What is NFT in crypto?
Even if you have not been involved in cryptocurrency or NFT, you must have heard these two terms. But do you know what they are?
If not, this NFT vs cryptocurrency article will be discussing these terms in detail.
With the rising popularity of NFTs, most people have been left with this question:
Is NFT crypto?
An NFT (Non-Fungible Token) is a digital asset running on the blockchain. It represents real-world objects such as art, audio, video, and in-game items. NFTs are bought and sold over the internet on NFT marketplaces, and they use the same encoding software as cryptos. Examples of NFT marketplaces include OpenSea, Rarible, Foundation, and SuperRare.
NFTs are now popular as a way of buying and selling digital artwork. Every NFT is unique and is identified by a unique identification code. NFTs work by creating scarcity. This is not the case with other digital assets that have an infinite supply. A limited supply of an asset should increase its value.
Most NFTs are digital assets that already exist in another form somewhere else. For example, securitized digital art already posted on Instagram or video clips from NBA games.
Mike Winklemann, a famous digital artist, also called “Beeple”, created a collection of 5,000 daily drawings to come up with “EVERYDAYS: The First 5000 Days,” the most famous NFT today. This NFT was sold for $69.3 million.
You can view an image or the entire collection online for free. But why would someone spend millions on something which they can download or screenshot for free?
Because an NFT gives the buyer ownership of the original item. The NFT also has an authentication mechanism that acts as proof of ownership. Most NFT collectors value ownership rights over the item.
Next, we will be answering the question:
Is NFT a cryptocurrency?
Is NFT crypto?
There are several cryptocurrencies, for example, Bitcoin, Ethereum, Dogecoin, and Litecoin, but NFT is not one of them.
Non-Fungible Tokens are not cryptocurrencies. Many people don’t know this.
Research conducted by Morning Consult, an intelligence decision company, showed that at least 1 in 10 people see NFTs as a form of cryptocurrency.
2,210 respondents took part in the survey and only 26% of them were able to define NFTs correctly. 7% of the respondents also thought that NFTs are tangible assets that are sold and bought using blockchain technology, while 12% of them thought NFTs were intangible assets that can be bought with U.S dollars.
Cryptocurrency owners also have a better understanding of NFTs.
NFTs are a recent innovation and not much has been explored about the NFT industry, hence the source of all this confusion. Additionally, although NFTs are not a type of cryptocurrency, the two are in the same field.
What is the difference between NFT and crypto?
The relationship between NFT and crypto is similar to that of human beings and chimpanzees. Although they share several characteristics, they are different species but with common ancestry. In the case of NFT and crypto, the common ancestor is the blockchain.
There are many differences between NFT vs cryptocurrency, but the main difference is that cryptocurrencies are fungible while NFTs are not.
1 BTC is equal to another 1 BTC and one can exchange them without a change in value. However, one NFT is not equal to another NFT. Each NFT is unique, distinct, and has a different value depending on its demand and perceived value.
During the early days of the NFT market, its price action heavily depended on the cryptocurrency markets. However, as the NFT industry grows, it has been breaking away from the cryptocurrency market.
NFT and crypto have also shown a difference in terms of their prices. When the cryptocurrency market was on a downhill in January, the NFT prices were booming, with OpenSea’s sales volume hitting an all-time high of $5 billion. Some cryptocurrency analysts argued that this was an indication that there is an indirect correlation between NFT and crypto. When cryptocurrencies such as Bitcoin boom, NFTs drop, and vice versa.
There have also been times when the prices of NFT and crypto moved in sync as was witnessed recently when NFT prices slipped along the rest of the market which was triggered by the war in Ukraine.
To buy NFT, you need crypto. Most NFTs are based on the Ethereum blockchain, and so far ETH is the best cryptocurrency for NFT purchase. It is anticipated that the NFT marketplace will start to accept NFT payments made using fiat currencies via credit cards. Companies such as eBay, Reddit, and Instagram are also planning to integrate NFTs, most likely using fiat options, a move that may cause a further decoupling between NFT and crypto. However, before this happens, the relationship between the two markets will remain pertinent, and NFTs will continue to rely on blockchains such as Ethereum to work.