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NFT and Cryptocurrency – What is the Difference?

3 mins read
NFT and Cryptocurrency - What is the Difference?

The world is changing in a blink of an eye. Traditional transactions are slowly hosted in the digital world and many people have started using virtual currencies as a method of payment. It’s crucial to understand the differences between these currencies as there are many opportunities as technology advances.

In this cryptocurrency and NFT guide, we’ll discuss the main differences between the two. This guide will give you a closer look at how NFTs work, where you can use crypto, how to trade, and whether you should invest in them.

NFT

Non-fungible tokens (NFTs) are known as unique digital assets that the purchaser can get. NFTs can be in the form of videos, music, pictures, or trading cards. Characters, virtual lands, or posts can be transformed into NFTs and people can buy them on the NFT marketplace.

Each NFT is unique, which means they are not interchangeable. They exist on a platform that’s decentralized and based on blockchain technology that assigns a unique identity to your work. It provides financial security that allows the NFT owner to be able to trade or sell them.

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How Are NFTs Valued?

NFTs are valued individually, meaning each piece represents a unique object which is digital art. They have real-world value but exist only in the digital world. The non-fungible tokens enable owners to have private ownership, creating a system of tradeability. 

When the NFT is created and the creator posts it on a particular social media platform, it will become the property of that platform. So, users can copy and share the artwork. 

For example, everybody can have a copy of the Mona Lisa painting, but the original masterpiece has its value. It’s the same situation with the tokens. However, when displaying and uploading these files on platforms that deal with NFTs, the creator will have unique ownership of the token.

Trading NFTs

NFTs are traded for money and bought online. However, you can’t trade them for other NFTs, cryptocurrencies, or other virtual currencies. The first step is to choose the marketplace. It’s recommended that you choose a market where you can buy NFTs without having to pay additional fees. Next, you need to deposit funds to ensure you have enough funds to trade NFTs. 

After these steps are completed, you need to research the NFT market and learn how it works. Understand the market strategies and concepts before you dive into NFT purchases. The fun part comes when you buy the tokens. Once you’ve decided which NFT to buy, it’s time to purchase it or bid for it.

Cryptocurrency

Cryptocurrency is the term for virtual money and is a digital currency in which a transaction is verified and kept in a decentralized system that uses cryptography. It’s a form of digital asset that works on blockchain technology, distributed over several computers.

Cryptocurrencies enable secure online payments with elliptical curve encryption, hash functions, or private and public key pairs used in the encryption algorithms. These digital currencies can be purchased or mined. The process is known as “cryptocurrency mining”.  Some of the most well-known cryptocurrencies are Bitcoin, Cardano, Stellar, Ethereum, Polkadot, Tether, and XRP. 

How Cryptocurrency is Valued?

The value of certain crypto is mainly determined by the demand and supply chain. If the demand for it increases, the prices of crypto increase as well. Since crypto comes from a decentralized system, the value often depends on competition, cost of production, availability of exchanges, regulations, etc.

The supply and demand mechanism is different for each crypto. For example, Ethereum has no cap on supply, while there will be only 21 million Bitcoins ever. Some crypto has a “burning” method of sending the token to an address in the blockchain that can’t be recovered. Demand can increase as people start adopting crypto as a way of making money.

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In 2021, the purchase of Bitcoin increased drastically due to the large number of investors who bought and held the currency.

Trading Cryptocurrency

Trading crypto offers two perspectives: to make profits in USD or collect Bitcoin. The crypto prices are volatile, so it’s not recommended that you actively trade the crypto. Please check the steps below on how to trade the cryptocurrency and if something is not clear, we encourage you to search for additional information.

  • Open a crypto brokerage account;
  • Deposit funds to the account – you can connect your bank account or receive wire transfers;
  • Choose the crypto you’ll invest in;
  • Select the investing strategy; and
  • Store the crypto;

To Sum Up!

In this guide, you’ve learned and understood the main differences between NFTs and crypto regarding trading, value, and investing. Whether you are an aspiring crypto enthusiast or a blockchain developer, please feel free to check our blog to learn more.

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