NFTs And Cryptocurrencies Are Not The Same Thing

Although often grouped together, NFTs and cryptocurrencies are not the same thing. They’re two completely different ways to use blockchain, and in this segment, we’ll be breaking down several?aspects that make them vastly different.

NFTs are singular and unique digital tokens that represent ownership on the internet. As their name?suggests, they’re non-fungible, which means that they aren’t interchangeable. Cryptocurrencies, on the?other hand, are typically a form of digital currency. Cryptocurrencies are fungible, which means that?unlike NFTs, they’re interchangeable. The word “fungible” can be defined as an aspect of an item that?allows for it to be easily interchanged with another identical item. When something is fungible, it is always of equal value to another identical item of its kind. For example, things such as the US dollar or Bitcoin are fungible, as one US dollar will always equal one US dollar, and one Bitcoin will always equal one Bitcoin.

NFTs are like concert tickets, whereas cryptocurrencies are like money. Concert tickets each hold a varying amount of value, and factors such as seat location and exclusive perks play a role in determining this. Concert tickets are therefore non-fungible, which means that you can’t simply interchange one ticket for another as they aren’t always equal in terms of value. Cryptocurrency, on the other hand, is?similar to money. The dollar in your wallet doesn’t have any specific factors, such as rarity or extra?utility, that would render it less valuable than the dollar inside a cash register at a store. Money, just like crypto, is therefore fungible, which means it is easily interchangeable and remains consistent regarding value across all units.

NFTs and cryptocurrencies both utilize the same underlying technology, which is blockchain. Blockchain allows for both NFTs and cryptocurrencies to be decentralized, secure, easily accessible, and allows for true ownership over digital items.

Imagine if things such as baseball cards and other collectibles began to be issued digitally. If you sent me a file or a picture of a digital baseball card that you owned, I would easily be able to save, replicate, and distribute the card. This would then beg the question, who truly owns the collectible? NFTs solve this problem, and for the first time ever, true ownership on the internet is now possible. Since NFTs operate using blockchain, the information stored within a token is decentralized and public. If baseball cards?were issued as NFTs, you’d be able to easily verify the owner of a specific card by looking at the public blockchain that it’s issued on. Thanks to blockchain, information regarding past and current ownership,?transfers, sales, and even the date that the baseball card was created is publicly available while still allowing individuals to retain privacy through the use of cryptography.

Autonomy and control have a lot to do with ownership. When we own something in real life, it’s ours.?Very few people can arbitrarily take something that we rightfully own away from us, and when it comes to digital items, this should be no different. If things such as concert tickets or baseball cards were issued as NFTs, they would truly be under your ownership due to the decentralized nature of blockchain?technology. When a blockchain network is decentralized, there’s no central server or “head” that has?control over the network. Power is distributed throughout the blockchains community, with each blockchain having its own governance and distribution system, making it incredibly hard to shut the?network down. You wouldn’t have to rely on a 3rd?party to keep the system running in order for your digital baseball cards or concert tickets to exist, nor would this company have control over what you do with your cards.

Although there’s been a frenzy of events, both negative and positive, in the blockchain space recently, it’s important to avoid grouping these equally unique and innovative aspects of web3 together. Each aspect of web3 is a different and innovative way of using the same underlying technology, which is blockchain. Blockchain is sort of like the internet; there may be some forms of its use that you love, and?others that you may disagree with, but there’s?no merit in judging the entire underlying technology?based on one form of its use. Whether it’s NFTs, cryptocurrencies, or something else, it’s important to view every?aspect of web3 as its own, independent form of blockchain-based technology, each with its own set of benefits and challenges.