Many people have perceived cryptocurrencies as a viable option for hedging against higher inflation. However, you must also know that cryptocurrencies also qualify as inflationary and deflationary assets. Will they help you combat inflation? The following post might help you find the answer with a detailed overview of inflationary and deflationary cryptocurrencies and the differences between them. 

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What is Inflation vs Deflation?

One of the first aspects of a discussion about inflationary vs deflationary crypto would focus on the difference between inflation and deflation. Both the terms might seem to have jumped out of an accountant’s handbook for any cryptocurrency beginner. Inflation points to a growth in prices of products and services when excess currency is in circulation, thereby causing the currency to lose value. 

On the other hand, deflation points to growth in the value of a currency along with the relevant drop in pricing of products and services. It is important to note that deflation is the consequence of limited currency in circulation. Inflation is good to an extent as it empowers the economy by driving people to spend more. On the other hand, inflation can turn into a serious issue when the prices grow faster in comparison to salaries.

Did you notice the common element in the difference between inflation and deflation? The answer is the supply of the currency. Fiat currencies are generally inflationary as it is possible to increase their supply according to your will. Since the overall economic activity remains constant in any situation, the value of a single unit of the currency drops. Deflation implies the reduction of demand and increase in supply, which can lead to higher purchasing power of the fiat currency. How does the concept of inflation and deflation fit in the domain of cryptocurrencies?

Inflationary Cryptocurrencies

As the world turns towards cryptocurrencies as a hedge against inflation, it is important to learn more about inflationary and deflationary cryptocurrency alternatives. The concepts of inflation and deflation are also applicable for cryptocurrencies as they are governed by the laws of supply and demand. 

An inflationary cryptocurrency is one with an increasing number of tokens in circulation. Some of the common approaches for introducing new tokens through mining, staking, and other methods can help in increasing the circulating supply of tokens. The increasing supply of the token would cause a drop in its value. As a result, users have to spend more tokens for purchasing a specific product, asset, or item. 

Dogecoin is the best example of inflationary cryptocurrencies in an inflationary vs deflationary cryptocurrencies debate. One of the creators of Dogecoin removed the hard supply cap of 100 billion DOGE in the year 2014. The move was particularly directed towards ensuring an unlimited supply of the asset. Subsequently, the supply of the token could easily outpace demand, thereby decreasing the value of all Dogecoin tokens. 

On the other hand, you can also identify other inflationary assets, such as Bitcoin, which feature inflation only to a specific limit. How can a cryptocurrency be a limited inflationary asset? The total circulating supply of Bitcoin is 21 million, thereby implying that there could be 21 million Bitcoins ever in circulation. Once the supply limit runs out, Bitcoin mining would disappear, thereby turning Bitcoin into a deflationary cryptocurrency. 

Interestingly, Bitcoin has employed an innovative mechanism for slowing down inflation by halving it. Period every four years, Bitcoin network reduces the number of Bitcoins that can be mined and entered into circulation. Some of you might be wondering about the fact that 19 million Bitcoins are already in circulation, thereby leaving little time for mining the rest. 

On the contrary, the gradually dropping rewards for mining would suggest that the 21 million mark might be years away. Bitcoin treads the thin line between inflationary and deflationary cryptocurrency with a considerable reduction in mining rewards. For example, the mining reward in 2016 amounted to almost 12.50 Bitcoins. In 2020, the rewards dropped to almost 6.25 Bitcoin and would round up to 3.125 BTC in 2024. Halving is an effective mechanism for reducing the number of cryptocurrency tokens in circulation. 

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Deflationary Cryptocurrencies

Deflationary cryptocurrencies are the ones where the supply of coins would decrease over the course of time. Therefore, the value of every coin would increase even in scenarios with consistent demand. On the other hand, different projects use unique deflationary initiatives for specific objectives. A detailed understanding of deflationary cryptocurrencies is an important requirement to learn the difference between inflationary and deflationary cryptocurrency alternatives in the market. 

One of the examples of showcasing deflationary cryptocurrencies refers to the crypto exchange Binance. The crypto exchange destroys a few of its native Binance Coins or BNBs to reduce the supply every quarter. Similarly, the crypto exchange Polygon also burns its native MATIC tokens to reduce supply of the token. 

In addition, you must also learn about the examples of cryptocurrencies that serve as central banks. Such cryptocurrencies use inflationary as well as deflationary methods for maintaining the value of the token. The best example of such a deflationary cryptocurrency refers to the TerraUSD or UST stablecoin. The TerraUSD network, or Terra Network, mints and destroys its tokens to maintain the price of the stablecoin constant at $1. 

Your understanding of inflationary vs deflationary crypto would also focus on the understanding of Ethereum as a deflationary cryptocurrency. The native token of Ethereum, i.e., Ether, was a completely inflationary asset at one point in time. On the other hand, Ethereum introduced an update in August 2021 to make Ether deflationary during rising in network activity. The update introduced a clause for burning ETH to reduce supply. According to the reports of a tracking website, over 1.7 million Ether coins amounting to more than $4.5 billion have been destroyed. 

The example of Ripple also shows a different approach for making its native token, XRP, a deflationary cryptocurrency. Ripple released 100 billion XRP tokens at once and locked away around 55 million tokens in 2017. The locked tokens would be released on a periodic basis to maintain liquidity. In addition, users have to pay a small transaction fee with every transaction featuring XRP. The Ripple network also burns the transaction fee for maintaining the deflationary nature of its XRP token. 

Factors behind Economics of Inflationary and Deflationary Crypto

The economic implications associated with inflation and deflation of fiat currencies can be quite confusing. However, the inflationary vs deflationary cryptocurrencies comparison presents a more straightforward interpretation of both concepts. Inflationary cryptocurrencies feature a system that enables a continuous growth in the number of tokens in supply. 

On the other hand, deflationary cryptocurrencies feature a system with tokens in supply reducing gradually over time. The deflationary mechanisms can include periodic burnout of tokens or lowered minting rewards. How do you differentiate an inflationary cryptocurrency from a deflationary cryptocurrency? Here are the three important factors for the economics underlying inflationary and deflationary cryptocurrencies. 

• Maximum Supply

Some cryptocurrencies have set a hard cap on the number of tokens they can ever put in circulation. The best example of a cryptocurrency with a maximum supply limit is Bitcoin, with its 21 million BTC mark. 

• Circulating Supply 

The most important factor of difference between inflationary and deflationary cryptocurrency refers to the token’s circulating supply. Circulating supply refers to the total number of cryptocurrencies associated with a specific blockchain moving around on the chain. 

• Total Supply 

The total supply refers to the total supply of tokens defined for a specific cryptocurrency token. It may also point to the number of tokens mined till now on the blockchain network, thereby creating similarities with the description of circulating supply. 

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Basis for Inflationary and Deflationary Cryptocurrencies Comparison

The most critical highlight in a comparison between inflationary and deflationary cryptocurrency draws attention to demand and supply pertaining to a specific cryptocurrency. A better understanding of tokenomics pertaining to inflationary and deflationary cryptocurrencies can set the ideal foundation for comparing them. The important factors in the tokenomics of a specific cryptocurrency include overall production, distribution, and quality of a cryptocurrency token. 

The tokenomics of a cryptocurrency are generally outlined in the whitepaper of the concerning blockchain. You can use the whitepaper of a blockchain to identify whether the native token offers an unlimited and gradually increasing supply or a restricted and gradually dropping supply. The cryptocurrencies with a fixed supply, such as Bitcoin, Binance Coin, Ripple, and Cardano, can showcase a reduction in supply alongside driving higher demand. As a result, these cryptocurrencies can gain value improvements over the course of time.  

Can the whitepaper help you identify the difference between inflationary and deflationary cryptocurrency? First of all, you need to discard the common beliefs regarding inflationary cryptocurrencies. Some of the inflationary cryptocurrencies with unlimited supply, such as Ethereum and Dogecoin, are not as bad as people imagine. 

They might be serving lower demand and higher supply now. However, one should understand how the crypto ecosystems don’t fall prey to economic downturns like the fiat currencies. Irrespective of an unlimited supply, an inflationary asset would never affect the long-term picture of demand and supply. 

Take the example of Ethereum, which does not have any hard cap. Irrespective of the hard cap, Ethereum blockchain allows only a specific amount of ETH to be mined every year. Assume that the existing ETH supply has a market capitalization of almost 100 million, then users can mine only 18 million ETH every year. In this case, the inflation rate would be 18%. With continuous growth in market cap of ETH over the course of time, the inflation rate would reduce gradually. 

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Inflationary vs Deflationary Cryptocurrency Comparison

The general action of investors might turn towards deflationary cryptocurrencies over the inflationary crypto assets. However, you can notice how inflationary cryptocurrencies can also bring plausible benefits alongside working on new mechanisms for reducing inflation. For now, the inflationary vs deflationary crypto debate ultimately rounds up on one plausible observation. 

The observation suggests that inflationary and deflationary cryptocurrencies have their unique advantages and drawbacks. For example, inflationary cryptocurrencies can cause scenarios where demand overpowers supply. At the same time, they are also essential for continuing the mining process without any interruptions. On the other hand, deflationary cryptocurrencies can help you capitalize on the benefits of a price surge, an important value benefit for investors. 

Here is an overview of the comparison between inflationary and deflationary cryptocurrencies on the basis of different factors.

