It is with no doubt that in the 21st century, the emergence of smart technologies has brought many industries to life and created a buzz to innovation and technological growth. “Crypto”, or Cryptocurrencies, and NFTs, are the new hype of today’s time. So what do these terms exactly mean? Cryptocurrencies are a type of digital currencies, which are alternative payment methods created by using blockchain algorithms, distributed among a large number of computers. With these encryption technologies, cryptocurrencies function both as a medium of exchange and also as a virtual accounting system that is quick, direct, and independent, without the need to any-third party moderator. A good example of such currencies are the very widely used Bitcoins, Etheruem, XRP, etc.
On the other hand, the “non-fungible tokens” or NFTS, are a form of cryptocurrency developed on an Ethereum-compatible blockchain based system. They are distinct or unique digital objects that can be interesting to own or even advantageous to trade because of their value. Simply, they can be considered as virtual collectables in an online gallery. By this, a new segment of the “crypto” audience is created. Similar to entrepreneurs and online investors who use Bitcoins or other cryptocurrencies, artists now have their own medium and space.
Source: OpenSea (Bent by ippsketch)
So what makes NFTs different from cryptocurrencies such as Bitcoins? The “crypted” forms of currency are known to be very secure, because of “cryptography”, which makes it impossible to counterfeit or double-spend. Their decentralized networks that are based on “blockchain technology”, act like distributed ledgers maintained and enforced by a large network of computers, which makes them immune from government interference or manipulation. Adding to this immunity feature, cryptocurrencies can be bought and sold with specialist exchange brokers, using specialized computing hardware. Primarily, but not exclusively this is what makes these currencies attractive to many users, and with the skyrocketing value of some cryptocurrencies, crypto trading became popular among large and small investors.
On the contrary, NFTs or non-fungible unique assets are also managed in a digital ledger, and are traded on the web similar to cryptocurrencies. NFTS can be described as any digital asset that is bought or any collectible that is owned online. Each NFT is unique, where it exists on a decentralized digital platform based on blockchains, joined to explicit qualities with certificates of authenticity, meaning these digital assets, unlike bitcoins, cannot be traded or supplanted with each other. On the unchangeable blockchain, NFTs are produced. Nobody can take away ownership of an NFT or make another one exactly like it. Additionally, because they are “permissionless,” anyone can make, purchase, or sell an NFT without any exclusivity or needing to have any sort of access or permission.
The worldwide cryptocurrency market is anticipated to develop from $910.3 million in 2021 to $1,902.5 million in 2028 at a CAGR of 11.1% in estimate. The motivation behind the growth came from the constant rise of ledger technology and online investments.
Because of the efficient features that blockchain technology offers, developing countries have also shown a rise in the use of digital currencies as a financial exchange medium, such as Bitcoins. Companies worldwide are investing in cryptocurrencies and collaborating with other companies to deliver convenient and efficient digital services to the users.
NFTs on the other hand, are expected to see a significant growth in its market. NFTs market value was $15.70 Billion in 2021, and is expected to reach $122.43 Billion by the year of 2028, with a CAGR of 34.10% during this period of time.
The rise of digital media influencers, gaming societies, and digital artists will continue to boost the rise of NFTs in the coming years. NFTs have a great opportunity to grow in many industries that can fuel its demand, especially with metaverse users. With the Covid-19 pandemic, the use of NFTs was highly accelerated, especially among artists and design fanatics who were looking to have virtual galleries, or artistic channels.
Like most disruptive technologies, there are benefits and drawbacks that are related to Cryptocurrencies and NFTs. Due to their decentralized nature, these payment methods do not rely on intermediary institutions, such as banks or other “middlemen,” to enforce, monitor, or regulate transactions the way that traditional payments do. Because such transactions are not regulated by authority, they can always be subject to loss or fraud. NFTs for example are very illiquid and volatile, investors should always proceed with caution when considering purchasing these assets.
In Conclusion, NFTs and Cryptocurrencies are like two segments from totally different species, but with common ancestry and a similarity in characteristics. Both industries serve the market in a variety of ways, and have actually made a huge change becoming the main trends in the financial world. It is with no doubt that both industries have opened up many investment opportunities to the public. The need for a reliable, long-term store of value is one of the biggest motivations for investing in cryptocurrencies. Most cryptocurrencies, unlike traditional money, have a finite supply that is limited by mathematical algorithms preventing any entity or organization from having the value diminished by inflation. NFTs as the new segment of crypto, has started off as something that only art enthusiasts are interested in, but in fact, unique and rare collectables can end up being very valuable, worth lots of money. It is important to mention here that with this craze over NFTs, smart investors should always tread cautiously when thinking about buying or investing their money with the different forms of cryptocurrency, despite their efficiency and convenience.