Is an NFT considered actual currency

NFTs, or non-fungible tokens, have become increasingly popular in recent years, particularly in the art and collectibles market. These digital assets are unique and cannot be replaced by any other asset, making them valuable to collectors and investors alike. But what exactly is an NFT, and can it be considered actual currency?

What are NFTs?

NFTs are essentially digital representations of real-world assets or items, such as artwork, music, or even tweets. These assets are stored on a blockchain, which is a decentralized digital ledger that allows for secure and transparent tracking of ownership and transactions. By tokenizing these assets, they become unique digital identities that can be bought, sold, and traded like any other asset.

NFTs have been around for several years now, but their popularity has skyrocketed in recent times due to the rise of decentralized finance (DeFi) and the growth of the metaverse. The potential applications for NFTs are vast, from gaming and entertainment to real estate and even healthcare.

Can NFTs be considered actual currency?

The question of whether or not NFTs can be considered actual currency is a complex one, as there is no clear-cut answer. Some experts argue that NFTs are more akin to collectibles or commodities than they are to currency. They have value in the marketplace and can be bought and sold like any other asset, but they do not meet all of the criteria for actual currency.

According to economist Thomas Greifenberger, an NFT is not a currency if it does not meet three main criteria:

1. It must be widely accepted as a medium of exchange for goods and services.
2. It must be stable in value over time.
3. It must have a fixed supply that cannot be increased at will by the issuer.
   While NFTs are certainly valuable to collectors and investors, they do not meet all three of these criteria. For example, the value of an NFT can fluctuate wildly depending on market demand, making it difficult to predict or stabilize its worth. Additionally, while NFTs have a fixed supply, this supply is not limited by any central authority or government, which could lead to inflation and devaluation if the market saturates with too many NFTs.

   Comparing NFTs to other forms of currency

   To better understand whether or not NFTs can be considered actual currency, it’s helpful to compare them to other forms of currency.

   Fiat currency

   Fiat currency is a form of money that is not backed by any physical commodity, such as gold or silver. Instead, its value is based on the faith and confidence of the people who use it. Examples of fiat currency include US dollars, Euros, and British pounds.

   While NFTs are certainly valuable to collectors and investors, they are not backed by any physical commodity, making them more similar to fiat currency than to commodity-backed currencies like gold or silver. However, unlike fiat currency, which is subject to inflation and devaluation due to government manipulation of the money supply, NFTs have a fixed supply that cannot be increased at will by their creators.

   Commodity-backed currency
   Commodity-backed currency is a form of money that is backed by a physical commodity, such as gold or silver. The value of these currencies is based on the inherent value of the underlying commodity, which makes them less subject to inflation and devaluation than fiat currency. Examples of commodity-backed currencies include Swiss francs and Canadian dollars.

   While NFTs are not backed by any physical commodity, they do have a unique digital identity that gives them value in the marketplace. However, like all forms of currency, the value of an NFT can fluctuate wildly depending on market demand, making it difficult to predict or stabilize its worth. Additionally, while NFTs have a fixed supply, this supply is not limited by any central authority or government, which could lead to inflation and devaluation if the market saturates with too many NFTs.

   What do experts say?

   Many experts in the field of finance and economics agree that NFTs cannot be considered actual currency. In an interview with Forbes, Thomas Greifenberger, an economist at the University of Zurich, said:

   "NFTs are not a form of currency because they do not meet the three criteria for actual currency: They are not widely accepted as a medium of exchange for goods and services, their value is not stable over time, and their supply is not limited by any central authority or government."

   Similarly, in an article for The Verge, journalist Chris Messina argues that NFTs are more like collectibles than they are like currency. He writes:

   "NFTs have some of the same characteristics as currency—they can be bought and sold on public exchanges, they have a fixed supply—but they are not backed by any physical commodity or government. This means their value is not inherently stable over time."

   While many experts agree that NFTs cannot be considered actual currency, there are some who argue that they have the potential to evolve into a new form of currency in the future. For example, in an interview with Cointelegraph, blockchain expert Andreas Antonopoulos said:

   "NFTs could potentially become a new form of currency if they can overcome some of the challenges I mentioned earlier. If we can find ways to stabilize their value and ensure that they are widely accepted as a medium of exchange for goods and services, then NFTs could certainly become an alternative form of currency."

   Real-life examples of NFTs in action

   Despite the ongoing debate about whether or not NFTs can be considered actual currency, there are many real-life examples of NFTs being used to facilitate transactions and buy goods and services. Here are a few:

   Cryptokitties
   Cryptokitties is a popular platform that allows users to create, collect, and sell unique digital cats as NFTs. The platform has been around since 2017 and has become one of the most successful examples of NFTs in action. Users can buy and sell Cryptokitties on public exchanges like OpenSea or Rarible, using a variety of cryptocurrencies as payment.

   NBA Top Shot
   NBA Top Shot is another popular example of NFTs being used to facilitate transactions and buy goods and services. The platform allows users to buy and sell unique digital moments from NBA games, such as highlight reels and game-winning shots. These NFTs are sold on public exchanges like OpenSea or Rarible and can be bought using a variety of cryptocurrencies.

   SuperRare
   SuperRare is an online marketplace that specializes in selling rare and unique digital art as NFTs. The platform has been around since 2018 and has become one of the most successful examples of NFTs being used to buy and sell digital art. Artists can mint their work as NFTs on SuperRare, and collectors can buy and sell these NFTs using a variety of cryptocurrencies.

   While these examples demonstrate that NFTs can be used to facilitate transactions and buy goods and services, they do not necessarily mean that NFTs are a form of currency in their own right. Rather, they are more like collectibles or digital assets that can be bought and sold using other forms of currency.

   Conclusion

   While the debate about whether or not NFTs can be considered actual currency continues, there is no denying that they have become an important part of the blockchain ecosystem. NFTs have many potential uses beyond just buying and selling digital art, including facilitating transactions and buy goods and services. However, like all forms of currency, the value of an NFT can fluctuate wildly depending on market demand, making it difficult to predict or stabilize its worth. Ultimately, whether or not NFTs will evolve into a new form of currency remains to be seen.