NFTs and Crypto, what’s the difference?

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Right now, NFTs and NFT stocks are all the rage. By March of 2021, the NFT for Nyan Cat, a 2011-era cat GIF, had sold for about $600,0001 at auction, NBA Top Shot NFTs had sold for over $500 million, and a single LeBron James highlight NFT had sold for more than $200,0002. According to Coindesk, roughly $174 million has been spent on NFTs3 since November 2017.

However, blockchain and its variants have been in the news for the past decade or so. What makes NFTs unique, and why are they causing investors to take notice?

What exactly are NFTs?

Non-fungible tokens are referred to as NFTs. Fungibility refers to the interchangeability of the elements that make up a thing or commodity. No matter which way you break them up, four quarters, ten dimes, and a dollar bill are all worth one dollar. Currency is fungible because it doesn’t matter which dime you have; it’s still worth a dime, and one dime isn’t necessarily more valuable than another. A non-fungible item is anything that is one-of-a-kind, such as chairs, jewels, or artwork and is therefore valued separately.

As a result, an NFT is a digital asset that symbolizes a one-of-a-kind item, such as digital art, music, or video game content. It’s easy to imagine a sword that your WoW avatar created and then sold for virtual gold to another player. The sword exists only in the digital realm, yet it has real-world value and cannot be exchanged for any other digital item.

Why are people investing in non-financial tokens (NFTs)?

NFTs provide private ownership of digital products, enabling consumers to unleash value from digital items through a system of ownership and tradeability. Digital assets are easy to share but difficult to own without NFTs.

You may produce digital art, but when you share it on social media, it becomes the platform’s property (unless you negotiate a deal otherwise). Anyone can also duplicate the artwork and distribute it on their own social media networks. This can still happen with NFTs, but the artwork will not be owned by the channel. NFTs allow the owner to express, brag about, and exercise exclusive ownership in ways that were previously impossible.

NFTs establish ownership of a work of art or any digital asset, letting users to freely sell and acquire it while also producing new value. A print of a Van Gogh painting, for example, can be owned by anyone, but the original is valuable. A meme can be copied and shared on social media by anyone, but the original has value. “A basic piece of what makes physical art valuable is the ability to reliably establish ownership of a work and show it somewhere,” says Devin Finzer, co-founder and CEO of NFT platform OpenSea4, “something that’s never been as true in the digital age.”

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Because there are a finite quantity of NFTs, their value fluctuates based on demand and interest. They can be created on the blockchain, or “minted,” and can represent both tangible and immaterial entities, such as:

  • Kanye West x Adidas Yeezys, for example, are limited edition sneakers that resale for over $1,000.
  • Beeple sold digital artwork like “EVERYDAYS: The First 5000 Days” for $69.3 million.
  • Jack Dorsey’s first tweet, which sold for $2.9 million, was accompanied by six music recordings.

What distinguishes NFTs from crypto?

NFTs and crypto are both based on blockchain, and both use the same technology and principles. As a result, they tend to draw the same types of people. NFTs are a subset of the cryptoculture, and you’ll almost always require cryptocurrency to buy and sell them.

The fundamental distinction, though, is evident in the name. Cryptocurrency is a type of money. It has just economic value and is fungible, just like any other currency. That means that no matter which crypto token you hold within a certain crypto currency, it has the same value as the next; 1 $ETH Equals 1 $ETH. NFTs, on the other hand, are non-fungible and have a value that extends far beyond economics.

What can NFTs be used for?

Initially, the advantage of NFTs was that they allowed true ownership of digital things in a way that mirrored the “real world.” However, NFTs are capable of far more. When an artist’s work is resold, NFTs allow them to continue to receive royalties, which isn’t possible with a tangible painting, for example. Celebrities such as Snoop Dogg8, Grimes, and Paris Hilton9 are understanding the importance of NFTs and are distributing unique keepsakes, art, and experiences as NFTs.

NFTs offer to cut out the middleman in digital publication, allowing all types of artists to sell directly to their followers and fans to act as patrons. NFTs could pave the way for a return to an older style of art community, where people support the artists they like.

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With NFTs, you can not only invest money in a budding artist by purchasing early work and profiting as the work’s value rises, but you can also invest time spreading their reputation and profit when their worth rises. “Now, creators can not only engage but also transact with their fans directly,” says Nichanan Kesonpat, a blockchain entrepreneur10. “The community can voice their opinions and have a better chance of being heard, the perks can be designed to reward members who add the most value, and the community can benefit through token ownership and redeemable real-world rewards.”

The possibility of NFTs in the future

Some observers believe NFTs are confined to digital art and/or limited-edition topics, while others believe they have enormous potential for new labour, economic, and social value paradigms. “Crypto is going to dramatically transform finance, value, organisation, governance, the internet, money, and more,” writes Andrew Steinwold, an NFT expert. However, it is non-fungible tokens (NFTs) that will have the most profound impact on human civilization and culture11.”

NFTs can be anything from concert ticket stubs to virtual real estate like the Bronx Zoo, which is constructed on the metaverse platform CryptoVoxels12, to digital pet ownership.

NFTs, according to thought leaders, might provide the foundation for virtual states, in which every NFT holder has an equal say in government. In contrast, today’s social media sites function like dictatorships, with a tiny group of people empowered to evict users on the spur of the moment. With the coming together of NFTs and cryptocurrencies, entire economies might be formed on digital assets.

NFTs are deserving of a second look.

Investors are paying renewed attention to something they may have previously disregarded as a techie-geek trend, with NFTs, cryptocurrencies, and other blockchain applications making headlines on a regular basis. NFTs are demonstrating that they aren’t merely a passing fad. An NFT ETF, such as Defiance’s NFTZ, can be a good way to get into a complex and sometimes expensive sector. The ETF is designed to diversify risk across a variety of promising companies involved in the NFT, blockchain, and cryptocurrency ecosystems. While NFTZ is not a meta ETF, it does contain certain equities related with it. NFTZ is the first ETF to enable access to NFT-related stocks within reach of ordinary and institutional investors, whether it’s metaverse stocks or something more focused on NFTs.

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About the Author: Noor Ul Huda Naeem

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