NFT means Non Fungible Tokens. DeFi means Decentralized Finance. NFTs are cryptographic assets. These assets are stored on the block chain. They carry unique identification number. The Decentralized Finance offers multiple financial services using block chain technology. In this article, I give you the differences between NFT and DeFi.
What is NFT?
The crypto currencies can be traded at equivalency. But you cannot trade NFT at equivalency. The crypto currencies are fungible tokens. Meaning, they are divisible and non-unique. The Non-fungible Tokens, on the other hand are unique and non-divisible.
Let us understand the non-fungible principle with examples. The flight tickets are non-fungible. There is no other flight ticket in the world as that of yours. You are to travel to New York from London at 20:00 hours on XX/YY/ZZZZ. The ticket is unique.
The same above principle applies to non-fungible tokens as well. They represent indivisible item like intellectual property or a picture.
Characteristics of NFT
The NFT can be sold or traded. The NFT is a data stored in block chain. This data can be sold or traded on digital markets. The NFTs cannot be interchanged mutually as you do with some crypto currencies like bit coin or ethereum.
How are NFTs different from crypto currencies?
The crypto currencies are fungible. You can trade one crypto currency with the other. However, you cannot trade one NFT with the other. You cannot express the value of one NFT in terms of other. For instance, you can buy X bit coins with Y ethereum. You cannot do this with NFTs.
What is De Fi?
The De Fi is a term use for trading, borrowing, investing money. The entire processes are done on distributed block chains. The DeFi need not require permission. You can easily access DeFi using crypto wallets. The transactions are transparent.
Applications of DeFi
LUNA, XTZ, AVAX are some of the DeFi tokens. You can use the DeFi systems like Pool Together or Comound to lend out or borrow digital assets.
NFT vs DeFi
- The NFTs are data stored in block chain. On the other hand, the DeFi is a financial service that does not rely on any intermediaries like banks or exchanges.
- The NFT offers value added services. They store the values of assets and aid in tokenizing them. The DeFi on the other hand offers financial transactions.
- There are no protocols for NFT. On the other hand, DeFi has protocols called DApps.
- The NFT assets are digital and physical. The technological applications of NFT are games, music, digital art, etc. On the other hand, DeFi is used to borrow and lend funds from crypto currencies.
- The control and visibility of NFT is moderate. The control and visibility of DeFi is high
- The source system of NFT is private. The source system of DeFi is open
On the internet platform, the NFTs are known by the term digital assets and the DeFi are referred to as financial system. The NFT aids in tokenizing your assets and the DeFi serves as the access point to financial services.
I have explained NFT and Defi and have clearly listed out the differences between them. Hope the article was useful.