Cryptocurrency vs NFT – Is Crypto Better Than NFT?

Cryptocurrencies or cryptos are decentralized and encrypted virtual currencies. The purpose of designing cryptos was to eliminate counterfeiting and double spending. The foundation of most cryptocurrencies is blockchain – a distributed ledger enforced by a decentralized network of computers. A digital coin holds the same value as any other coin that is part of that currency, much like fiat currencies. They are stored, traded, and transferred electronically. The biggest advantage they have over their fiat counterparts is that they are easy and quick to transfer, hard to hack, and not managed by any central authority.

Did you know?

The crypto market was valued at $858.43 billion at the end of 2022.

One of the biggest wins of cryptos over fiat is their potential for multiple applications, such as:

Digitisation of Precious Metals – Asset Tokenisation

Asset-backed tokens have intrinsic value, making them “safe havens” in the crypto realm. The tokenisation of digital assets improves the liquidity of those physical assets in the real world. Tokenisation also facilitates trading with small amounts.

Pace Up Transactions

Pegging a cryptocurrency to a fiat currency makes the associated coin a stablecoin. These stablecoins are extremely useful for moving cryptos quickly between exchanges.

Crypto-Gaming and Governance – On-chain Governance

Cryptocurrencies and gaming are a winning combination, redefining the governing policies for online gaming platforms, private organisations, and clubs with the concept of decentralised autonomous organisations (DAOs).

An NFT is a unique digital file linked to a unique cryptographic token of a blockchain network. This process is called minting, which is a fancy word for creating. Fungible means changeable, so non-fungible emphasizes that each NFT is unique and cannot be altered in any way. These individual tokens have valuable information stored on them and hold value primarily due to market demand. Therefore, they are bought and sold like art, the segment that has adopted NFTs with open arms.

Did you know?

The global non-fungible token market size is expected to reach $211.72 billion by 2030, growing at a CAGR of 33.9% from 2022 to 2030.

Support Play-To-Earn Gaming Model

Digital collectibles are the most exploited use case of NFTs, as it enables non-duplicability and ownership traceability of in-game assets.

Facilitates True Ownership

The traceability endowed by blockchain has paved the way for curtailing digital art piracy. Blockchain prevents any tampering with a work of art and even ensures that royalties are received by the creators on each trade of their creation.

Membership Verification with Digital Tickets

With growing demand for virtual spaces like the metaverse, identity verification has become a challenge due to the high level of privacy and cryptographic coverage. NFTs, in the form of digital tickets, provide a means to verify participants for virtual events, such as concerts and webinars.

Although both digital assets use blockchain, there are significant differences between NFTs and cryptocurrencies:

Trading

The value of a cryptocurrency token is purely economic, which means it works like a fiat currency, and each coin trades for the same value as another. Whereas an NFT, even if it belongs to a collection of similar NFTs, is valued based on consumer sentiment and is traded independently of others in its own ecosystem.

Purpose

The purpose of cryptocurrencies is to establish a global decentralized digital financial system. NFTs, on the other hand, serve as a unique digital representation of what is considered valuable and needs ownership provenance.

Volatility

Although both assets can be highly volatile, NFTs are relatively stable. The artistic aspect and consumer affinity lend more value to each NFT, while cryptocurrency tokens get their value from the markets and the technology or business backing them. This is like how stocks are valued.

Uses

Cryptocurrencies are used in the digital world like fiat currencies in the financial markets. They are used to buy and sell assets. Some nations accept them as true or physical currency against goods and services as well. NFTs have numerous uses, such as domain names, collaterals, smart contracts, digital identities, medical records, digitised certificates, and much more.

Marketplaces

Cryptocurrencies can be bought from exchanges and brokers such as Binance, Coinbase, Kraken and eToro. They can be exchanged for fiat currencies and other cryptocurrencies. NFTs are sold at designated digital galleries, called marketplaces. Owners exhibit their NFTs, and an enthusiast may purchase them at the best available price. Some of the most popular NFT marketplaces are Opensea, Rarible and Foundation.

Although two very different types of digital assets, Cryptos and NFTs do share similarities due to the technology they are based on:

1. The foremost common element is that both function on blockchain-based digital encrypted ledger technology.
2. An immutable and transparently accessible record of all transactions of each asset is maintained on the blockchain.
3. Neither a particular token nor a coin can be simultaneously owned by two people.
4. Both are stored in cryptographically secured Web-3 wallets identified by unique addresses and owned by individuals who hold their key.

Often cryptos are bought in exchange for fiat according to their value in the market. While NFTs are bought using a cryptocurrency that owner wants, some marketplaces allow NFTs to be bought with fiat currencies as well.

When an NFT is bought using a cryptocurrency, if the value of the crypto rises, the value of the NFT tends to appreciate and vice versa. However, it is not necessarily certain that if an NFT is highly valued, the currency used to purchase it will also gain valuation. For instance, you might buy gold with a certain amount of USD. When the value of USD increases so does the value of the gold you purchased. However, if it were a painting, and its value increases because the painter became a celebrity, the value of the USD will remain unaffected.

In short, cryptos are a means to purchase NFTs.

Someone who invests in NFTs might be dabbling in cryptocurrencies too. Many people who invest in cryptos do so because they are often viewed as safe havens during economic turmoil. Not that they are risk-free, but the value of cryptocurrencies accelerates much faster than that of fiat currencies. On the other hand, NFT-buyers are more leisure-driven. They are either fans of the art or the creator. Individuals who are enthusiastic about a particular type of art or an art piece, or music may purchase an NFT. Gamers and metaverse enthusiasts spend thousands of dollars to own one-of-a-kind digital assets. However, with smart contracts and digital tickets, NFTs have further compelling potential uses. Of course, influencer hype surrounding both NFTs and cryptos cannot be underestimated, especially with trending hashtags and memes sent viral by influencers like Elon Musk.

While the NFT vs cryptocurrency debate is not likely to end anytime soon, it is possible that the underlying technology and both types of digital assets will evolve into a widely accepted medium of value exchange. Coin Hint experts think that the choice to invest in either of them is as risky as it is rewarding.