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Unless you've been living under a rock for the last few years, or live in some remote location on Earth, chances are you've heard the terms cryptocurrency and NFT. But, in your heart of hearts, do actually know what they are?
What are cryptocurrencies?
Cryptocurrencies are a form of virtual or digital currency that is secured using cryptography. This means that they are incredibly secure and are near impossible to counterfeit or double-spend.
Various encryption algorithms and other cryptographic techniques are usually involved in any cryptocurrency you care to look at that serve the purpose of safeguarding the networks from outside manipulation. Which cryptographic methods are used does vary, but can include things like curve encryption, public-private key pairs, and hashing functions.
What are NFTs?
NFTs, or Non-Fungible Tokens to give them their full name, are cryptographic assets held on a blockchain. Fungible, if you are not aware, is a word that originally derives from the Latin verb fungi meaning "to perform". In modern parlance, though admittedly mainly in legal jargon, it tends to mean "interchangeable".
This is massively significant. To put it into perspective, physical fiat currency is the complete opposite. A pound is always a pound, a dollar is a dollar, so on so forth.
Each NFT comes with its own identification code and metadata that allows it to be uniquely identified from all other NFTs and, therefore, enables its ownership to be readily tracked and traced.
What is the main difference between them?
NFTs and cryptocurrencies are as much alike as human beings and chimpanzees. While they share many similar characteristics, they are completely different species with common ancestry. In the case of NFTs and cryptocurrencies, that common ancestor is blockchain.
NFTs and cryptocurrencies share some significant similarities and a few important differences. The main is the fact that cryptocurrencies are, by their very nature, fungible.
NFTs, as their name suggests, are not. One Bitcoin equals another Bitcoin, but one NFT does not equal another NFT. Each is distinct, unique, and valued differently depending on their perceived value and demand.
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