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• Supply 

The obvious aspect in the overview of inflationary vs deflationary cryptocurrencies points at supply. As a matter of fact, the difference between inflationary and deflationary cryptocurrencies is all about the change in supply of the native token. In the case of an inflationary cryptocurrency, you have an increased supply of the token in circulation. On the other hand, a deflationary cryptocurrency is one that offers a reduced supply of cryptocurrencies. 

• Purchasing Power

The purchasing power of inflationary and deflationary cryptocurrency also serves as one of the basic pointers in their comparison. One of the evident observations about an inflationary cryptocurrency would refer to the lower purchasing power. When the number of tokens of a specific cryptocurrency has increased in circulation, it loses its value. On the other hand, the deflationary cryptocurrency would gain value due to the limited supply. The reduced supply alongside the consistent demand can support growth in pricing of the deflationary cryptocurrency. 

• Conversion

The flexibility for conversion of inflationary to deflationary assets is also another important aspect in the comparison between the two types of cryptocurrencies. Inflationary cryptocurrencies are inherently inflationary, which means that they come with an unlimited supply. On the other hand, the inflationary vs deflationary crypto debate must focus on how inflationary cryptocurrencies can turn into deflationary cryptocurrencies temporarily.

Inflationary cryptocurrencies can impose deflationary mechanisms for fighting inflation in certain cases. For example, Ethereum, which has an inflationary cryptocurrency ETH, burns a specific share of the tokens at times of high activity. However, deflationary cryptocurrencies are deflationary by nature and could not be created according to will. The specific examples of deflationary cryptocurrencies show how they use distinct mechanisms or restrictions to restrict the supply of tokens in circulation.

• Value

One of the significant highlights in a comparison between inflationary and deflationary cryptocurrencies would also refer to their value. How are inflationary and deflationary cryptocurrencies different in terms of their value for crypto in general? The difference between inflationary and deflationary cryptocurrency would show you that deflationary cryptocurrencies would increase in value over the course of time owing to scarcity. 

On the other hand, it is important to note that demand also plays a critical role in driving the value of deflationary cryptocurrencies. Without any demand, the value of an asset would decrease considerably, contrary to the general expectations. When you consider the value of inflationary cryptocurrencies, you might not fetch much with them right now. However, the value of intrinsic cryptocurrencies rests in diverse use cases, such as the popular example of Ether for DeFi applications.   

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Final Words

The inflationary vs deflationary cryptocurrencies debate offers interesting insights into the world of cryptocurrencies. Even the crypto landscape is not immune to the clauses of inflation and deflation, owing to the factors of demand and supply. The differences between inflationary and deflationary cryptocurrencies basically reflect the fact that supply of a cryptocurrency determines its value and purchasing power. 

However, you must notice mechanisms for converting inflationary cryptocurrencies into deflationary cryptocurrencies through burning tokens or fixing caps on circulating supply. The differences between inflationary and deflationary cryptocurrencies are essential for every investor interested in cryptocurrencies. At the same time, it is also important to learn every risk factor associated with cryptocurrencies in detail. 

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

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Many of you must be wondering about the possible pointers of difference between NFTs and the metaverse, while some of you may be witnessing the terms for the first time. The following discussion offers you a detailed overview of NFTs and the metaverse alongside the differences between them.

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What are NFTs?

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Non-fungible tokens or NFTs are a new group of digital assets based on blockchain technology. NFTs are basically the representation of assets on a blockchain network. For example, you can create unique digital artwork and convert it into an NFT. The artwork would stay on a blockchain network with access privileges specified by the owner. 

Similarly, you can also represent a piece of real estate as NFTs on a blockchain network. How are NFTs so special in the metaverse vs NFT comparison? The distinct highlight of NFTs refers to the fact that they represent unique ownership titles to a specific asset, physical or virtual. If you own an NFT, you are the sole owner of the NFT, and nobody else can exercise their rights to the asset. 

Blockchain serves as the most common highlight of difference between NFT and metaverse, with a direct focus on blockchain being a component in both. Blockchain technology not only serves as a decentralized, peer-to-peer system for cryptocurrency transactions. It can work as a ledger of transactions with a specific asset and could help in tracing the journey of the NFT through different transactions. Who bought the NFT? Are there any subsequent sales of the NFT in the future? No matter what information you want about an NFT as its owner, you can discover it easily. 

NFTs or non-fungible tokens are unique assets because they are not interchangeable. Apart from the assurance of single proof of ownership, non-fungible tokens cannot be exchanged for one another. You cannot exchange a vintage trading card with a few collections of new trading cards. The ‘non-fungible’ in NFTs basically means that every NFT has its own distinctive highlights, separating them from one another.

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 Real Uses of NFTs

The NFT vs metaverse comparison would also point at the different examples of non-fungible tokens in music and artwork. An overview of the examples of NFTs could provide a better impression of how they are different from the metaverse. You can notice some of the popular examples of NFTs, such as the CryptoPunks and BAYC NFTs. 

Bored Apes are a huge hit among celebrities as they are gaining popularity as the most interesting profile pictures on the internet. Similarly, other use cases of NFTs imply a representation of ownership over physical assets. The distinct traits of the NFTs support their different use cases. When you purchase an NFT, you receive the ownership certificate for the asset it represents. 

You can find the next pointer in the non fungible token vs metaverse comparison on the grounds of accessibility of NFTs. Where can you find them? Accessibility of NFTs definitely plays a crucial role in ensuring that you have them at your disposal when you need them. Interestingly, the broad collection of NFT marketplaces is one of the foremost advantages for accessing NFTs when you need them. Some of the popular NFT marketplaces, such as OpenSea, offer access to all types of NFTs with their detailed information. You can use cryptocurrencies for purchasing NFTs just like you would purchase another crypto asset.

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Understanding the Metaverse

The answers to “Are NFT and metaverse the same?” can find a solid footing only through a detailed understanding of the metaverse also. After uncovering the basics of non-fungible tokens, it is important to unravel the mystery behind the metaverse. Conceived as a major plot element in a science-fiction novel in 1996, the metaverse points to some significant changes in the way we use and access digital technologies. One of the most significant highlights about the metaverse suggests that it would be a 3D representation of the internet. Think of moving around the internet as if it were a huge virtual superstore with different shops and stalls. 

The metaverse definition can offer much-needed clarity for the metaverse vs NFT comparison. As of now, the internet has been through a few distinct stages of evolution, starting with web 1.0 and continuing with web 2.0. The web 3.0 revolution is more likely to introduce a wave of new decentralized applications tailored for personalized use cases. Many companies are working on developing their metaverse platforms with the basic objective of changing how people think of virtual gaming or virtual worlds. Many users could experience the different features of the metaverse at one particular instance of time. 

The general definition of a metaverse in the non fungible token vs metaverse comparison would draw the limelight towards the identity of a virtual world. The metaverse is a massive, open, shared, and persistent virtual world rendered in 3D with a collection of various virtual spaces. Each virtual space in the metaverse can offer access to specific services and solutions. 

Most important of all, the virtual spaces in the metaverse are completely interoperable with each other. You can establish a solid line of difference between NFTs and the metaverse by checking out the similarity between them. The metaverse also depends on blockchain technology to an extent for facilitating interoperability alongside security of assets. Blockchain technology not only offers decentralization for the metaverse but also the foundations for a creator economy.

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Real Uses of Metaverse

The world is still a few years away from witnessing a completely functional metaverse. However, many metaverse platforms have already made a mark in the web 3.0 ecosystem for their unique functionalities. As of now, most of the use cases of the metaverse are evident in the field of gaming. The difference between NFT and metaverse might become a bit clear when you can identify the basic relationship between the concepts. Non-fungible tokens are the essential tokens or products required for trading within the metaverse. NFTs serve as representatives of asset ownership within the metaverse. For example, virtual land parcels are actually NFTs. 

The use cases of the metaverse are more likely to expand in the future as the technology attains more maturity. One of the most popular use cases of the metaverse refers to advertising in the metaverse. Brands can leverage virtual spaces within the metaverse as the favorable grounds for spreading the word about their new products or services. Many popular brands such as Nike, Louis Vuitton, and others have successfully ventured into the metaverse for the objectives of advertisement. 

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Difference between NFTs and the Metaverse

NFTs and the metaverse are practically the two hottest terms in the emerging web 3.0 landscape right now. Almost everyone in the world of technology wants to know, “Are NFT and metaverse the same?” with massive levels of unprecedented growth in their popularity. On the contrary, it is important to look for the ways in which both terms are different. The differences between NFT and the metaverse can help you understand how they fit in the broader web 3.0 ecosystem. 

Many of you must have perceived the internet we see today as the perfect iteration of the same. However, the web 2.0, or the internet we see and use today, has a lot of complications underneath. For example, the control of user data in the hands of centralized companies is a huge setback for user privacy. 

The concepts of metaverse and NFTs are revolutionizing the future of the internet. The primary difference between NFT and metaverse points to the basic definition of the two. Non-fungible tokens are basically a type of virtual token, while the metaverse is a virtual world of its own. Here is a detailed overview of the differences between them.

Here is an outline of the differences between NFTs and the metaverse in a table.

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• Foundations

The definition of NFTs and the metaverse provide adequate grounds for effective comparison between them. You should take note of the fact that the basic foundation in the NFT vs metaverse comparison revolves around the use of blockchain technology. Blockchain is an integral part of NFTs as it is crucial for smart contract development, which dictates the ownership and transactions with NFTs. 

