NFTs or non-fungible tokens are the latest buzz in the crypto market. These are blockchain-based tokens that are used to represent the digital form of valuable, unique or rare physical items such as art or images. NFTs are different from traditional digital currencies and cryptocurrencies, as they cannot be traded with each other.
Let’s talk about how NFTs are different from cryptocurrencies and where and how to use them.
Digital currency is a very broad term and covers all types of electronic money that can be transferred and spent digitally. Cryptocurrencies, digital fiat currencies, etc. are digital currencies. Cryptocurrencies are different from traditional digital currencies, as they are not issued by governments or banks and do not have any physical existence. NFTs are the same as cryptocurrencies, as they are also based on blockchain technology. However, unlike cryptocurrencies, NFTs cannot be exchanged or traded as a store of value.
What are NFTs?
NFTs are non-fungible tokens that are created on the blockchain and typically represent the ownership of real-world items ranging from fashion to music, arts, images, collectibles, sports cards, and even unique skills, allowing creators to monetize their items or skills.
NFTs are digital assets, but they are not cryptocurrencies. Each NFT is unique and thus, cannot be exchanged for another. You cannot use your NFT to buy another NFT. The value of an NFT is associated with its rareness and demand. NFTs represent the ownership of a linked physical item or asset and can be used to conveniently buy, sell or trade the physical asset on the NFT marketplace.
HUMU is a popular example of an NFT marketplace for creators in the fashion industry. Not only the HUMU platform allows creators to tokenize and monetize their unique work, designs, content, etc. through a community of fans and creators globally but also it provides assurance of fair and fast payments.
What are Cryptocurrencies?
Cryptocurrencies are decentralized currencies based on blockchain technology. These are unregulated, independent currencies issued in a predefined manner and usable for a variety of purposes such as digital money, payments, utility tokens, security tokens, and others. Cryptocurrency transactions are highly secure, as all transactions are verified and stored on an immutable, encrypted blockchain. Also, cryptocurrencies allow users to perform fast and low-cost digital transactions, including payments, anywhere in the world.
Bitcoin, ETH, Ripple, DOGE, etc. are some of the popular cryptocurrencies. Most of these can be used for digital payments and are interchangeable with each other.
Cryptocurrencies Vs. NFTs
The main difference between cryptocurrencies and non-fungible tokens is that NFTs cannot be traded or exchanged with each other, as each NFT is a unique digital representation of a unique physical asset. Cryptocurrencies, however, can be traded with each other as well as with other digital currencies such as digital fiat.
Same as cryptocurrencies, NFT transactions are securely recorded on the blockchain and can be traced back in case of disputes. NFTs hold the information of the physical items attached to them along with certificates of authenticity.
NFTs are bought and sold through a bidding system on designed platforms called NFT marketplaces. Cryptocurrencies are sold on crypto exchanges.
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