Have you ever heard of NFTs and Cryptocurrencies? Well, only if you have been living under the caves or on a deserted island in the farthest region of the earth for years, you haven’t heard about them. Actually, these two are the most buzzing technologies currently in the town. But, the question is how much you know what they actually are and why they have got trendy these days. So, without much ado, let’s find out what is NFT and how NFTs are different from cryptocurrencies.
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NFTs abbreviated as Non-fungible tokens (NFTs) are nothing but unique digital assets, such as music, photographs, videos, GIFs, drawings, etc that are tokenized on a blockchain. NFTs are provided with metadata, history and exclusive identification codes, which helps them to distinguish from each other. How rare a piece is and how much it is in demand among people are to name a few factors that add to define the value of an NFT. You can even turn a tweet into an NFT if you want and trade it online using cryptocurrency.
One of the best things about NFT is that it is complemented by blockchain technology. For those who don’t know, blockchain is basically a digital ledger technology where every transaction and interaction is recorded as a block and is shared in a network connected via peer-to-peer nodes. These blocks have some amount of storage capacities. When they are filled, they get closed and linked with the block filled previously, thus, producing a chain of data which is known as the blockchain.
In layman’s language, just assume that you have a property, be it a digital piece of artwork, a painting, a song, a sports card or a signature, and you have assigned a token of ownership to it. This means that whoever owns this token would be the legitimate owner of that property. This token will be stored in a decentralized manner in the blockchain ledger. Your property may have hundreds of copies that can be viewed on multiple devices all across the globe but this token defines who actually owns the property.
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“EVERYDAYS: The First 5000 Days” by Beeple Crap
The concept of NFTs can be traced back to 2012 however it gained traction only in the year 2017 when Matt Hall and John Watkinson used the Ethereum blockchain to create 10,000 unique characters under their project called Cryptopunks as a tribute to Cryptopunks who, in the 90s, first incepted the idea of cryptocurrencies. Later in the year 2021, there was a steep rise in the popularity of the entire NFT ecosystem with the initiation of new marketplaces, infrastructure, collectables, and games, among others.
The first tweet by the CEO Jack Dorsey was sold at $2.9 million. Nyan Cat which is an animated GIF was auctioned at $500,000. And above all this, digital artwork named “EVERYDAYS: The First 5000 Days” by Beeple Crap fetched a whopping $69.3 million.
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Both NFTs and cryptocurrencies are based on the same principles and the same technology which is blockchain. This is why it is a favourite among those who have an affinity and interest in blockchain technology. For easier understanding, you can assume NFTs as a subset of cryptocurrencies, which is required for buying and selling of NFTs.
But, how NFTs are different from cryptocurrencies lies in the name itself. As the name suggests, just like any currency, cryptocurrencies are fungible and have their own economic value. This means that a specific cryptocurrency will always have the same value as the next one. Like one dollar is always equal to the value of another dollar. One Bitcoin or Dogecoin will always be worth another Bitcoin or Dogecoin.
On the other hand, the concept of NFTs is slightly different from cryptocurrencies. Each NFT comes with a unique signature which makes it impossible to exchange for or compare with another NFT. Every art piece is different, which makes its value different, which in turn makes it non-fungible and unique in itself.
Also Read: How Blockchain Technology is Improving Supply Chain Management?
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