On the other hand, the metaverse is a large world based on the vision of creating an open, shared, persistent, and highly interactive internet. Non-fungible tokens feature the traits of immutability, non-fungibility, and security. On the other hand, the metaverse offers a broad range of traits, including decentralization, user identity, creator economy, and experiences. 

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• Origins

The origins of NFTs go back many years to 2017 with the introduction of CryptoPunks. At this time, the CryptoKitties collection also made some news for congestion of the Ethereum network. The origins of NFTs suggest the possibilities for creating new blockchain-based assets which denote unique ownership. As a result, the arrival of NFTs might have apparently triggered new developments in facilitating decentralization of asset ownership.

The metaverse vs NFT comparison in terms of origins shows the vision and goals behind each technology. Speaking of goals, the metaverse does not have a single goal. It improves decentralization and opens up the doors to many other use cases. The origins of the metaverse go back to a science-fiction novel, which depicts the metaverse as an escape from the real world. 

• Usability

The next prominent highlight in the non fungible token vs metaverse difference would point at the usability. How easily can you access the NFTs or metaverse platforms? You can find many platforms such as NFT marketplaces for getting your hands on the best NFTs. As of now, OpenSea is the biggest NFT marketplace where you can navigate through all details of NFTs before buying them. 

You would also find how the metaverse is also easily accessible through multiple platforms. Users can access the Sandbox metaverse, Roblox gaming metaverse, or other metaverse platforms, especially the Facebook Meta platform. All you need is a set of your favorite VR or XR gadgets, and you can enter any metaverse platform. 

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Final Words

The overview of the NFT vs metaverse comparison shows that they are completely different entities. Most of the confusion surrounding similarities between them revolves around the fact that both of them have close ties with decentralization. NFTs are transforming the way we perceive asset ownership in the real and virtual worlds. 

On the other hand, the metaverse is transforming the way we perceive and use the internet. Will both technologies bring any meaningful change to the world in general? As the world experiments with new innovative developments in NFTs and the metaverse, many professionals are interested in learning about them. Explore a treasure trove of learning resources on NFTs and the metaverse on 101 Blockchains now.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

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Binance is one of the biggest names in the world of cryptocurrencies and is probably the biggest centralized crypto exchange. As of 2021, Binance registered a trading volume of $9.5 million. In addition, Binance also features a unique blockchain network with two parallel blockchains, i.e., the Binance Chain and the Binance Smart Chain (BSC). 

This is where you can come across the BEP2 vs BEP20 debate, as they are the native token standards of Binance Chain and Binance Smart Chain. However, it is important to note the other important highlights in differences between BEP2 and BEP20 token standards, particularly focused on their functionalities. 

The following discussion offers you an overview of the difference between BEP2 and BEP20 tokens with a detailed guide on the foundations for their differences. With a comprehensive impression of the Binance Chain and Binance Smart Chain, you can figure out the differences between BEP2 and BEP20 clearly.

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What is BEP2?

The obvious highlight in any BEP20 vs BEP2 comparison would draw attention to the definitions. First of all, it is important to take note of BEP2, which is the fundamental token standard for the Binance native coin or BNB. The standard token format worked for all the transactions on the Binance crypto exchange. BEP2 token standard was initially tailored for use on centralized as well as decentralized exchanges. 

However, the standard token format for BNB presents notable restrictions for using BEP2 tokens in any other blockchain beyond Binance. Therefore, it is possible to use BEP2 tokens only as transaction fees for Binance centralized and decentralized crypto exchanges. On the other hand, token holders can convert BEP2 tokens into BEP20 tokens for applications in other Binance landscapes.

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Binance Chain and BEP2

The basic overview of BEP2 sets a strong foundation for answers to “What is the difference between BEP2 and BEP20?” with some distinguishing traits. However, it is important to note that BEP2 tokens are an integral part of the Binance Chain, the first blockchain network by Binance. The Binance Chain served as the foundation of the Binance decentralized exchange, focused on processing decentralized crypto transactions. 

Binance Chain can work in integration with the whole Binance ecosystem alongside the facility for interactions with Binance Smart Chain. On the other hand, it is important to note that Binance Chain does not offer support for executing smart contracts. You cannot build a dApps ecosystem with Binance Chain. On top of it, Binance Chain uses the Proof of Work consensus mechanism, much similar to Bitcoin.

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What is the BEP20 Token Standard?

The next competitor in the BEP2 vs BEP20 debate is also a token standard for the native Binance coin, BNB, on Binance Smart Chain. BEP20 standard BNB tokens are the native tokens for the Binance Smart Chain. The most important highlight of the BEP20 token standard is the inspiration from Ethereum ERC20 token standard. 

BEP20 token standard features many similarities to the ERC20 token standard and offers compatibility with Ethereum smart contracts. On top of it, BEP20 also takes an upper edge in the BEP20 vs BEP2 comparison by supporting compatibility with the Ethereum Virtual Machine. Another significant highlight of BEP20 tokens is interoperability, thereby enabling easy conversion of BEP20 tokens to BEP2 tokens. 

Interestingly, the BEP2 to BEP20 Bridge serves as a vital tool for converting BEP2 tokens into ERC20 compatible tokens for linking with other blockchain networks. The basic objective underlying the origins of BEP20 primarily focuses on all the transaction requirements for different decentralized applications on Binance Smart Chain.

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Binance Smart Chain and BEP20

The pointers in the difference between BEP2 and BEP20 would obviously revolve around Binance Chain and BSC. Binance announced the development of BSC in April 2020 and launched it in September 2020. The Binance Smart Chain emerged in response to the massive popularity of Ethereum and the associated dApps ecosystem. 

In addition, new emerging fields in the domain of decentralization, such as NFT, crypto games, and NFT, have been one of the prominent reasons for driving Binance to come up with BSC. If Binance could support all these activities, then it would need a blockchain network that can support smart contracts. 

While Binance Chain definitely seemed like a favorable suggestion, it was not capable of smart contracts or complex programming language. As a result, Binance Smart Chain evolved as a favorable answer to the limitations of the Binance Chain. Rather than the Proof of Work consensus, BSC utilizes the Proof of Stake Authority or PoSA consensus algorithm. 

The new consensus algorithm is a prominent highlight for BSC apart from the BEP2 to BEP 20 Bridge, also referred to as the Binance Bridge. The new Proof of Stake Authority consensus algorithm helps in securing the blockchain while also enabling functionalities for creating and staking in the dApps landscape. One of the notable examples of BSC applications refers to PancakeSwap, the popular decentralized exchange. 

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Differences between BEP2 and BEP20

After a detailed impression of the Binance Chain and BSC alongside their relationship with BEP2 and BEP20, you can reflect on the differences between BEP2 and BEP20. When you take a look at both the token standards, you can find a few differences. However, there is more to the BEP2 vs BEP20 token standard comparison than the overall differences between Binance Chain and Binance Smart Chain. Here is an in-depth comparison between BEP2 and BEP20 tokens on the basis of every pointer of difference you can possibly take into account.

Here is an overview of the difference between BEP2 and BEP20, which can help you understand their broader implications –

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• Blockchain Network

The first and obvious answer to “What is the difference between BEP2 and BEP20?” points at the Binance blockchain they work on. BEP2 tokens are native to the Binance Chain, while the BEP20 tokens are native to the Binance Smart Chain. Remember that BNB tokens can be BEP2 as well as BEP20. 

• Smart Contract Support 

The second critical highlight of the differences between BEP2 and BEP20 focuses prominently on support for smart contracts. As the popularity of decentralized applications continues to reach new heights, developers are seeking reliable web3 ecosystems for new projects. 

In such cases, smart contract support is a promising highlight for developers interested in creating decentralized applications and smart contract-based solutions. The support for smart contracts on Binance Smart Chain ensures flexibility for developing web3 projects and dApps. BEP20 takes the upper edge over BEP2 in terms of the support for smart contracts. 

• Token Addresses

The token addresses also serve as an important highlight in the BEP20 vs BEP2 comparison. You can differentiate a BEP2 token address from a BEP20 token address quite distinctively. The wallet address for BEP2 tokens starts with a “bnb” in the beginning, alongside implying the need for a MEMO. On the other hand, the BEP-20 tokens have wallet addresses that are quite similar to that of the Ethereum blockchain. You can notice that the wallet addresses for BEP20 tokens start with “x0” in the beginning, like Ethereum wallet addresses.

• Ethereum Compatibility

The next evident answer to the differences between BEP2 and BEP20 tokens refers to the compatibility with Ethereum. BEP2 token standard is the first native token standard for the Binance Chain and is limited within the Binance ecosystem. It is impossible to use BEP2 tokens on other blockchain networks. On the other hand, the BEP20 token standard has been tailored to the foundations of the Ethereum ERC20 token standard. 

Therefore, BEP20 gains the upper hand in the difference between BEP2 and BEP20 in terms of compatibility with Ethereum. As a matter of fact, you can discover many similarities between BEP20 and ERC20, which make BEP20 tokens compatible with the Ethereum ecosystem. Therefore, BEP20 has been designed with the vision of flexible and easy interactions with web3 ecosystem. 

