One of the most frequently asked questions about these two is: they're both on the blockchain, right?
That question is, at best, misleading. For one, because it presumes there's only one blockchain (there isn't) and, for two, that NFTs and cryptocurrencies must work the same way, serve the same purposes and represent the same concept(s).
Only in one of these assumptions could be considered valid:
|Cryptocurrencies||Non-fungible tokens (NFTS)|
|1. purchased as an investment vehicle||1. purchased as an investment vehicle|
|2. used to buy other things, maybe even a coffee at your favourite shop.||2. bought to establish yourself as a collector.|
|3. acquired to gain access to certain games that incorporate NFTs.|
|4. bought to support a specific NFT project or the NFT community, in general.|
Let's break these points down, discuss their merits and find out why the cryptocurrency and NFT markets are booming.
On Blockchain and Cryptocurrency
In real-time, blockchain technology is a fairly new development. The first blockchain was launched in January 2009 by a mysterious creator, Satoshi Nakamoto, who had only published a white paper detailing the concept a few months before. After mining the genesis block - the first block of the chain, Satoshi 'vanished', leaving his creation for all to wonder about and speculate over.
The initial concept was promoted as a way to decentralize currency. Published a month after the most cataclysmic events that fuelled the 2008 global financial meltdown, Satoshi made his point clear by inserting a reference to bank bailouts in the blockchain's first transaction code.
Satoshi envisioned blockchain and cryptocurrency as a to wrest control of the financial world from established institutions. In itself, that's a telling proclamation.
For one, the proposition advocates for casting off centuries of tradition in finance. More importantly, though, the concept implied that control over the financial sector should be squarely in the hands of younger generations; those who feel most comfortable in the digital realm.
Regardless of how far-reaching the implications are/were, there's no doubt that the initial concept addressed currency and finance exclusively.
We could hardly say that, whoever Satoshi was/is, they weren't visionary. It's just that they didn't envision quite far enough.
Today, we know that blockchains are capable of so much more than just mining coins, even though every transaction that finds its place on the blockchain requires crypto coins.
Blockchains and cryptocurrencies are what make NFT projects successful - among other undertakings, so it's vital to understand that, while they are related and both blockchain-based, cryptocurrency is separate from NFT.
On Collecting NFTs
For a long time (in cyberspace time, not real-time), people remained wary of blockchain and cryptocurrencies. Still today, many believe that cryptocurrency is just a massive Ponzi scheme - at worst, or a giant waste of money, at best. Those pundits rail over the idea of handing your hard-earned money over for something you'll never get to hold in your hand.
Apparently, they overlook the fact that blockchains have expanded their functions to include far more accessible services than 'coins you can never hold in your hand'. Non-fungible tokens are a prime example of such.
The first non-fungible token was minted in 2014; it sold for the princely sum of $4. Although the transaction took place at a live conference event, it didn't precipitate a pivot towards NFTs - though it did raise some interest. For the next three years or so, various other startups launched NFT projects to moderate success.
It wasn't until 2017 that awareness of NFTs dawned in the public sector, spurred by the online game CryptoKitties. While perhaps not the first game calling for the purchase of characters - think about avatars and accessories you can buy for other roleplay games, it was arguably the most endearing and engaging.
In a sense, CryptoKitties kicked off the NFT collection concept. It took a while to get the ball rolling but, nowadays, gamers and NFT enthusiasts alike are happy to spend a bit of their cryptocurrency stash to buy a distinctive piece of digital art.
The wealthy have gotten in on the act, too.
The most high-profile NFT sales over the past year have been of the multi-million-dollar variety. Beeple, who has been creating distinctive digital art for years, sold one of the world's most expensive NFTs through one of the art world's most exclusive auction houses.
We can be thankful to those wealthy art patrons who shone the spotlight on NFTs as legitimate and collectable art while also being aware that the average NFT collector could likely never aspire to purchase art of the type that rich collectors fill their halls with.
