Cryptocurrency is a currency and is fungible, meaning that it is interchangeable.
For instance, if you hold one crypto token, say one Ethereum, the next Ethereum that you hold will also be of the same value.
However, NFTs are non-fungible, which means the value of one NFT is not equal to another. Every art is different from others, making it non-fungible, and unique.
Risks Involved in NFTs
The emergence of fake marketplaces, unverified sellers often impersonating real artists, and selling copies of their artworks for half prices are major challenges.
Trading NFTs involves technical processes that are sometimes misunderstood -- and that can lead to investors not knowing quite what they are dealing with.
NFTs can have a negative impact on the environment.
In order to validate transactions, crypto mining is done, which requires high-powered computers that run at a very high capacity, affecting the environment ultimately.
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Importance of Non-Fungible Tokens
Non-fungible tokens are an evolution over the relatively simple concept of cryptocurrencies.
Modern finance systems consist of sophisticated trading and loan systems for different asset types, ranging from real estate to lending contracts to artwork.
By enabling digital representations of physical assets, NFTs are a step forward in the reinvention of this infrastructure.
News Source: The Indian Express
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