• Consensus Mechanisms

The consensus mechanisms of Binance Chain and Binance Smart Chain also serve as important pointers of difference. You can notice that Binance Chain uses the Proof of Work consensus algorithm. Therefore, transactions involving BEP2 tokens are more likely to have higher costs and damage to the environment. In addition, Proof of Work is also resource-intensive, with limited possibilities for additional rewards. 

The BEP2 vs BEP20 comparison turns in favor of BEP20 for its Proof of Stake Authority consensus mechanism. The Proof of Stake Authority consensus mechanism in BEP20 tokens enables access to opportunities for staking. At the same time, users have the advantage of better speed and lower costs for transactions. 

Developers are turning towards Binance Smart Chain for the support of BEP20 token standard in creating web3 solutions with staking facilities. On the other hand, the Proof of Stake Authority consensus mechanism ensures limited damage to the environment. 

• Transaction Costs on the Binance

The BEP20 vs BEP2 comparison would also draw the limelight on the burden of transaction fees. Developers are more worried about the transaction costs, as it can make or break the appeal of their new projects. BEP2 tokens impose transaction fees on the Binance CEX and DEX, thereby presenting a massive cost burden. On the contrary, BEP20 tokens don’t imply the need for any transaction fees for Binance CEX and DEX. 

• Scalability

The unique parameters of BEP20 tokens also mark a prominent entry in answers to “What is the difference between BEP2 and BEP20?” which can match the growing needs for scalability. Unlike BEP2 tokens, the minting and burning parameters of BEP20 tokens can help developers configure the number of new tokens required or the number of tokens you have to burn. 

The flexibility for controlling the supply and demand of BEP20 tokens definitely serves as a boost for scalability of BEP20 projects. In addition, you have the given advantage of compatibility with Ethereum in BEP20, which support its claim for scalability.

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Final Words 

On a concluding note, the debate on BEP2 vs BEP20 ends up in favor of BEP20. BEP2 is undoubtedly the original token standard in the Binance ecosystem. However, BEP20 is the driving force behind the change that can empower Binance for the web3 ecosystem. Whether it is the support for smart contracts or compatibility with Ethereum, BEP20 has all the right ingredients to build the future of Binance. 

On the other hand, you cannot exclude BEP2 tokens completely from the picture as they are an integral highlight of the Binance platform. Interestingly, the BEP2 to BEP20 Bridge has made it easier to ensure interoperability between Binance Chain and Binance Smart Chain. Will both the token standards work independently or merge in the future? Learn more about the Binance Smart chain and find the answers.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post BEP2 Vs BEP20 – Key Differences appeared first on 101 Blockchains.

Ethereum evolved as one of the prominent solutions for resolving the limitations associated with Bitcoin, the first-generation blockchain network. The primary idea behind Ethereum revolved around introducing an open-source blockchain network with the functionality for developing smart contracts. One of the most prominent use cases of Ethereum has been evident in token development. 

As a result, the ERC 1155 vs ERC 721 debate has become a critical concern for everyone interested in Ethereum. Most important of all, these two token standards are quite significant for the emerging applications of non-fungible tokens. The popularity of ERC 721 and ERC-1155 token standards have been largely revolving around the growth of NFTs. Let us learn more about these two token standards and how they are different from each other. 

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What are ERC Token Standards?

Before discussing the ERC 721 vs ERC 1155 differences, it is important to have a brief overview of ERC token standards. What is the significance of ERC token standards in the crypto landscape? ERC or Ethereum Request for Comments is basically a technical document that provides specifications for the methods, innovation, research, and traits for a specific group of users in the Ethereum ecosystem. 

The ERC token standards like ERC-721 and ERC 1155 offer explanations for different rules pertaining to ERC tokens on Ethereum. Most important of all, the Ethereum community contributes to amendments in the rules of the token standards after a comprehensive review. As of now, the three most popular ERC token standards include ERC-20, ERC-721, and now, the ERC-1155.

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Why Should You Think of ERC 721 vs ERC 1155?

Ethereum has grown into a massive ecosystem of decentralized applications and web3 trends. As a result, development teams have to come up with new token standards. The earliest instances of token standards, such as the ERC-20 token standard, helped in defining the functionalities of traditional tokens. On the other hand, the ERC-20 token emphasized associating every asset with fungibility, thereby offering the functionality of fiat currency. 

On the other hand, ERC 721 has been gaining notorious levels of attention in recent times. Why? The primary reason for the increased adoption of ERC-721 token standards is the growing hype around NFTs. Non-fungible tokens are everywhere in the tech world, starting from social media to crypto research papers. The ERC-721 token standard offers the right foundation for creating a customized, non-interchangeable token. For example, you can create a unique collectible trading card with the ERC-721 token or a completely unique personal avatar. 

Where does ERC 1155 come into the picture? The comparisons between ERC-721 and ERC-1155 are gradually becoming more significant for the future of crypto. You must notice how ERC-721 focuses only on non-fungible tokens. This is where the difference between ERC 1155 and ERC 721 becomes quite clearly evident. 

The ERC-1155 token standard comes with a revised set of traits, which allows the mixed use of fungible and non-fungible tokens. Quite confusing, isn’t it? NFTs are gradually evolving as a major force in popular culture. Therefore, the token standards for creating and managing NFTs are obviously crucial aspects of their future. Developers can explore a wide range of options in the unique traits of the token standards for creating applications tailored to their needs.

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ERC-721 Token Standard

The first entry in an ERC 1155 vs ERC 721 comparison points at the latter. If you look closely, the ERC-721 token standard actually started off the NFT phenomenon. The standard was a first of its own kind and helped in creating unique tokens. While non-fungible tokens had been there for a long time, ERC 721 opened up the gates for the mainstream popularity of NFTs. ERC-721 standard played a vital role in introducing the unique NFTs to the public with CryptoKitties. 

The developers of CryptoKitties, Dapper Labs, brought ERC-721 in 2017 with an Ethereum Improvement Proposal or EIP. The CryptoKitties is a set of unique, randomly generated kittens you can use as digital collectibles. You must note that the CryptoKitties are completely unique, and no one can replicate them. In addition, the transaction history offers a clear impression of the kitty’s ownership records since its creation. 

Many of you must have grabbed some points for ERC 721 vs ERC 1155 comparison from these highlights of ERC-721. However, it is also important to note that ERC-721 tokens are not all about complete uniqueness. As a matter of fact, the ERC 721 token standard offers the following additional feature specifications.

• Flexibility for transferring NFTs between accounts alongside the facility of trading NFTs for other currencies. 
• Easy options for finding out the owners of a particular asset. 
• Effective identification of total supply for a specific set of NFTs on the network. 

ERC-721 token standard has actually served as a formidable force in driving the popularity of NFTs by huge margins. Interestingly, many NFTs based on the ERC-721 token standard have dominated the crypto landscape. Some of the notable examples of projects based on the ERC-721 token standard include NFT artwork or avatars, PFP projects, and fractional ownership in virtual land parcels. 

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ERC-1155 Token Standard

The second player in the ERC 721 vs ERC 1155 token standard debate offers a practical solution to the different setbacks evident with ERC-721. The origins of the project go back to the Enjin Project, which introduced the token standard in 2019. One of the most striking highlights of the ERC 1155 token standard is the fact that it includes the best of ERC-20 as well as the ERC-721 token standard. 

Enjin project focused on challenges associated with the ERC-721, especially the lack of flexibility for batch transfers. In the case of ERC-721 token standards, you would need individual transactions for each NFT while transferring multiple NFTs. As a result, the transactions can end up imposing high costs for trading each NFT individually. 

The most notable aspect is the difference between ERC 1155 and ERC 721 focuses largely on support for batch transfers. ERC-1155 allows encompassing multiple assets in one smart contract, thereby enabling their transfer with limited network congestion and lower transaction costs. The next significant highlight of the ERC 1155 token standard is the support for non-fungible as well as fungible tokens. How? ERC-1155 offers the ability to support multiple states on a single contract and address. 

On top of it, ERC-1155 also stands higher in the ERC 1155 vs ERC 721 debate for the ability to create semi-fungible tokens. The semi-fungible tokens would basically serve as fungible tokens during trading, and they would become NFTs upon being redeemed. Another notable aspect pertaining to the ERC-1155 token standard is the facility for reverting token transfers.

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Comparison between ERC 721 and ERC 1155

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The two popular ERC token standards in the crypto space right now have unique traits. However, the functionalities of the ERC-1155 standard showcase how it can overshadow the ERC 721 token standard. On the other hand, it is important to identify the situations where ERC-721 serves as a better fit than ERC-1155. Here is an outline of the differences between ERC-721 and ERC-1155. 

• Ease of Use

The first factor in a comparison of ERC 721 vs ERC 1155 refers to the ease of use. In the case of ERC-721, you would need a single operation for each transaction. On the other hand, ERC-1155 enables the facility for multiple operations within a single transaction. The best thing about ERC 1155 is that the smart contracts could offer support for an unlimited assortment of tokens. On the contrary, the ERC-721 token standard implies the need for new smart contracts for transactions with each type of token. 

• Batch Transfers

The second pointer in the difference between ERC 1155 and ERC 721 draws the limelight on flexibility for batch transfers. You can use the ERC-1155 token standard as vital support for facilitating batch transfers of tokens. The facility of batch transfers plays a crucial role in reducing the transaction costs and time associated with each transaction. 

