The world is slowly shifting from traditional modes of the transaction to digital wallets which hold both, fiat currency as well as cryptocurrency. With many options to pick from, it is important to know the difference between the various forms of currency. Digital currency is nothing but the electronic form of fiat money that is issued by governments. Cryptocurrency, meanwhile, is a non-physical currency that is issued by a private system. It is decentralised, not regulated by any governing authority and runs on blockchain technology. NFTs or Non-Fungible Tokens are digital assets that denote real-world items like music, art, memes, fashion, etc. From collectible sports cards to memes, NFTs can represent any entity or be used to monetize any skill.
To put it simply, digital currency is the electronic form of real-world money. A person can buy products, conduct transactions using digital currency in any part of the world even though digital currency does not have any real-world physical presence. While digital currency does not require encryption, users will need to use unique and secure passwords to protect their digital wallets from theft or hacking.
Cryptocurrency runs on blockchain technology that records and stores data on all transactions made in a public ledger that can be accessible to anyone. It is a decentralised system, that is independent of any centralised regulation. All transactions are recorded in a decentralised ledger that is available to everyone to see, nullifying the need for a central authority. Unlike digital currency, it is protected by strong encryption.
NFTs are one-of-a-kind digital assets that represent real-world items. NFTs are not interchangeable and are different from cryptocurrencies which are fungible tokens. This means that NFTs cannot be traded the way cryptocurrencies are. NFTs are managed by a digital ledger and all transactions are done online.
How Are They Different From Each Other?
The primary difference between the three is that unlike cryptocurrency and digital currency, NFTs cannot be traded for each other as they are unique representations of real-world assets. Cryptocurrencies and digital currencies can be traded for each other as there will be no loss to their value.
Digital currencies are centralised and are regulated by authorities like banks and governments that keep a track of the transactions that take place. Cryptocurrency and NFTs are decentralised and are regulated by the communities that run them.
Unlike Cryptocurrency and NFTs that are accessible through a digital public ledger making all transactions transparent, digital currencies are private and information based on transactions and all money transfers are confidential.