Ahh, the ever-expanding world of cryptocurrency. I truly love it.
I’m an investor who is always researching and learning what’s the next best thing in our cryptoverse. I have made some nice gains along this volatile and lucrative rollercoaster that is the crypto market and am more than happy to pass along what I have learned.
Today, I will share the differences, similarities, and advantages I’ve found when it comes to non-fungible tokens (NTFs) and decentralized finance (DEFI). I’m also excited to write about some of my favorite coins for each sector.
The Difference Between NTF And DEFI
What is a NFT?
According to www.coinmarketcap.com, “A NFT (non-fungible token) is a special cryptographically-generated token that uses blockchain technology to link with a unique digital asset that cannot be replicated.”
In other words, they are crypto tokens you can buy that are connected to digital assets like art for instance. Each has a specific value connected to it that cannot be reproduced because they are undeniably proven to be genuine through technology.
Did that sound too technical? Well, for now, all you really need to know is that NFTs have degrees of rareness, uniqueness, and are often indivisible. Different traits determine different monetary values. And, they are basically bulletproof as far as adultering their qualities.
It is magical because NFT authenticity is verified by the Blockchain, their ownership rights are preserved with the wonders of decentralization, and they are transferable!
NFTs have a multitude of use cases in the digital world. They are ideal for digital art, games, assets, collectibles, and identity verifications to name a few. It is certainly a good way to keep your digital items safe from theft and altercations.
Some NFT examples include:
- Celebrities memorabilia can be made in NFTs to verify the digital items are directly from the stars themselves
- If you get a Masters in Science, your university can potentially create a NFT showing irrefutable evidence of your degree and qualifications
- An artist decides to create a new line of digital shoes and will release only 100 pairs as NFTs; Buy the first pair and you’ll be able to prove they were the first and therefore worth more in value
What is DEFI?
Decentralized finance is a way to operate freely within a financial system without the need for third parties to control financial transactions. It is essentially a movement that is eradicating the traditional slow ways of centralization amongst the traditional monetary systems.
In DEFI, third-party players like the banks are replaced with smart contracts, which are independent and built to be free of human corruption.
Although smart contracts are becoming better and better, some DEFI projects are still unaudited, meaning, you are responsible for the protection and vulnerability of your investment. Having said that, DEFI is a practical and relatively safe way to lend, borrow, or trade peep to peer without a middleman.
Beyond the DEFI movement, there are DEFI coins too. We will get to some of my favorites later in this article.
NFT and DEFI Similarities
– They are both transferable, peer to peer
– They both rely on the beautiful blockchain technology
– They both, technically offspring from the original, one and only bitcoin
NFT and DEFI Differences
– NFTs are digital assets while DEFI is a movement that cuts out the middlemen
– DEFI allows you to borrow and lend capital while NFTs only represent digital assets
-DEFI projects primarily run off of the Ethereum network and are smart contract heavy
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Three Of The Best Coins In NFT And DEFI
Uniswap itself is a decentralized platform for the automated trade of various tokens. In 2020 they created their own governance token called UNI. This allows its users to help shape the future of Uniswap and profit as the token becomes more valuable.
Aave is also a governance token and a decentralized protocol where you can borrow and lend cryptocurrency. Borrowers can use their crypto for loans in other forms of money and lenders can earn interest by putting their crypto in a liquidity pool. The AAVE token gives holders a say in future developments as well. I think by now you understand the brilliance of this. It’s like holding stocks in a company you believe in, only a whole lot better with a whole lot more capabilities.
Synthetix is another decentralized project with a spin on things. It allows SNX token holders to have exposure to a variety of cryptos and NON-CRYPTO ASSETS. You can make profits on an asset without directly holding that asset. Heard of ETFs? (exchange-traded fund). It’s an investment in the stock world that gives you broad exposure to the market with low fees with lower risks. Synthetix offers something similar to that.
