Before you can decide which is the better future investment, you need to understand the differences between Non-Fungible Tokens (NFTs) and cryptocurrencies like Ethereum and Bitcoin. Both are ways to make money and they use the same blockchain technology, but there are many differences too.
Many experienced investors put money into both. But there are a few key variances and things that any investor needs to look out for.
Shared Characteristics and Main Differences
NFTs and cryptocurrencies are maintained with the same software and data encryptions. The same blockchain technology was how NFTs came about. They branched off as cryptographic assets for digital art. Bitcoin and other digital currencies, just like NFTs, cannot be controlled by banks. The only other similarity is that both use the technology of digital wallets that are incredibly secure for online transactions.
These digital assets differ in one specific way. NFTs can’t be used to buy an item or to award someone money. Cryptocurrencies can be withdrawn or deposited at the investor’s will. With tokens, a seller can only withdraw once someone has bought the NFT. However, NFTs can only be bought with crypto coins. They are very much interlinked but completely different in every way.
Cost, Risk, and Value
Although these digital assets have a few things in common, they are vastly different in how they are traded, for one. Cryptocurrencies are traded just like the stock market, yet they are riskier. Even in stock market there is appetite for risk too. Ethereum and other cryptocurrency investors risk losing thousands in a very short timeframe but they can also make a ton of money. NFTs have a set price based on the seller, and their value can appreciate over time, but very slowly. Security tokens are another facet of fungible cryptocurrency. These tokens are used to pay gas fees when trading coins. If staked, the tokens can be used to validate external transactions which provides the owner with a portion of the transaction fee–sort of like a dividend.
Cryptocurrencies can be bought and sold for physical money based on market fluctuations, yet NFTs are unique pieces of work or real-world items that are closely tracked and recorded. There is a set price for NFTs, but the cost and value of crypto coins vary constantly throughout the day. In many ways, NFTs can be a safer investment. Buy NFTs if you think they might suit your financial goals and you want to create a strong portfolio.
Fungible vs Non-Fungible
Fungible essentially means something can be traded or negotiated for the same item. Dogecoin, Bitcoin, and Ethereum are fungible. One coin can be traded for another without either person losing or gaining. NFTs can’t. The only way to trade NFTs is to buy and sell those specific NFTs. These digital tokens can only be traded for an as unique item and in the same category as the original asset. This is a rare case though.
NFTs are worth the amount that a buyer is willing to pay for them. There is no market fluctuation to watch out for and buy or sell at just the right time. Once a Non-Fungible token has been sold, the rights to that asset belong to the buyer until they choose to sell it. You won’t even have to understand how copyright licensing works.
Both NFTs and crypto coins run off the same software and use the same protocols to validate authenticity, but as you can see are very different in many important ways.