What is the connection between NFTs and cryptocurrencies?

There is growing interest in NFTs all around the world, but investors with previous knowledge of cryptocurrencies are at an advantageous point here. There is a high level of correlation between these two asset classes. However, there are also important differences between NFT and crypto, which you should be aware of as a trader.

We will try to explore the link between cryptocurrencies and NFTs, in order to help beginners better understand this connection, with the help of the experts at MetabaseNFT, a social online NFT marketplace. Ultimately, you need to know how the industry functions before making investments, so here are the most important aspects to note.

Are NFTs cryptocurrencies?

A cryptocurrency is designed as a digital form of money. It has economic value and can be used for purchasing goods or services, making cross-border payments, or even as a way to hold on to  wealth. Having said that, it is fungible, meaning there are many tokens in circulation, each with the same value or price. 

As the experts from MetabaseNFT explain, this is where the difference emerges. Because NFTs are unique assets, they are not used to facilitate economic transactions. Instead, people treat them as an investment, just like most forms of art (paintings, sculptures, etc.) are.

Fungible assets have the risk of depreciating over time. A non-fungible asset, on the other hand, even if it has a floating value, contains potential to grow in value against fiat currencies or cryptocurrencies. The MetabaseNFT platform has recently been launched not only because there is growing interest in NFTs, but also in order to seize the advantages brought upfront by this innovative asset class. 

NFTs and blockchain

According to MetabaseNFT, there are several advantages to the fact that the blockchain is used for transactions related to NFTs. For example, artists no longer need to rely on galleries or auction houses to sell their art. Instead, it’s possible to sell directly to the consumer by creating (or “minting”) an NFT linked to that piece of art.

Like cryptocurrencies, NFTs are created on a blockchain. The platform with the most NFTs right now is Ethereum, the second-largest blockchain in the world after Bitcoin. There are other platforms facilitating the creation of NFTs, but Ethereum remains the top pick because tens of thousands of projects already operate on its infrastructure. 

An NFT can be created or minted from digital objects that represent tangible and intangible items like graphic art, collectibles, virtual avatars, music, and video game skins. At MetabaseNFT, for instance, it’s possible to choose between NFTs based on digital art and music, while new categories are projected to be added soon. 

NFT storage

Just like with cryptocurrencies, since NFTs are minted on a blockchain, they are also stored on the blockchain. This is in order to ensure strong security and negate some of the pitfalls associated with holding a physical asset. When buying an NFT which represents ownership rights over a painting, for example, you won’t have to store that painting in a secure place. Instead, you will receive a digital asset that certifies your ownership.