On the other hand, ERC 721 token standard implies the need for creating an individual smart contract for transferring each NFT or token. If you plan on sending multiple NFTs in an ERC-721 system, then you have to create transactions for individual NFTs. As a result, the load on the network increases by massive margins, thereby leading to congestion and increased transaction cost and time. 

• Support for Semi-fungible Tokens

Just as the world started experimenting with different uses of non-fungible tokens, everyone is gearing up to welcome semi-fungible tokens. The standard non-fungible and fungible tokens have become quite redundant with their own limitations. Semi-fungible tokens bring the best of both by enabling the conversion of fungible tokens into NFTs or vice versa. Interestingly, ERC 1155 token standard offers the flexibility for creating semi-fungible tokens. Most important of all, the ability to convert digital or real-world assets into NFTs or vice versa is a huge advantage for the ERC-1155 token standard. 

• Security of Assets

Another significant point of difference in the ERC 1155 vs ERC 721 comparison points at the features of security. Many crypto users have one common nightmare, i.e., sending their assets to the wrong address. The immutable nature of transactions on the blockchain is obviously one of the defining traits ensuring the safety of assets on the blockchain. However, the feature can be quite costly for an honest mistake. 

With the ERC-721 standard, you don’t have the facility for reclaiming your assets if you transferred them to the wrong address. On the contrary, the ERC-1155 token standard offers a unique feature known as the ‘safe transfer’ function. The safe transfer function is a product requirement for evaluating a transaction’s validity and also enables hassle-free token transfers. 

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Bottom Line

The most crucial highlight of the difference between ERC 1155 and ERC 721 focuses on the way ERC-1155 addresses the limitations of ERC-721. While ERC-721 offered the foundation for non-fungible tokens, ERC-1155 offers the traits required for future NFTs. Once you begin exploring the definitions of both token standards, you can uncover many critical points of differences. 

However, ERC-1155 presents an upper hand when it comes to long-term prospects for NFTs. The new token standard, introduced in 2019, has been phenomenal in introducing possibilities of semi-fungible tokens and batch transfers of NFTs. As a matter of fact, the ERC-1155 token standard can improve the usability of NFTs and remove the barriers to NFTs. Learn more about the token standards and their implications on the broader crypto landscape.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post ERC 1155 Vs. ERC 721 – Key Differences appeared first on 101 Blockchains.

The early months of 2021 would have been another phase in the world of tech with the usual advancements in blockchain and crypto. However, NFTs had other plans as they made a huge impact in the month of February with a $69 million sale of a piece of digital art. Non-fungible tokens have been around since 2016, with popular projects such as CryptoPunks or CryptoKitties being some of the early pioneers in this space. 

However, many people have been assuming that NFTs are just over-hyped digital images and are not different from JPEGs. On the contrary, NFTs are more than JPEGs in many ways, starting from verification of ownership to authenticity of the artwork. The following discussion will help you understand why NFTs, which can rake in around $40 billion, is definitely more than JPEGs.

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Understanding NFTs

The first thing you need to understand how is an NFT different than a JPEG is the definition of NFTs. You can explore a wide range of definitions of non-fungible tokens all over the internet. Basically, NFTs are digital assets with the mark of unique ownership. Non-fungible tokens have a broad assortment of use cases ranging from virtual items such as CryptoKitties to real-world assets such as real estate. The most notable examples of NFTs include land titles, sports cards, artwork, digital collectibles, and many others. 

Many aspiring NFT investors might harbor apprehensions regarding investments in digital artwork. After all, isn’t it the same JPEG image that you can download on your laptop or mobile phone? In addition, you can also send the JPEG image to other people without receiving anything in return or paying anything to the creator of the JPEG image. However, NFTs change the game altogether and thereby provide a stark contrast from the usual JPEGs you see today.

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Are NFTs same as JPEGs?

The most important highlight of NFTs in an NFT vs JPEG comparison would refer to the ‘non-fungibility’ aspect. Non-fungibility implies that the assets represented by NFTs are unique and non-interchangeable. For example, you can trade a 10-dollar bill for ten one-dollar bills. However, you cannot trade a unique trading card for a different card as it would change the value of the collector’s collection.  

In addition, NFTs can also offer the additional advantages which come with blockchain as they are basically smart contracts on blockchain networks. Ethereum serves as the most popular choice for developing NFTs right now, with support for unique assets. You can store the unique cryptographic tokens in different virtual crypto wallets and access them according to your convenience. 

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Why is it Important to Think of NFTs Now?

Non-fungible tokens are one of the most interesting improvements in the blockchain and crypto space. Blockchain technologies have been introducing new perspectives on the design, use, and transfer of digital assets. NFTs have introduced a promising digital standard for exercising ownership over tangible assets such as artwork and real estate. 

In other words, non-fungible tokens are creating viable prospects for the simple and secure trading of physical assets on blockchain networks. On top of it, NFTs are an integral highlight of the emerging web3 landscape with significant applications in the metaverse. All these aspects provide a clear impression of how NFT are more than JPEGs in terms of value.

Some numbers about non-fungible tokens can show you how they are more important than JPEGs. The total sales in NFT marketplaces amounted to more than $40 billion by the end of 2021. Could you have believed the fact that celebrities would spend millions on purchasing profile pictures of fancy apes? Well, Bored Ape Yacht Club proved how NFTs had become a formidable cultural phenomenon. 

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Value Added by NFTs

The traits of NFTs and their popularity alongside the positive market trends suggest favorable opportunities for anyone to invest in NFT, albeit with professional guidance and risk tolerance. NFT artwork has proved to be more than just digital images or JPEGs, and the value of NFTs has been increasing promisingly. 

However, investors must be cautious of investments in NFTs as the perception of value of non-fungible tokens depends on many factors. The more useful an NFT seems to be, the more value it will have. Does utility stand as the sole factor for determining the value of an NFT? Non-fungible tokens can offer the following additional value advantages of JPEGs, making them a favorable choice for NFT investors worldwide. 

• Scarcity 

The first trait of non-fungible tokens which separates them from JPEGs is the option for scarcity. NFT developers or artists can create only a few selected artworks in NFT collections, thereby increasing scarcity. 

• Ownership

The most notable aspect of an NFT vs JPEG comparison would also draw references toward ownership. Non-fungible tokens operate on distributed ledger technology, with the original creator controlling the private keys to the NFT on the blockchain. If you own an NFT, only you can transfer the NFT to any other account or put it up for sale.

• Non-interchangeable

NFTs stand strong in terms of utility due to their non-interchangeability trait. While DAOs are opening up the scope for collective ownership of NFTs, there is a way you can divide an NFT into two different parts for selling it. NFTs are non-interchangeable, which is a basic aspect of their non-fungible nature.

• Unique Assets

The final aspect in the comparisons between NFTs and JPEGs refers to the uniqueness of NFTs. Non-fungible tokens have unique metadata, and it is practically impossible to modify the metadata. As a result, you can understand “how is an NFT different than a JPEG” with the support of verifiable authenticity.

• Interoperability

Non-fungible tokens are also different from JPEGs in the fact that you can trade them across different blockchain-based platforms. You can trade NFTs across all Ethereum-based platforms without any restrictions, thereby offering flexibility for NFT investors to explore new prospects. 

• Transparency

Another significant highlight of NFTs which separates them from JPEGs would refer to transparency. The foundation of NFTs on the blockchain ensures access to the decentralized and immutable public distributed ledgers with detailed information on the NFTs. Therefore, non-fungible tokens provide better facilities for public verification of records associated with issuing tokens and other activities and transfers. As a result, transparency in NFT transactions with the assurance of verifiable authenticity sets them apart from common digital images.

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How Will NFTs be more than Just Art?

The majority of discussions around NFTs often turn towards proving that NFTs are more than JPEGs, while non-fungible tokens present the scope for many other use cases. Many people associate NFTs with artwork and consider that they are advanced and secure versions of JPEGs. However, non-fungible tokens have many other applications beyond the domain of art. Non-fungible tokens have obviously provided a promising tool for digital artists and content creators worldwide. 

On the contrary, it is important to explore how NFTs can be used for other purposes beyond art to understand their actual capabilities. Interestingly, non-fungible tokens were created as deeds or certifications for some assets. One of the significant takeaways from the NFT vs JPEG comparison, i.e., the validation of authentic and unique ownership of assets, provides the basis for productive applications of NFTs in other cases. Here are some of the potential use cases which show how NFTs are much more than JPEGs. 

• Metaverse Assets

Non-fungible tokens are an integral aspect of the metaverse as they represent in-game items. For example, virtual land parcels in Decentraland or the Sandbox are actually NFTs. Similarly, game characters and other assets in the metaverse can also make the most of NFTs for leveraging the benefits of unique ownership. At the same time, you can know “how is an NFT different than a JPEG” by reflecting on interoperability in NFTs. With the help of interoperability, non-fungible tokens can facilitate the seamless movement of assets across different spaces in the metaverse. 

• Real Estate

The use of NFTs in the real estate sector also showcases some favorable highlights to invest in NFT projects. Non-fungible tokens provide proof of ownership, and in the future, NFT-based property deeds might become a common practice. As of now, the sale of digital property in the metaverse through NFTs has been gaining momentum. It is only a matter of time before non-fungible tokens serve as vital tools for representing property ownership on blockchain networks. 

