Difference Disclosed: NFT Vs. Cryptocurrency Vs. Digital Currency

You must have been living under the rock for all this decade if you still scratch your head when someone talks about NFTs or cryptocurrency investments. The popularity level of virtual currencies and digital collectibles has gone higher and higher in the past few years especially after Millennials started eyeing them as a ‘cool’ investment trend. Despite being in the financial space for over a decade now, there still exists a lack of in-depth knowledge amongst the investors about cryptocurrencies, NFTs, and digital currencies.

Do you know that cryptocurrencies, NFTs, and digital currencies are three different financial concepts? Yes! You read it right. The three popular asset forms are unique yet different from each other in various aspects. This article is here to help you understand this difference so that you can indulge in cryptocurrency trading without any hassle and as per your interests.

Let’s start with the typical definitions of cryptocurrencies, digital currencies, and NFTs before jumping onto the differences between them.

What is a cryptocurrency?

Often considered limited to Bitcoin, the cryptocurrency domain today stands tall as a full-fledged multi-million-dollar industry. In Layman’s terms, a cryptocurrency is a form of paperless money that runs entirely on a decentralized ledger called a blockchain. All the transactions are stored, verified, and processed within this blockchain network that is accessible to only the participating nodes. The entire ecosystem supports decentralization and eliminates dependence on any central authority like a bank. The transactions are stored in small packets called blocks that are duly time-stamped and linked through cryptographic encryption. Blockchain offers high-end security, transparency, and immutability to the users.

What is digital currency?

Digital currency involves money in an electronic form. The e-money allows users to purchase their favorite ice cream in a local parlor while also giving them full authority to send and receive money from any corner of the world. This kind of money does not have a physical presence like the currency notes we use presently. The users need to have a unique and secret password to run their digital wallets that store their digital wealth.

What is NFT?

NFTs or Non-Fungible Tokens are a kind of digital collectibles. They are unique digital assets that represent real-life valuables in the digital space. Each NFT is different from others as they represent a particular asset. While cryptocurrencies are fungible, NFT projects are non-fungible tokens and cannot be interchanged. They run on a blockchain network and represent anything and everything ranging from an art piece, sports merchandise, etc.

What makes NFT, Crypto, and Digital Currency Different?

1.? ? ? Trading

Where cryptocurrencies and digital currencies can be easily traded against each other, NFTs cannot be traded for each other. NFTs represent unique real-world assets in the digital world. If traded or replaced against each other, NFTs are bound to lose their value.

2.? ? ? Control

Digital currencies are centralized assets which means that they are controlled by a banking institute or a regulatory authority. However, cryptocurrencies and NFTs run on blockchain technology which supports full decentralization. There is no central governing body and each transaction is verified by the operating nodes. The use of blockchain technology for facilitating cryptocurrency security allows users to remain to rest assured about the safety of their invested funds.

3.? ? ? Core Ecosystem

Cryptocurrencies and NFTs are accessible via a decentralized public ledger or blockchain network. This makes the transactions traceable by all the participating parties involved within the decentralized channel. Whereas in digital currency, the information is held privately so as to maintain confidentiality within the system. Cryptocurrencies support the anonymity of the users but digital currencies do not offer such privacy.

Conclusion

Living in the technological era has pushed us towards a digitalized finance space where everything is virtual yet possesses a real value. Cryptocurrencies, digital currencies, and NFTs are gaining a lot of popularity amongst investors because of their inherent operational capacities. This article has helped you to differentiate between the top-3 investment options in the present scenario. They are similar but different in management and approach. So, before making an investment make sure you are well-informed about their core working ecosystems.

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