Everything on NFT, Cryptocurrency, Tokenomics, so even a child could understand

This is all you need to know guide on NFT and Tokenomics written in simple explanation.

Photo by Dan Dennis on Unsplash

The NFT is the craze, and no one wants to be left out. Everyone wants to be a part of it. Who wouldn’t want to earn more money, right now? However, there is still a fear in joining this craze. This is because the average people still do not understand how cryptocurrencies work and the Tokenomics functions. In this article, we will be breaking down the ideas to understanding what you will get into and how money earning works.

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Topics:

  • NFT
  • NFT and Patronage
  • Cryptocurrency
  • NFT and Cryptocurrency
  • Tokenomics
  • Token

Recap: What is NFT?

If you read my previous article, I made a simple explanation of NFT and albums.

I wrote about the process of NFT and how it works. This time, I will explain the cultural economy built, which is patronage.

NFT and Patronage

Patronage has always gone hand in hand with the arts, notability, and credibility. The most accomplished patron would give their patrons the prestige that comes from ownership. It brings them prestige as no one else can enjoy it, besides them. There is a term known as ownership- as-consumption, it is owning art and lending it to a museum for the public to enjoy, or and in facilities where they are seen rarely if at all.

When people buy an NFT, they own something without excluding others from its enjoyment. .The patronage is on the experience of ownership. The NFT art does not need to have a niche to impact economic art. The NFT-funded artist can continue to work in the open cultural space to gain fans, sell tickets, market merchandise or just get his or her art out to as wide a public as possible.

However, the public doesn’t have thousands of dollars to spend. Once the craze cools for the collectors, and if NFTs are more affordable, other people will want to join the movement.

So basically,

NFT comes from patronage, but the artwork is shown to the public. Those artists will have a space to branch out to a wider audience because NFT does not have a specific niche.

If NFT markets find a way for it to affordable, more people will join.

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Cryptocurrency

What is cryptocurrency?

A cryptocurrency is a digital or virtual currency is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are based on blockchain technology, which is a decentralized network. The blockchain has a distributed ledger enforced by a disparate network of computers. There is no central authority, so they are immune to government manipulation.

So basically,

To break it down, it is an online currency that cannot forge because it has a difficult code to unlock. The reason why it is difficult to unlock is because of blockchain technology. The important feature of blockchain technology is the distributed ledger, which is on multiple networks of computers. It means that if someone were to manipulate your transaction, this person has to forge all the computers with that receipt.

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What is a decentralized network?

So basically,

Each server is a person. If post a story on Instagram, it will spread to the entire social group and everyone has a copy of your story. In case, someone makes a rumor on you, there are multiple people to verify the account is wrong because everyone saw the Instagram post. Unlike centralized networks, it just stays in a single server meaning you were alone. The reason why it is not as secure as the decentralized network is one server isn’t enough to verify your claim.

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NFT and Cryptocurrency

Cryptocurrency and NFT are from the same programming, but the digital signature of the NFT makes it impossible to exchange. You have to remember what NFT stands for “Non-fungible Token.” If you forgot what it means, it cannot be traded or exchanged for one another. It means NFT is not equal in value with another NFT. Unlike, a cryptocurrency it is fungible, and one Bitcoin is equal to another Bitcoin, which makes it a trusted way to conduct transactions. The value of the NFT is decided by how much a person is willing to pay for it.

So basically,

Both have the same programming.

Cryptocurrency is trusted more to do transactions because it is fungible, which means you can exchange it.

NFT is non-fungible and cannot exchange because of its digital signature. It means you cannot trade an apple for an orange.

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Tokenomics

Tokenomics is the study of the workings of cryptocurrencies within their ecosystems. These would explain the process of token distribution and how they can incentivize behavior in the behavior. However, Cryptocurrency allows individuals to create their micro-economies. They would follow the monetary policy of the banks and apply it in the blockchain network.

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The economist constantly monitors the issuance of the currency through the money supply data. The government controls the creation process of additional currency that causes the value of the money to reduce, which is inflation.

On the other hand, the cryptocurrencies and tokens built on blockchain have a schedule of issuance, and you can predict the number of coins created on a certain date in time. It gives comfort to owners to the degree their assets will be predictable than governments creating money.

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So basically,

Tokenomics is the study of cryptocurrency. It’s like our economics for traditional currency, not digital currency.

As our traditional currency follows monetary policy conducted by the government, the cryptocurrency uses blockchain instead, which removes the need for a third party, which is the bank.

The government controls the addition and reduction of currency, which we would know as inflation. The cryptocurrencies are built with the blockchain, and issue on their schedule and decide the number of coins.

What is a token?

A token is a term that means privately issued currency. This currency is issued on cryptocurrency or digital money. It comes with its terms and conditions because of the blockchain. In traditional currency, the government sets the terms and issuance of the currency and guides the economy with money as a value exchange medium.

So basically,

It’s digital money, which you use as a medium of exchange.

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NFT and Tokenomics

Now, that leaves you with the question of how these two are related.

So basically,

You can only buy NFT with tokens, and if you understand how Tokenomics works, then you can earn tokens to buy NFTs.

Please leave a clap and comment on what terms you want to learn, so I’ll make it easier.

NFT Enthusiast | Searching for Unicorn NFTs