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Final Words

The differences between non-fungible tokens and the common JPEGs you find on the internet show how NFTs are special. Non-fungible tokens come with a unique proof of ownership, uniqueness, and scarcity. You cannot discover these traits in JPEGs. In addition, NFTs don’t just apply to artwork only. The multiple use cases of NFTs, such as for metaverse assets or representation of real estate, offer a glimpse of the long-term possibilities associated with them.

While you can know that NFTs are more than JPEGs, it is also important to know that non-fungible tokens are not all about art. As a matter of fact, the basic tenet of NFTs revolves around offering control and ownership over assets, digital or physical. How will NFTs grow in the future? Dive deeper into the world of NFTs and become a professional.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post Why NFTs are more than just JPEGs? appeared first on 101 Blockchains.

On the other hand, people who are new to crypto often encounter difficulty in choosing a suitable option from the two top contenders. Therefore, you must know the differences between Ledger and Trezor hardware wallets for choosing the ideal option to store your cryptocurrencies. The following discussion offers a detailed Trezor vs Ledger comparison on the basis of various critical points of difference.

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What are Hardware Wallets?

Before you start the Ledger wallet vs Trezor wallet comparison, you must have a clear impression of crypto wallets and hardware wallets. If you have decided to buy some cryptocurrencies, where will you store them? The crypto wallet is just like the physical wallet you use for storing cash and credit cards. 

However, the crypto wallet does not store the actual cryptocurrencies. On the contrary, it serves as a repository for the private keys or backup phrases required for crypto transactions. The two most common categories of crypto wallets include software wallets and hardware wallets. 

The common examples of software wallets for crypto, such as Coinbase and Gemini, require an internet connection. You can think of software wallets and web or mobile applications which serve as crypto wallets. As a matter of fact, the software wallets are more likely to take control of your private keys. In this case, hardware wallets present a better alternative. Hardware wallets are basically physical devices used for storing your cryptocurrency private keys. 

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Working of Hardware Wallets

Now that you know about the basics of a hardware wallet, you must know about its works before drawing out an in-depth hardware wallet comparison for all available choices. The primary function of hardware wallets is the storage of private keys. You can add another layer of security with a PIN to access the hardware wallet. Users can connect the hardware wallet to the internet when they have to sign or confirm transactions. 

Most important of all, hardware wallets keep the private keys to your cryptocurrency away from the internet, thereby ensuring safety. However, you should also pay attention to the seed phrase generated for the hardware wallet. Users must write down the seed phrase and store it in a safe place as it can help in regenerating the private key in event of losing the hardware wallet.

What is Ledger Hardware Wallet?

Ledger is a crypto hardware wallet provider with many popular offerings, including the Ledger Nano X. The hardware wallet has been developed with a custom operating system known as Blockchain Open Ledger Operating System. As of now, the Ledger Nano X supports more than 1,100 cryptocurrencies through the Ledger Live app. 

What is Trezor Hardware Wallet?

Trezor is another crypto hardware wallet solution offered by SatoshiLabs. The most popular offering in hardware wallets with Trezor Model T is a promising choice for innovative functionalities. The Trezor hardware wallet features open-source firmware and software. At the same time, the Trezor Model T supports over 1200 different cryptocurrencies, thereby enabling easier management of cryptocurrencies. 

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Differences between Ledger and Trezor Hardware Wallets

Ledger and Trezor are obviously the two top players in the hardware wallet industry. They offer secure storage for your cryptocurrencies with support for more than 1000 coins. You can find enthusiastic supporters of both hardware wallets. For example, the new Trezor Model T has come up with a larger touchscreen. 

On the other hand, the Ledger Nano X offers Bluetooth connectivity and a mobile app. Therefore, a detailed overview of the Ledger vs Trezor comparison can help you choose the ideal choice for your cryptocurrency requirements.

Here are some of the notable pointers for comparing the two most popular crypto hardware wallets.

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• Support for Cryptocurrencies

One of the foremost factors in a comparison between Ledger hardware wallet and Trezor wallet is the support for cryptocurrencies. You would obviously look for a hardware wallet that lets you use different cryptocurrencies without any limitations. In this case, Ledger has the upper hand with support for over 1800 different cryptocurrencies and tokens. 

On the other hand, Trezor supports around 1649 coins and tokens. You can find an additional advantage with Ledger in a Trezor vs Ledger wallet comparison with the support for tokens such as Uniswap, Graph Token, Yearn Finance Token, or Avalanche. Therefore, Ledger turns out as a promising choice for any crypto user interested in exploring the DeFi landscape.

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• Ease of Use

The next crucial factor in a Ledger wallet vs Trezor wallet comparison is the ease of use. You are less likely to go for a hardware wallet that is difficult to use. Interestingly, both the Ledger and Trezor hardware wallets have been tailored for beginners as well as expert users. You have to follow some common steps for using both hardware wallets, such as updating the firmware of the device and creating the wallet. 

In addition, you have to create the backup seed phrase and set a PIN for the hardware wallet. While both the Ledger and Trezor hardware wallet offer simple setup processes, Ledger needs you to install the Ledger Live app. On the other hand, the Trezor wallets work through a web-based interface. 

Most important of all, the design improvements in Trezor offer it a plausible advantage in a Trezor vs Ledger comparison. The larger screen and web interface of the latest Trezor Model T make it more intuitive and easier to use. In addition, you don’t have to install an app for each cryptocurrency you want to use with the Trezor wallet. On the contrary, Ledger needs you to install a specific app pertaining to the cryptocurrency you want to use. 

• Features

One of the significant points for comparing Ledger and Trezor hardware wallet also brings you across features. Both Trezor and Ledger are top contenders among crypto hardware wallets and offer almost similar features. However, the subtle differences in the design of the hardware wallets can help you differentiate between the two top choices. 

The Ledger hardware wallet features a sleek design similar to a regular USB storage device. On the other hand, Trezor wallets are lighter in weight and feature unique shapes with plastic casings. Ledger gains the upper hand in features again by offering support for iOS devices, a feature unavailable in Trezor wallets. 

The hardware wallet comparison in terms of features turns in favor of Trezor for its larger display. You can notice the differences between the displays of Ledger and Trezor hardware wallets by reflecting on the top models by each company. For example, the Ledger Nano X features an OLED display with a 128×64 pixels resolution. On the other hand, the Trezor Model T offers a 240×240 pixels LCD color touchscreen. 

Ledger stays strong in the Trezor vs Ledger debate on the grounds of features with the optional Bluetooth connectivity. As of now, Trezor does not offer the feature of Bluetooth connectivity on any of its devices. 

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• Security 

Security is obviously one of the formidable pointers for discovering the ideal choice in a Ledger vs Trezor debate. As the top hardware wallets, both of them offer industry-leading security for cryptocurrencies with private keys residing on the devices. However, the basic design and operations of both wallets have different implications on security of your crypto assets. 

First of all, you need to know that Trezor utilizes a single chip base in the design of hardware wallets. On the other hand, Ledger utilizes a double chip base, where the second chip is a financial-grade Secure Element chip. The Secure Element chip ensures additional security for a user’s cryptocurrencies against hardware attacks. 

However, the Ledger wallet vs Trezor wallet comparison in terms of security does not tilt completely towards Ledger. While Ledger uses the open-source Blockchain Open Ledger Operating System, it uses closed-source firmware. As a result, you cannot find any scope for testing vulnerabilities in any Ledger hardware wallet model. On the other hand, Trezor has many setbacks when it comes to security. 

For example, users have to enter the password in Trezor wallets through the company’s keyboard. In such cases, the chances of your password being compromised with a keylogger increase by humongous margins. However, you don’t have to worry about such issues in security with Ledger wallets, as they require users to enter the PIN directly on the device. 

Recently, the Trezor Model T has introduced support for the Shamir Backup, thereby improving the scope for private key security. On the other side, Ledger has experienced security breaches that have reduced the trust of users in the hardware wallet. 

• Mobile App

The final aspect of hardware wallet comparison between Ledger and Trezor would focus on the facility of a mobile app. You must have noticed how the Ledger Live app is an essential requirement for using Ledger wallets. Users can download the app on their mobile or desktop devices. The Ledger Live app helps them check crypto balances in real time alongside sending and receiving funds. However, Trezor does not have a mobile app right now, and users access the hardware wallet through a web-based interface. 

Curious to know the answers to some of the commonly asked cryptocurrency questions? Check the detailed guide on Frequently Asked Questions About Cryptocurrency         

Final Words

The final overview of the Ledger vs Trezor comparison offers a credible ground for evaluating their use for different objectives. Cryptocurrencies offer a wide range of opportunities, and users may have different requirements for storing and managing their crypto. Hardware wallets are a trustworthy choice for secure storage and management of crypto assets. 

However, a comparison between the two top hardware wallets shows that both of them have many differences. Ledger and Trezor offer user-friendly and secure hardware wallets with some distinct value benefits. For example, Trezor features a larger and more colorful touchscreen, while Ledger offers the benefit of Bluetooth connectivity. Evaluate both the top choices among hardware wallets right now before you select one for your ventures in crypto.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post Ledger vs Trezor – Hardware Wallet Comparison appeared first on 101 Blockchains.

While centralized exchanges might serve as one of the dominant forces in the crypto industry, decentralized exchanges are making their presence felt. Therefore, it is important to draw out a clear CEX vs DEX comparison for reaching a suitable choice between the two. The following discussion presents a clear outline of the differences between centralized exchanges and decentralized exchanges in the crypto world.

