What is an NFT? – Investing.com

How is an NFT Different from Cryptocurrency? Copied

At the most basic level, NFTs are cryptocurrencies, but their utility is vastly different. Bitcoin and other altcoins are “fungible”. 

Fungibility means that one BTC can be exchanged for another. As a result, no matter who sends or receives them, cryptocurrencies and much of the fiat currency we currently use have equal value. 

This is not true of NFTs. One NFT cannot be directly interchanged with another. This is because NFTs are programmed with specific traits, order, and qualities.

An instance would be the recently released digital collectibles celebrating the life of now-deceased National Basketball Association (NBA) superstar Kobe Bryant. 

Split across eight different collectibles; these NFTs highlight different parts of his once-promising career before his sudden demise in 2021. Each collectible is unique and shows a different aspect of the famous Mamba NBA star’s illustrious career on the basketball court. 

Given these collectibles’ cultural significance, they sell for between $30 to over $20,000. This is expected to become more valuable as more collectors look to add the NFT to their lineup. 

This is where NFTs distinguish themselves from their other blockchain-based assets. Aside from the fungibility narrative, the supply is another significant difference between NFTs and other digital assets. 

A limited collection of an NBA Top Shot in-moment video of a dunk means that only a few users will own that video. This increases their value due to their unique qualities and traits and the exclusivity they provide. On the other hand, cryptocurrencies like Ethereum do not have a limit on their total amount.

The most common ceiling for NFTs is 10,000, meaning only about 10,000 wallet addresses would ever hold a specific NFT project. Because supply is limited, demand is bound to outnumber supply, resulting in the high value that popular NFT projects command.

EVERYDAYS: THE FIRST 5000 DAYS, a piece by a digital artist popularly known as Beeple, is a classic and recent NFT success story. The NFT, which depicted a 5000-day journey over a half-decade, sold for $69.3 million, making it the third most-valuable work of art created by a living artist.

Another area of distinction is in their use cases.

While cryptocurrencies are primarily concerned with the financial aspects of blockchain technology, NFTs go a step further. 

For example, it demonstrates digital asset ownership. Making it simple for people to mint personal assets as NFTs and store them on the blockchain. Unless they transfer it to another individual, the asset becomes immutable and linked to their wallet address and identity. They can also be used to represent in-game items like wearables and to represent ownership of physical assets.

NFTs are seeing even more use cases than other cryptocurrencies, as they are used in the educational sector to confirm certificate ownership, in real estate to do the same thing, in healthcare for seamless patient record keeping, and a variety of other spaces.