music, or other virtual assets like real estate. NFTs can also represent the identity of owners, property rights, and more.

For example, NF-Tim Collection includes different types of NFTs, each one granting access to different utilities like the access to web development premium tools developed by Creative Tim(Utility NFTs).

While the current market for NFTs is centered around collectibles, its importance is also growing in new markets.

Each NFT is singular or unique, and cannot be traded for the same thing of the same value. Compare it with Leonardo Da Vinci’s Mona Lisa. Though there are multiple variations of the same image, there is only one unique Mona Lisa painting, and it cannot be exchanged with the same thing of the same value.

NFTs, at a high level, are mostly based on the Ethereum blockchain. However, many blockchains have recently implemented their own version of NFTs.

What is Crypto?

Crypto, also called cryptocurrencies, are digital currencies based on blockchains. The term crypto is used primarily because these currencies are secured using cryptography. Cryptocurrencies are protected, impossible to counterfeit, and secured using encryption algorithms, and private/public key pairs.

Cryptos can be sold and bought on decentralized exchanges like OpenSea and Binance, and you have to set up a crypto wallet to buy and store your crypto.

In the battle of NFTs vs. crypto, crypto is a fungible token and is replaceable. They are just like physical currencies where you can exchange one for another, and still get the same thing with the same value. One Ethereum is as good as any other Ethereum, and that is the main difference between NFT and crypto.

What do NFTs and crypto have in common?

While NFTs and crypto are different in terms of their fungibility, they are still based on the same underlying technology.

The common aspects related to NFTs and crypto are:

  • Blockchain and fungibility

Both cryptos and NFTs exist in a blockchain. Cryptos are created using blockchain but are fungible. However, there is a certain characteristic of blockchain which allows its transaction history to be stored and communicated publicly. Hence, even if the value of the cryptos created on a blockchain is the same, the identifier associated with it is different and irreplaceable. For example, a crypto owned by Elon Musk has a unique identifier that identifies it as being owned by him. This crypto has also been sold as an NFT.

NFT utilizes this uniqueness of blockchains to tokenize assets and create non-fungibility. NFTs make each token unique and irreplaceable,e making it impossible for one non-fungible token to be equal to another. Just like cryptos, NFTs also have unique ownership details for identification and transfer between different token holders.

  • Advantages of blockchain

NFTs and cryptos both benefit from the advantages of being based on the blockchain. Both of these tokens and their trading is ideal when it comes to removing intermediaries. Both of them can be used to connect artists with audiences directly. Security and immutability are also benefits that both share. Both of them also benefit from the ability to easily transfer assets digitally.

  • Minting

NFTs are also created using a process called minting, much like cryptos. In both crypto and NFTs, minting creates a new block, and the information of the newly created block is validated by the validator. The information is recorded and spread across the peer-to-peer network. Similar to crypto, the NFT creation process also includes creating smart contracts to assign ownership and transferability.

NFT vs Crypto – What are the differences?

The differences between NFTs and crypto are outlined below:

  • Fungibility

As mentioned before, fungibility is one of the defining differences between NFTs and crypto. Exchanging a piece of art with another piece of art never yields the same value in the case of NFTs. But, in the case of crypto, the value of one Ethereum crypto will always be equal to another.

  • Purpose

The main purpose of using NFTs is simply to create a proof of ownership of an asset. NFTs have been used to designate the ownership of audio files, videos, and any form of digital content. They have also been used to tokenize and represent physical objects like collectibles, real estate, or works of art.

Since NFTs are irreplaceable and unique, it makes them an ideal token for establishing ownership and authenticity. When saved on a blockchain and distributed in a secure database, NFTs cannot be tampered with, thus making them perfect for establishing ownership.

Cryptos, on the other hand, are simply the means of exchanging digital information or dealing with the current shortcomings of physical currencies. Cryptos are used to buy and sell stuff in a safe, centralized, and secure manner.

  • Divisibility

NFTs are not divisible. They represent a unique, distinct token that identifies ownership and authenticity. Since their division would make it impossible to validate ownership, they are indivisible.

On the other hand, cryptos are divisible. One Ethereum can be divided into several smaller parts to indicate a certain value. Bitcoin can be divided into 8 decimal places, and the term used for the smalles