In this article, we’ll look at the main differences between Bitcoin and NFTs.
By the time you are finished reading this article, you will understand:
One point worth noting before we begin is that NFTs can exist on more or less any blockchain.
While the first NFT’s were minted on the bitcoin sidechain Counterparty in January of 2014 (known as ‘TEST’), most NFT’s since were created on other blockchains.
That is slowly changing with the invention of Ordinals on Bitcoin.
For simplicity of understanding, I am using Bitcoin as the primary reference blockchain for this article and will use it in examples.
That said, not all NFTs work the same way across all blockchains, but that is beyond the scope of this article.
Bitcoins are not the same as NFTs. But they are also not opposites.
Here is what I mean by that.
In simple terms, Bitcoin is a system that uses a blockchain to record transactions on a ledger that anyone can look at. NFTs are purely digital creative assets (like an image or a sound file) that gets stored permanently in a transaction on a blockchain.
So…while Bitcoin and NFTs are different, they are related in a way.
To illustrate what I mean by this, think of bitcoin and other blockchains as trains.
Trains can be used to transport people, animals, cargo, or any number of other objects.
Think of the ‘bitcoin train’ as a train that has historically transported giant piles of money.
Transporting money was the intended purpose when this ‘bitcoin train’ was manufactured.
However, because the ‘bitcoin train’ is still just a train, it can transport other things too.
Someone could, for example, have the train transport a piece of artwork instead of a bag of money, especially since no one owns or controls the ‘bitcoin train’.
Is the piece of art a kind of train? No - trains and art pieces are very different things.
But the train and the art do have a relationship to each other. The train is just something that transports objects, and sometimes that object is a piece of art.
Ok…so obviously, blockchains are not trains either. They are more like databases.
So let’s tie the train metaphor together with how the blockchain and NFTs work together.
When you make a transaction on the bitcoin blockchain, you are usually sending some economic value (like money) to someone else.
This transaction takes up actual memory in a block, and that block space is limited (just like a train car).
You pay for the right to use that blockspace in the form of fees when making a transaction.
However, technically, you are not limited to using that blockspace to send bitcoin to another person.
You could, instead, pay the fee to use up the space in that block to put an image of your choice inside it.
This would be known as “minting” an NFT.
This is especially appealing for someone who wants that image to exist permanently - something no one can ever delete.
To go back to our train metaphor, it would be like paying to have your painting welded to the hull of the train car so it cannot be removed.
NFTs are minted differently depending on the blockchain, and those details are not that important for this article.
I just want you to understand what the NFT REALLY is and what kind of relationship it has to a blockchain.
That said, NFTs on bitcoin (whether they are created via a sidechain like Counterparty or using a newer technology like Ordinals) are still minted and transferred by making standard bitcoin transactions that do not appear any different to other transactions when merely looking at on-chain data.
Even though both Bitcoin and NFTs use blockchain technology, they are not the same.
An NFT is ultimately a kind of transaction on a blockchain that is meant to reference some sort of creative work for others to enjoy and trade.
Bitcoin has a blockchain where NFTs can be minted, but that is not its primary purpose (for now anyway).
Hopefully this article has cleared up any confusion about the differences between NFT’s and Bitcoin.