NFT is different from cryptocurrency. However, the close relationship between both digital assets often confuses investors. If you’ve ever wondered: “Is NFT a cryptocurrency?” then you will be pleased to know that the answer lies in understanding the two concepts.
To start with, what is an NFT? A non-fungible token (NFT) is a digital asset that exists on the blockchain and cannot be interchanged for another asset, due to its unique attributes. On the other hand, cryptocurrency, as the name implies, is a digital currency created on the blockchain to serve majorly as a means of exchange within an ecosystem.
From their definitions, it is clear that these two concepts have their similarities and differences. This article satisfies your curiosity and helps you fully understand the answers to the following questions:
- What are NFTs?
- NFT vs. Crypto: What is the difference?
- What’s the connection between NFTs and Crypto?
- What crypto coins are NFT?
- What is the best crypto for NFT?
What are NFTs?
The word NFT stands for “non-fungible token”. They are digital assets representing real-world assets such as pictures, music, videos, real estate, etc. NFTs are termed “non-fungible” because they are not interchangeable. This means that no two NFTs are the same.
NFTs live on the blockchain, and therefore possess several attributes common to other assets utilizing blockchain technology, such as immutability and decentralization features.
Most NFTs that exist today belong to a collection, jointly called an NFT collection. Examples of popular NFT collections today are CryptoPunk, Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), etc.
It is noteworthy that most NFT collections live on the Ethereum blockchain. Other blockchains that are home to several NFT collections are Solana, Polygon, Avalanche, etc.
NFT vs. Crypto: What Is the Difference?
Now we have understood the concept of NFT. Let us look at another question: “How is NFT different from cryptocurrency?”
To fully grasp the differences between the two concepts, let us take a keen look at their stated difference below: The primary difference between an NFT and a cryptocurrency is that an NFT is non-interchangeable, whereas a cryptocurrency is fungible.
To illustrate, imagine having a $1 bill and a friend of yours also has a $1 bill. You can both exchange your $1 bill and it would still be the same. This is exactly how it is with cryptocurrencies, they are easily exchangeable. 1 BTC in one wallet is interchangeable with 1 BTC in another wallet.
To understand the non-fungibility of an NFT, imagine having two balls – a soccer ball, and a basketball ball. Both balls have their keen similarities. However, they are not the same because they are non-interchangeable.
Another difference between an NFT and a cryptocurrency is how they’re valued. Suppose you want to buy a cryptocurrency, say 1 bitcoin, you will have to buy it based on its trading price at that very moment. It is quite different in the case of NFTs, as some factors contribute to the price an NFT gets sold. Some of these factors are scarcity, reputation, and demand.
Scarce and rare NFTs likely end up being sold at a high price, even if the holder received it free or at a low price. A recent example was the sale of a CryptoPunk NFT which sold for around $4.4 million.
The reputation of an individual or organization can as well drive the price of an NFT to the high side. A notable example is the sale of Jack Dorsey’s first tweet, which was sold as an NFT for $2.9 million.
Another example is the sale of Everydays: The First 5000 Days, a visual work by digital artist Mike Winkelmann (a.k.a Beeple). He compiled 5000 pictures accumulated over 13 years into one collaged image. The NFT was sold for $69.3 million, representing the largest NFT sale to date.
What’s the Connection Between NFTs and Crypto?
Now that you have a satisfying answer to the question: how is NFT different from cryptocurrency? Let us consider the similarities between NFT and crypto. This will further help shed light on our key question: “Is NFT a cryptocurrency?”
The major connection between NFT and cryptocurrency is the fact that they are both built on the blockchain. This means they possess the characteristics of blockchain technology, such as decentralization and immutability.
Another binding force between an NFT and a cryptocurrency is that a cryptocurrency is usually used as a currency to buy an NFT. In several NFT marketplaces, the prices of NFTs are represented in denominations of cryptocurrencies. For example, an NFT can be sold for 1 ETH or 1 SOL.
What Crypto Coins Are NFT?
The simple answer to this question is that there are no crypto coins that serve as NFTs. There is no such thing as NFT crypto. But then, there are NFT projects that have cryptocurrencies tied to them, where these digital currencies function as utility tokens within the projects.
An example of such an NFT project is the BAYC project. BAYC launched its utility token, ApeCoin, in March. The token serves as the project’s native token and also aids the BAYC ecosystem in building blockchain games, hosting events in the metaverse, and other services.
In May, the BAYC project raised over $300 million from selling virtual parcels of lands in its metaverse, Otherside, where ApeCoin served as the means of exchange.
Another example of a project tied to a cryptocurrency is Axie Infinity, a popular play-to-earn (P2E) game that offers in-game rewards and other benefits. The P2E game has an NFT called Axie, which are fierce-looking creatures that user players purchase to play the game. The project’s native token, AXS, serves as a means for exchanging assets in the game.
Other blockchain-based projects with strong links between NFT and crypto are Decentraland, The Sandbox, STEPN, and others.
Having established that there is no such thing as NFT crypto, keep in mind that every NFT project utilizes blockchain. This means that there is an underlying network whose native crypto gets spent as gas fees whenever a user mints or transfers an NFT. These blockchains include Ethereum, Solana, Avalanche, BNB Chain, etc.
What Is the Best Crypto for NFT?
There is no particular crypto that is known as the best crypto for NFT or an NFT project since various cryptocurrencies and their underlying blockchain network may have specific features that may attract an NFT project.
One major feature most NFT projects look out for when choosing crypto or its blockchain network is the cost of gas fees. For networks like Ethereum, gas fees are considerably higher when compared with other networks such as Polygon, Solana, Cardano, and several others.
Scalability is another feature some projects might capitalize on when launching their NFT collection. This feature entails the speed it takes to conduct a transaction. Scaling solutions such as Avalanche, Solana, Polygon, and many others are better picks for several projects.
Other projects may be more focused on decentralization and therefore build on networks like Ethereum, which are reputable for their decentralization. It is noteworthy that Ethereum is the most used network to launch NFTs.
Network stability is another thing NFT projects may look out for when selecting a blockchain. According to a June report, the Solana-based NFT marketplace Magic Eden confirmed that it would be expanding to other networks. The move would help reduce its dependency on the Solana network due to recent outages. This shows that the stability of a blockchain is important too.
From this article, we have come to see that the clear answer to the question: “Is NFT a cryptocurrency?” is NO. We arrived at this conclusion because the two concepts, “NFT” and “cryptocurrency” have their similarities and differences.
Readers also learned that there is no such thing as NFT crypto. Rather, some NFTs work hand in hand with some cryptocurrencies. Also, all NFTs ultimately rely on the native cryptocurrency for whatever blockchain they are built on to serve as gas fees.
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