In the world of digital trading, cryptocurrency and the use of Non-Fungible Tokens are among the most talked about. But what exactly are these and are they the same thing? There’s a lot of investor-specific lingo that gets thrown around in the investor-sphere and it can feel impossible to keep up.
In short, a cryptocurrency is a form of payment that circulates without the need for a centralized institution to regulate it. Cryptocurrency is able to be traded for goods and services as well as other types of crypto. In other words, it’s fungible. However, Non-Fungible Tokens, or NFTs, are the opposite. Each NFT is unique and can’t be replaced by something else.
In this article, we’ll go into further detail about what cryptocurrency and NFTs are, how they differ from each other, and the pros and cons of each one. We’ll also let you know what we feel is the better investment for beginners.
What is Cryptocurrency?
Unlike physical cash or credit/debit cards, cryptocurrency is a type of currency that can be traded without the need for regulation from banks or government entities. While crypto can be used for goods and services, many choose to use it to invest, much like with Wall Street, but decentralized.
The most popular cryptocurrency currently available is Bitcoin and is typically the cryptocurrency most beginners start out with when investing. To invest in cryptocurrencies, most people join an exchange platform or use a broker instead.
There are now more than 16,000 different types of cryptocurrency available for investors.
- There’s no middleman. Because each purchase is between two people, you’re far less likely to be subjected to fraud or a scam from a middleman.
- They’re mostly anonymous. Although you need to provide some type of identity authentication, your information is protected and you can buy/sell/trade virtually anonymously.
- Transactions are almost instantaneous. Cutting out the middleman not only decreases the risk of fraud, but you send/receive your transaction almost instantly.
- It’s more open to illegal activity. Because it isn’t regulated, crypto trading and usage open users up to scams.
- The crypto market is volatile. Just like with stocks, the market is a rollercoaster. Values constantly increase and decrease and it’s hard to keep up if you aren’t careful.
What are NFTs?
When something is fungible, that means it can be traded or exchanged for other fungible items. Cryptocurrency and USD are considered fungible as they can be traded. However, Non-Fungible Tokens, or NFTs, are the opposite. Each NFT is considered unique and can’t be replaced. This makes it physically impossible for one NFT to be worth the same amount as another.
NFTs are considered the digital representation of certain assets. They’re also considered extensible. This means you can take two different NFTs to create an entirely new NFT as a result.
Although the process for using NFTs is different than with cryptocurrency, you can usually use NFTs on many of the same platforms as crypto (i.e. Ethereum).
- It can’t be replaced or changed. Once the value of an NFT is determined, it can’t fluctuate or deflate as crypto does.
- They have better contracts. When artists use NFTs, they can attach a royalty to their work. This way they still get compensated if one purchaser resells it to another person.
- A new type of revenue for artists. Artists can utilize NFTs to get what they truly feel their art is worth rather than relying on what others are willing to negotiate for it.
- NFTs are still new. Because it’s still developing, an NFT’s worth relies heavily on its sentimental value.
- The power usage may be problematic. When creating and selling a large amount of NFTs, a lot of power is needed to do so. This then has a negative effect on the environment.
Now that you know the general ins and outs of cryptocurrency and non-fungible tokens, which one is actually better? The answer to this question really depends on what your intentions are with investing. Do you want to have the opportunity to trade and ride fluctuating markets? Cryptocurrency is more your speed.
With that said, an artist who is looking to make more money honing in on their craft and talent may suffice better using NFTs. With each NFT being unique in its value, you’re less likely to feel slighted when you make a purchase or sell your NFT.
Regardless of what you choose, we hope this article has been helpful for you and your journey into investing.
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