How are NFTs different from cryptocurrencies?
Non-Fungible Tokens (NFTs) and cryptocurrencies are both built on blockchain technology, but they serve distinct purposes. The primary difference lies in their fungibility. Cryptocurrencies, such as Bitcoin and Ethereum, are fungible; each unit is identical and can be exchanged for another unit with equal value. For instance, one Bitcoin holds the same value as another Bitcoin.
In contrast, NFTs are unique digital assets that represent ownership of specific items, such as art, music, or virtual real estate. Each NFT has distinct information or attributes that make it unique, and thus they are not interchangeable on a one-to-one basis. This uniqueness is verified through smart contracts on the blockchain.
Furthermore, NFTs often incorporate additional metadata that provides context about the asset, such as its creator, provenance, and usage rights. This information enhances their value, especially in creative industries. Conversely, cryptocurrencies primarily function as a medium of exchange or a store of value.
In summary, while both NFTs and cryptocurrencies utilize blockchain, their core differences lie in fungibility, purpose, and the information they carry, paving the way for various applications in the digital economy.