Still, the dam is now burst and the art collection field is now more equitable. Wouldn't this be a great time to learn NFT development and list your name as a collectable art creator?
NFTs and Gaming
As mentioned above, the game CrryptoKitties wasn't the first customizable computer game, nor was it the first to require players to purchase accessories as they level up. However, this new type of gaming, blockchain gaming was so enticing that, at one point, the network was completely jammed.
In the early days of computer gaming - long after Pong but way before gaming consoles became ubiquitous, gamers could only choose from the array of accessories and characters already coded into the game's software.
The limitation of characters and accessories in even today's games unintentionally isolates players even though they might chat while they play; a relatively new development in online gaming.
Another flaw of standard gaming: a clever gamer can hack the game to give themselves advantages over other players.
Decentralized games neutralize those shortcomings. They also make the games fairer and even offer the possibility of earning while gaming, instead of spending to upgrade their characters' arsenals, wardrobes and accessories.
And, because the possibilities inherent in blockchain technology are virtually boundless, so are the iterations for NFT gaming. In all, the concept has great potential but there are a few stumbling blocks along the way, not the least of which are high transfer fees and blockchain scalability:
- capacity: though blockchains are theoretically limitless, there must nevertheless be physical devices to store data, and not every node in the network is equally capable
- networking: increased delay in propagation as well as consumption of vast resources
- throughput: the time needed to process and confirm one transaction and the size of each block
The scalability question covers the entire blockchain concept, not just its individual functions such as gaming and cryptocurrencies. Still, NFT gamers delight in their enhanced gaming experience, one that wouldn't be possible without cryptocurrency and blockchain technology.
NFTs and Social Media
Many NFT purchases are made by digital art enthusiasts looking for a new avatar for their social media accounts. And all those memes we all delight in - the gifs, jpegs and all the rest? They too are NFTs.
To put it simply, NFT means ' unit of data on a blockchain', with each data unit representing a unique piece of digital art.
Unlike cryptocurrencies whose appearance is limited to coin likenesses, NFTs may be musical or visual, representing anything from athletics to environmental concerns. It's no surprise, then, that many NFT collectors choose digital works of art that reflect their ethos for display on social media.
The NFT Community
The term crypto community is, by now, familiar. It's how the media refers to cryptocurrency advocates and enthusiasts, and it represents anyone involved in the buying, selling and developing of cryptocurrencies and blockchain technology.
What we don't hear enough about is the NFT community, a completely separate group of people who support and encourage each other in the development of their art; they may even collaborate, at times. The NFT community also comprises those who purchase, trade and collect digital art.
While we're describing the NFT community writ large, we have to point out that there is more than one NFT community. The communications platform Discord is home to several such communities, including for special interests such as sports NFTs, gaming and even flipping NFTs.
Belonging to such a community brings NFT enthusiasts many benefits, not the least of which is getting in on early buys when - or even before a new NFT collection is released.
Of course, you don't have to buy NFTs to belong to an NFT community, just as you don't have to own any cryptocurrency to belong to the crypto community. However, being a member of such a community gives you access to the technical and artistic know-how that those community members have in spades.
One of the five core values embraced by NFT communities is non-judgment.
You might remember hearing your teacher or parent say that there are no dumb questions, only to pose your question and be treated as though you were the world's biggest dumb head. You won't suffer that treatment from your NFT community friends.
Crypto and NFT enthusiasts tend to see themselves as rebels; a tad edgy and rejecting standard norms. Rather than embody the 'Can Do!' spirit, they're more of the 'How are we going to do it?' mindset. They welcome anyone who embraces their refreshingly liberating philosophies.
And they'll be more than happy to take you through how NFTs are created.
Now, you know that, from the community perspective, there's not much difference between cryptocurrency and NFT but, in practically every other way, NFTs and crypto coins are worlds apart in purpose, function and versatility of use.
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