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What Are Crypto Exchanges?

Before an overview of the DEX vs CEX difference, let us go through a basic understanding of crypto exchanges. Crypto exchanges are basically the stock exchanges for the crypto world. Just like you can purchase and sell assets such as shares and derivatives on stock exchanges, crypto exchanges allow you to purchase and sell blockchain-based tokens and coins. The two notable types of cryptocurrency exchanges include the first generation platforms, which were more centralized in nature, and the recently emerging assortment of decentralized exchanges. 

While both the players in the CEX vs DEX crypto exchange debate offer the functionality for crypto trading, they differ in many other factors. For example, the type of exchange plays a crucial role in determining how a specific transaction works. At the same time, the features for the user and flexibility also differ considerably in the two types of exchanges. Therefore, a fundamental overview of the two types of crypto exchanges can set the perfect tone for a comparison between them. 

Want to clear the confusion between decentralized and centralized concept? Check the detailed comparision guide on Decentralized vs Centralized

What Are Centralized Exchanges?

As the name implies, centralized exchanges are crypto exchanges created by centralized organizations which exert control over ownership of the exchange. The centralized organization serves as the intermediary between buyers and sellers. Some of the common examples of centralized exchanges include Coinbase, Gemini, and Binance. 

The most prominent highlight in the DEX vs CEX difference would obviously focus on how centralized exchanges actually work as banks. You can deposit your crypto in the central wallet of the exchange, which stays in the control of the centralized organization. Centralized exchanges also facilitate documentation and execution of crypto trades on internal systems. 

Centralized exchanges bring a wide array of benefits, including the ways in which they are suitable for crypto beginners. The user-friendly UIs and support of the centralized company behind CEXs offer the ease of recovering your crypto assets. In addition, centralized exchanges also provide the assurance of better liquidity with more users involved on centralized crypto exchange platforms.

On the other hand, centralized exchanges are not completely flawless in a CEX vs DEX debate, owing to their shortcomings. For example, centralized exchanges require KYC verification which violates the basic tenets of cryptocurrency, such as user anonymity. At the same time, centralized exchanges have all the deposited coins in the control of the company running the exchange. Therefore, crypto owners don’t have complete control over their assets on centralized exchanges. 

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What Are Decentralized Exchanges?

The answers to “What is DEX and CEX?” are essential for drawing out a basic overview of the possible differences between them. Following the definition and overview of centralized exchanges, you must be eager to find out about decentralized exchanges. As the name implies, decentralized exchanges are basically the counterparts of centralized exchanges with a different structure. You can clearly guess that the decentralized exchanges are free from the control of any single entity, serving as intermediaries. On the contrary, decentralized exchanges are actually smart contracts tailored for offering peer-to-peer transactions. 

The best thing about DEXs is that you don’t need any KYC verification for interacting with them. You have a clear answer for “What is the difference between CEX and DEX” in the assurance of user anonymity with decentralized exchanges. The two notable categories of decentralized exchanges include order book DEXs and automated market makers or AMM DEXs. The first generation of decentralized exchanges followed the conventional order book model used in centralized exchanges. 

Some of the common examples of order book DEXs include the Gnosis Protocol or LoopRing. The order book DEXs rely on algorithms rather than central platforms for discovering and moving transactions among individual users. Smart contracts helped in documenting the transactions on order book DEXs. Therefore, order book DEXs replaced the centralized organization with an algorithm and ensured decentralization. However, the order book model lacks in terms of efficiency, irrespective of the benefits of decentralization. 

As a result, Automated Market Maker DEXs arrived on the scene for solving a notable issue with decentralized exchanges, i.e., liquidity. Some of the common examples of Automated Market Maker or AMM DEXs include Compound, Uniswap, and SushiSwap. AMM DEXs is a significant highlight in CEX vs DEX crypto exchange debates owing to their efficiency in replacing order books. Automated Market Maker relies on using liquidity pools sourced from users rather than waiting for matching buy and sell orders. The people who invest their assets in the liquidity pool receive governance tokens which also ensure distributed governance in the exchange.

Want to know the working of decentralized exchanges and what value advantages they offer? Read the detailed guide on How A Decentralized Exchange Works 

Differences between Centralized Exchanges and Decentralized Exchanges

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The detailed description of centralized exchanges and decentralized exchanges offers adequate information for comparing them. One of the first things you note in a centralized exchange vs decentralized exchange comparison is that DEXs have addressed many shortcomings in centralized exchanges. 

At the same time, decentralized exchanges have also come up with some unique issues of their own. Therefore, you need a detailed comparison between CEXs and DEXs on the grounds of specific factors pertaining to their usability. Here are some of the notable points of difference in a comparison between centralized and decentralized crypto exchanges. 

• Custody of Assets

One of the foremost aspects in the answers to “What is DEX and CEX?” reflects on the custody of assets. Who has control over the crypto assets you deposit on a centralized or decentralized exchange? Do you hold your crypto assets directly in your ownership or place them under the control of the exchange? 

In the case of centralized exchanges, you have to place your assets in the custody of the exchange before you start trading. Decentralized exchanges allow you to hold your assets with exclusive control over them. However, the non-custodial nature of decentralized exchanges also calls for focusing more on the security of your private keys. 

• Impermanent Loss

Decentralized exchanges provide a neat system for crypto trading with the facility of liquidity pools. However, the advantage of decentralized exchanges over centralized exchanges might have a prominent underlying risk. Liquidity providers are often exposed to the risk of impermanent loss in decentralized exchanges. Liquidity providers can only withdraw their share in the value of the liquidity pool rather than the number of tokens they invested in it. 

The ratio of different crypto assets in the liquidity pool of DEXs changes frequently alongside the execution of trades. As a result, the liquidity pool can adjust to the market scenario with more tokens that are losing value. Subsequently, liquidity providers have to withdraw more tokens that have to lose value. You would not find the possibility for impermanent loss in centralized exchanges, thereby presenting a formidable advantage in CEX vs DEX comparisons. 

Want to know the risks associated with decentralized exchanges? Read the detailed guide on Decentralized Exchanges (DEX) Risks That You Can’t Ignore        

• Regulations

Even if DEXs have been soaring high in terms of popularity in recent times, they have been associated with some regulatory setbacks. How have decentralized exchanges become popular all of a sudden? The answer is clearly evident in the fact that decentralized exchanges have bypassed some of the regulatory obstacles. 

The most evident answer for “What is the difference between CEX and DEX” focuses on how companies creating a DEX don’t follow KYC or AML standards. Autonomous operations of decentralized exchanges obviously free them from any concerns of KYC verification or AML procedures. However, institutional investors are less likely to exercise their interest in platforms that don’t follow KYC and AML compliance. 

• Liquidity

Another important highlight in CEX vs DEX crypto comparisons draws the limelight towards liquidity. You might have assumed that DEXs are the winners when it comes to liquidity, especially owing to the use of liquidity pools in AMM DEXs. However, there are many other concerns that affect the liquidity of decentralized exchanges. For example, decentralized exchanges have to struggle more in comparison to CEXs in the case of large investors due to regulatory insufficiencies. 

New and emerging DEXs cannot compete with large and well-established centralized exchanges in terms of liquidity. Without the desired liquidity, decentralized exchanges are unsuitable for large orders owing to concerns of unprecedented additional costs or slippage. However, new aggregator and compliance protocols are gradually emerging as viable solutions to problems of liquidity on decentralized exchanges. 

Want to know about the largest decentralized exchange in the world? Read the detailed guide Now on UNISWAP – Know Everything about the Largest Decentralized Exchange (DEX)

• Trading Options

You can also find the DEX vs CEX difference in the case of trading options offered on the crypto exchanges. Centralized crypto exchanges provide a wide range of trading options for users, including crypto lending and borrowing, airdrops, futures trading, options, spot trading, and leverages. While some DEXs offer some of these trading options, most of the work on decentralized exchanges revolves around crypto lending and borrowing, and speculations. 

• Availability 

The aspect of availability is also a crucial highlight in the centralized exchange vs decentralized exchange comparisons. Centralized organizations operate centralized exchanges and are more susceptible to crashes. For example, centralized exchanges can reduce access to users for minimizing losses in event of massive market crashes. On the contrary, decentralized exchanges don’t have any problems as they don’t have any intermediaries. You can always access DEXs, irrespective of market crashes, and use your assets as you want. 

Final Words

The final impression regarding the CEX vs DEX debate shows that decentralized exchanges have a long way to go. Decentralized exchanges have obviously emerged as an easier alternative than centralized exchanges. For example, you don’t need KYC verification or any pressure of entrusting the control of your crypto assets in the exchange. However, the advantages of decentralized exchanges also lead to some setbacks, such as a lack of trust from institutional investors. 

On the other hand, centralized exchanges offer better ease of use with flexible user interface designs. As of now, centralized exchanges are the first point of entry for anyone interested in exploring the crypto space. However, decentralized exchanges have the potential to transform the future of crypto ownership and trading. Learn more about cryptocurrencies and explore the implications of crypto exchanges.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post Centralized Exchange (CEX) vs. Decentralized Exchange (DEX) – Key Differences appeared first on 101 Blockchains.