My NFT Favorites:
Decentraland is fascinating to me because it acts as a virtual reality platform owned by its users. Users can buy virtual land, develop on it, experience it, and earn money from It in various ways. Two tokens exist in this decentralized world, MANA and LAND. MANA is a fungible cryptocurrency that can’ be held and sold or used to spend in the Decentraland metaverse. MANA can be exchanged for LAND parcels, which are basically NFTs used to record ownership, coordinates, and details within Decentraland.
Wow! Creating inside a virtual reality land with our virtual digital currency. Times are interesting!
CHZ is the acronym for the leading NFT in sports and entertainment. Fans can purchase and trade these tokens as well as participate in certain outcomes via polls and voting. Ownership of NFTs in this space allows fans to get that much closer to their favorite entertainment source by being able to influence and experience them on a brand new level.
Enjin Network is a gaming platform that allows its users to create websites, message boards, and even virtual stores within itself. ENJ is another cryptocurrency but it allows players to buy, sell, and trade in-game NFTs with real-world value.
The gaming world has never been more exciting and it is only growing. To hold some ENJ as well as using it to back digital assets within the expansive world of gaming, could be a lucrative investment…if you play the right game that is.
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Should You Invest In NFT Or In DEFI?
(Not financial advice, only my opinion!)
To NFT or to DEFI? That is the crypto question.
I tell ya, NFTs are really intriguing to me because they allow us to own and verify digital assets with specific scarcities and values. With a built-in BS detector, thanks to the beloved blockchain, you could effortlessly sell an original digital art piece you bought years prior for a heavy chunk of change. No appraiser, no art connoisseur, no nothing.
“But as an investment for SHORT TERM gains in 2021-2023…?“
You could, but it seems more likely a wiser long-term strategy over the next decade. Because of its trendiness and insufficient mainstream usability, NFTs are more likely to fade in and out in the short term until the idea becomes as easy to deal with as using the internet. THAT is when early investors can sell to the plethora of newcomers and reap those LONG TERM gains from getting in before the masses.
I imagine the future of non-fungible tokens to be a beautifully disturbing one, where, most of the physical world we know now, will become transformed into NFTs. Classical art AND the museum they sit in, artists’ creations AND the attributes of themselves, real estate AND the states or even countries they reside in, all digital assets in the cryptoverse/metaverse.
Some NFTs are somewhat of a phenomenon because, for example, Jack Dorsey (Twitter Creator) sold his first tweet as an NFT for 2.9 million! Could it be worth 10 million in 10 years? Maybe to someone…that is a phenomenon I can’t comprehend myself, but it is possible.
DEFI is not only another interesting and practical sector, indubitably a strongly structured narrative. A story I believe is going to remain intact, long term. It’s becoming a sure way to avoid those pesky people or institutions that attempt to control your money and your profits. It could be the promised land!
Investing in DEFI is also ethically a sound choice. It enables the bankless to gain access to financial services most of us take for granted. Imagine not having a bank account, not being able to take out loans, not being able to invest money or store it safely. DEFI solves this for anyone with an internet connection and a computer/smartphone.
In fact, over 60% of people living in countries like Vietnam, Egypt, and Mexico are excluded from the traditional financial services. Most of them could gain access to everything they need and more through DEFI.
If you’re going to pick one as a new investment, I would go with DEFI projects (not financial advice of course). All you need to do is pick the ones that have solid developing teams and a great track record. You can find multiple ways to grow your money through DEFI. You definitely won’t have to worry about whether a piece of digital art was just a trend or not.
This Is Only The Beginning:
That was fun! Although we only scratched the surface, I hope you have a better understanding of these two crypto players. Now it’s time for you to make some conclusions for yourself about NFT and DEFI investments.
Are you going to buy up all the LAND possible in Decentraland or are you going to pour as much crypto into decentralized liquidity pools for passive income?
Personally, I’m invested in both the DEFI and the NFT market.
One thing I know for sure, this is the very beginning and we all better buckle up!
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