Home » Crypto Vs NFT: What You Need To Know.

Crypto Vs NFT: What You Need To Know.

by Sneha Shukla

Crypto Vs NFT: What You Need To Know.

With the boom in Bitcoin price, cryptocurrency started becoming more popular. Crypto a digital currency became a channel for an alternative form of payment using an encryption algorithm. Using the encryption algorithms would mean that cryptocurrency would function as a currency and a virtual accounting system. But for you to start using crypto, you would need a wallet for the storage of your portfolio. 

Apart from using crypto as a form of payment, you can also trade it in the crypto market. There are crypto trading apps in India that have helped traders carry out crypto trading in the market. While trading, you have to be very cautious because the crypto market is very volatile. What this means is that your investments can become very valuable and double up if you make careful analysis and your investments can also blow up if you are not prudent enough.  

How Does Crypto Work?

As mentioned earlier, cryptocurrency is a digital currency that is used for the transaction. Practically, they are mostly bought and sold as an investment. Bitcoin became the first cryptocurrency and after the spike in price, so many other coins became available. Bitcoin was originally designed for digital payments but became more of a store for value than a digital payment. 

Cryptocurrencies are powered by blockchain technology. Blockchain networks are distributed digital ledgers used in asset management and recording of transactions freely. These records are stored across multiple computer networks. Each of these computers is called a node and these nodes scrutinize and store various data. As soon as a new transaction is initiated and completed, they are moved to a block of data and subsequently this block is added to the chain. This process is updated whenever a new transaction is carried out. 

Cryptocurrencies are valuable but the value of each coin depends on various factors. Just like many assets out there, demand and supply are major catalysts that contribute greatly to the value placed on each crypto. The demand and utilization of a coin by many crypto users would see the price rise exponentially. This means that the more people demand a particular coin, the more valuable the coin becomes. 

On the other hand, supply is equally influential to the price of a cryptocurrency. This is so because without supply, then there is no value. Experts have pointed out Bitcoin as a coin that is most likely to maintain its value because a limit of how many Bitcoins can exist has been placed on it. The maximum limit placed on the existence of Bitcoin is 21 million. This was done to introduce scarcity and at the same time maintain its worth and relevance in the crypto economy. 

So when considering a coin to invest in, always look at the ones that have a strong use and potentially have the option of wider adoption. Ethereum is considered valuable today because it has a smart contract that makes it possible to develop several applications both for finance and gaming. 

While it is good to invest and be involved in crypto trading, it is also wise to look at the potential risks involved. The crypto market is a very volatile market and price fluctuations are very common. So before investing, always have in mind that the price value might not be the same tomorrow. This will help you in planning well and investing wisely while considering risk management. 

NFT: What It Means And How It Works. 

NFT also known as Non-fungible tokens are cryptographic assets built on the blockchain network. They are characterized by unique identity codes and metadata that differentiate them from each other. Unlike cryptocurrencies, these NFTs cannot be traded or barter with its equivalence. This is different from crypto which has an almost identical features with each other and can serve as a means of payment. 

NFTs are unique and mostly represent real items such as artwork or even real estate. They can also represent people’s identity, property rights, a stamp of ownership etc. This means that once you own an NFT, it is your own and cannot be replicated elsewhere. And once you sell this NFT, you automatically lose ownership and right to that token.

NFT was developed from the ERC-721 standard. This network was developed by the same set of people responsible for the ERC-20 smart contract. This ERC-721 modifies the minimum interface, thereby defining the security system, the ownership status/details and metadata needed for the distribution of this token. 

NFT eliminates intermediaries and links artists to their potential audience. This is because they are built on blockchain networks. Because they eliminate these intermediaries it eases transactions between the artists and the audience and helps in creating new markets. These NFTs have several uses and represent a whole number of real-life items. 

The NFT market is pivoted around collectables such as digital arts, NFT music, sports cards etc. some of these cards have sold millions over time. An example is the case of former Twitter CEO Jack Dorsey who sold the NFT version of his first tweet on the Twitter platform for more than $2.9 million. Another example is the transaction that happened in March 2021 where a group of NFT digital artists Beeple sold their work for $69 million. This shook the market and set a model for others. It has then been one of the most expensive digital art transactions sold so far. 

The NFT shifts from the typical crypto model by distinguishing each token from the other. They make this token unique and irreplaceable thereby killing any chance of each token being equal to another. 

 

Importance of NFT

The current financial system is characterized by complex trading and loaning system for several assets. By allowing digital representation of these various assets, the NFT is a mile ahead in the reinvention of this structure.

Another importance of NFT is its market efficiency. The remodeling of a physical asset into a digital asset narrows the whole process and eliminates intermediaries. This avoids the need for an agent or a middleman and directly connects an artist with his audience. 

Cryptocurrency and NFT are fast changing the digital financial system and there is a need for one to understand their various processes. Understanding their uniqueness will help you to make an informed decision before investing and this will in turn help you manage your risk and investments.  

 

Related Posts

Leave a Comment