NFT vs. Blockchain: What's the Difference?

Many people have recently heard of the buzzword “NFT,” but there is still some confusion about what it means. You can usually find NFTs in the same discussion as other concepts like “cryptocurrency,” “blockchain,” and distributed ledger technology “DLT.” Since most people confuse these terms together, they often use them interchangeably. However, while these terms are related, they are not synonymous.

Let’s try to differentiate the terms NFT and blockchain below.

NFT vs. Blockchain

Blockchain

Of the two terms, blockchain is broader and older. The concept of blockchain is to gather the information together to form one “block” and then connect the blocks. Users call the entirety of the blocks linked to each other a “chain,” creating the blockchain. This chain feature makes it extremely difficult to modify any information on the platform because any changes you make will also affect the other blocks. Furthermore, since blockchain is a distributed network giving everyone on the chain access to see and verify every transaction, fraudulent acts become easy to spot and stop. Both cryptocurrencies and NFTs use this technology to execute trades.

Features

Blockchain technology has several main features.

• Accurate – Because other computers in the network verify blockchain records, information is accurate. This process minimizes human error by a large margin.
• Peer-to-Peer (P2P) – Blockchain transactions don’t need an intermediary like a bank. Instead, users transact with each other directly.
• Distributed – No single institution or party is in charge of a blockchain.
• No working hours – Unlike banks and other financial institutions, the blockchain has no start and end of the day. Users can make blockchain transactions at any time and day. This is especially useful for cross-border payments because time zones are less of an issue.
• Transparent – Each transaction is visible to everyone in the blockchain. However, these details do not contain any personal information like names. Instead, each user has a unique code that differentiates them.
• DLT – This allows for the decentralized nature of blockchain.

Applications

While blockchain started as the technology fueling cryptocurrency, there are a lot of other applications of this innovation.

• Quicker international payments that are less prone to human errors.
• Smart contracts can verify the information and then take particular action based on their analysis.
• Supply chain tracker that can record inventory more accurately and faster.
• Financial record tracker that reduces fraud and human error when noting business expenses.
• Public security utilizes the lack of a central point of authority to constantly ask everyone on the network to verify information together.

Non-Fungible Tokens (NFTs)

NFT is an acronym for Non-Fungible Tokens. Each NFT is a unique digital asset “minted” on the blockchain. Minting an NFT means converting the file into one that can be stored on the blockchain, verifying its existence as a unique token. Many NFTs are collectibles, like sports cards, game characters, and digital art.

The term “non-fungible” refers to objects that do not have an equivalent value. For example, one Bitcoin equals one Bitcoin, making it fungible. An NFT’s value can change and fluctuate, making it non-fungible. A “token,” on the other hand, is an asset or digital object. An NFT image is a unique token that has no equivalence in value.

Because NFTs are on the blockchain, each one comes with ownership information. This ownership makes it easier to trace the origins and provenance of an NFT compared to a physical object. NFTs can be any digital file, such as an image, a music file, an avatar, gamified NFT, or even event tickets. In fact, Jack Dorsey, the creator of Twitter, sold an NFT of his first tweet for almost $2.9 million.

Users can also use NFTs to represent a physical object like fine art or real estate. For instance, sections of Andy Warhol’s artwork were auctioned off as NFTs. This allows multiple people to own a small piece of an Andy Warhol work.

Features

The features of NFTs make them an attractive investment for many collectors.

• Record of ownership - Unlike physical objects like oil paintings, the origins of an NFT are easy to track.
• No mediators - Using a blockchain removes mediators' need to manage NFTs. Artists and collectors can transact directly with each other, reducing processing time and human error.
• Fractionalization - Certain cases, like the Andy Warhol artworks, have created a new market for NFTs by dividing ownership among hundreds of people; each person can own a small piece of the work.
• Licensing- Licensing original artwork can be done through NFTs, making the process trackable.

Relation to Cryptocurrency

NFTs and cryptocurrencies use blockchain technology, but each has its distinct characteristics.

Blockchain NFTs are unique digital tokens, while cryptocurrencies are currencies executed on the blockchain. Many NFTs can only be purchased using cryptocurrency. Meanwhile, users can trade various cryptocurrencies with fiat money. Both serve as investments that any can buy or exchange over time.

NFTs and cryptocurrencies have a blockchain foundation and employ comparable innovation and standards. As a result, they frequently attract participants who share similar interests.

NFTs typically require cryptographic forms of payment. They are non-fungible, and their value extends far beyond economics. Meanwhile, cryptocurrency is fungible and has economic value depending on your cryptocurrency type.

NFTs vs. Blockchain

These two emerging concepts have gotten a lot of attention recently; although they are similar in that they live in the same world, each has its own characteristics and features that make them distinct. In any event, blockchain and NFTs have altered many social norms, from how we look, value, produce, and distribute art to how we think about security, accuracy, and convenience.