The growing large-scale use of cryptocurrencies in daily life has prompted the creation of blockchain layers for facilitating improved network security and recordkeeping, among other functionalities. Layer 1 basically refers to the base blockchain protocol, while layer 2 refers to a third-party solution integrated with layer 1 to facilitate scalability.

The following post helps you discover a detailed overview of the layer 1 vs layer 2 blockchain comparison. You can find an outline of the different types of solutions included in layer 1 and layer 2 blockchain. At the same time, you can notice the qualities associated with both types of scaling approaches. 

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Why Is Scalability Important?

Blockchain technology comes with many given benefits, such as improved security levels, better recordkeeping, and fuss-free transactions. However, scalability continues to be a serious concern, which generally leads to debate over “Is layer-1 or 2 better?” in discussions around new blockchain networks. Every blockchain network follows a decentralized system for completing transactions in different steps. 

The different steps required for blockchain transactions often take up a lot of time and processing power. Now, imagine if a blockchain network is clogged up with transactions stacked up one after the other. In such cases, the application cannot fulfill transaction requests of all users, thereby creating inequality in user experience. Therefore, you can clearly notice how scalability is an essential requirement for the future of blockchain networks. 

Want to know the best blockchain scalability solutions? Read Now: Blockchain Scalability Solutions

Why Do Blockchain Networks Face Problems with Scalability?

Another important factor you should know before finding the difference between layer 1 and layer 2 scaling solutions is the root cause for the problem. Why do you have to face such an issue in the first place? The only answer for scalability issues in blockchain networks comes from the fact that blockchain networks are decentralized. 

Blockchain networks use processing power and time for safeguarding user privacy and integrity of transactions. The data transactions must pass through different steps, including acceptance, mining, distribution, and verification on a node network. A blockchain network invests so much processing power and time in decentralization and security that it falls back in terms of scalability. This is where blockchain layers come into the picture.

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Layer 1 and Layer 2 Solutions

Layer 1 solutions basically involve changes in the base protocol of blockchain networks for ensuring better scalability. On the other hand, layer 2 solutions focus on adding third-party integrations to the mainnet of the blockchain network. While layer 1 solutions focus on modifying the base protocol, layer 2 solutions emphasize supporting the base protocol with off-chain solutions or protocols. While the basic distinction provides an answer to “What is the difference between layer 1 and layer 2 blockchain?” you must understand each term in detail. A comprehensive understanding of layer 1 and layer 2 blockchain scaling solutions could help you draw a better comparison. 

• Layer 1 Scaling Solutions

The outline of layer 1 vs layer 2 blockchain scaling differences would be incomplete without the definition of layer 1 blockchains. As the name implies, the layer 1 blockchain network refers to the base protocol of the blockchain network. Layer 1 scaling solutions help in improving the base layer of the blockchain protocol to facilitate improvements in scalability. 

You can discover a wide range of methods tailored for direct improvements in the scalability of blockchain networks with layer 1 solutions. For example, layer 1 solutions can enable direct modifications in protocol rules for improving transaction capacity and speed. At the same time, the layer 1 scaling solutions can offer better scope for accommodating more data and users. The common approaches followed in layer 1 scaling include improvements in block size or speed of block creation. 

However, the blockchain layer 1 vs layer 2 debate would take the two most important layer 1 scaling solutions into consideration. The two foundational modifications for achieving layer 1 scaling in blockchain networks include consensus protocol changes and sharding. 

For example, some consensus mechanisms such as Proof of Stake could provide better efficiency in comparison to Proof of Work blockchain protocols. On the other hand, sharding helps in the distribution of the workload of the whole network among different datasets, known as shards. 

Want to know the major difference between proof of work(PoW) and proof of stake(PoS) blockchain consensus algorithms? Check Now: PoW vs PoS Comparison

• Layer 2 Scaling Solutions

The next player in the difference between layer 1 and layer 2 blockchain, i.e., layer 2 scaling solutions, are unique technologies. The basic vision of layer 2 scaling focuses on using networks or technologies working over an underlying blockchain protocol. With the help of the off-chain protocol or network, a blockchain network could achieve improved scalability and efficiency. 

Layer 2 scaling solutions basically involve transferring the transaction burden of a blockchain protocol to the off-chain architecture. The off-chain architecture would report the final results of the transferred transaction to the main blockchain. In simple words, layer 2 scaling solutions facilitate simpler and flexible delegation of data processing tasks to supporting architecture. As a result, the base blockchain protocol does not experience congestion, thereby opening up the doors to scalability. 

One of the common examples of layer 2 scaling solutions refers to Lightning Network, which serves as a scaling solution for Bitcoin. The Lightning Network can help in improving transaction speeds and efficiency on the Bitcoin blockchain. In addition, you can also find many other solutions in support of layer 2 scaling in layer 1 vs layer 2 blockchain debates. The notable examples of layer 2 scaling solutions include nested blockchains, sidechains, and state channels. 

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What is the difference between Layer 1 and Layer 2 Blockchain Solutions?

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The basic outline of layer 1 and layer 2 scaling solutions gives the right foundation to differentiate between them. Here are some of the notable points of difference between layer 1 and layer 2 blockchain scaling solutions. 

• Definition

Layer 1 scaling solutions basically refer to the modifications in the base layer of the blockchain protocol for desired improvements. For example, you can increase the block size for accommodating more transactions or change consensus protocols for speed and efficiency. 

On the other side of the “Is Layer-1 or 2 better?” debate, layer 2 scaling solutions work as off-chain solutions sharing the load of the main blockchain protocol. The mainnet of a blockchain protocol transfers specific information processing and transaction processing tasks to layer 2 protocols, networks, or applications. The off-chain protocols or solutions complete the designated task and report the final results to the main blockchain layer. 

• Method of Working

The blockchain layer 1 vs layer 2 comparison would also take the basic method or approach of working into account. In the case of layer 1 blockchain networks, the basic method for scaling focuses on changing the base protocol itself. As a matter of fact, you have to make fundamental changes in blockchain protocols with layer 1 scaling solutions. So, you would not have any opportunity to downsize the modifications immediately if the transaction load drops radically. 

On the contrary, layer 2 scaling solutions work as off-chain solutions, which operate independently of the main blockchain protocol. The off-chain protocols, networks, or solutions only report the final results demanded by the main blockchain protocol. In a way, layer 2 blockchain scaling solutions work by sharing the transaction load of the main blockchain network. 

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• Types of Solutions

The next important criteria for finding answers to “What is the difference between layer 1 and layer 2 blockchain?” would refer to the types of solutions you can find. In the case of layer 1 blockchain solutions, you can find two prominent types of solutions such as consensus protocol improvement and sharding. Layer 1 scaling also includes changes to block size or block creation speed for ensuring desired functionalities. 

In the case of blockchain layer 2 scaling solutions, there is practically no limit to the type of solutions you can use. Any protocol, network, or application can serve as an off-chain layer 2 solutions for blockchain networks. However, you need to take note of the popular layer 2 scaling solutions such as nested blockchains, sidechains, and state channels. 

• Qualities 

You can also find a clear impression of the difference between layer 1 and layer 2 by focusing on the qualities of both types of networks. Layer 1 networks serve as the source of truth and bear the final responsibility for transaction settlement. You can find a native token on layer 1 networks for accessing the network’s resources. Another important trait in the case of layer 1 blockchain networks refers to innovation in the design of consensus mechanisms. 

Layer 2 scaling solutions or networks offer the same functionalities as the layer 1 blockchains, albeit with additional traits. For example, layer 2 solutions improve the network performance alongside programmability while reducing transaction fees. Each layer 2 solution features a unique method for mapping transactions back to the concerned base layer. 

Want to know how transactions work in blockchain? Read Now: How Blockchain Records All The Transactions

• Setbacks 

The setbacks with layer 1 and layer 2 solutions don’t account for differences. On the contrary, they show the common highlights between the two types of scaling solutions. The only problem you can find common in blockchain layer 1 vs layer 2 solutions is the difficulty in adding the layers to existing protocols. 

Final Words

The differences in the blockchain layer 1 vs layer 2 comparison show that both of them focus on improving scalability. Layer 1 scaling focuses on adjustments in the original blockchain protocol to enable scalability. On the other hand, layer 2 scaling involves the use of third-party solutions, networks, or protocols for expanding blockchain scalability. With the help of off-chain solutions sharing the blockchain network workload, scalability is easier to achieve. 

However, when you look closely at both of them, they are distinct layers of improvement on a blockchain protocol. The continuously expanding blockchain ecosystem with new solutions like DeFi and NFTs has been drawing more users every day. Therefore, scaling is an imperative necessity for the sustainability of blockchain networks. Start learning more about blockchain scalability and its implications now.

The post Blockchain Layer 1 vs Layer 2 – Key Differences appeared first on 101 Blockchains.

With so much potential in NFTs, one should definitely wonder about the concerns of custodianship with non-fungible tokens. This is where you come across the difference between custodial and non-custodial NFTs to find the ideal choice for NFT custody. The following discussion helps you understand custodial and non-custodial NFT wallets alongside the differences between them. You can use the differences to find whether custodial NFTs serve as a better option than the NFTs in non-custodial wallets. 

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Basics for Custodial vs Non-custodial NFTs Comparison 

Before diving into an outline of differences between custodial and non-custodial NFTs wallets, you need to understand the significance of custody. The hype around NFTs has definitely filled the online space with a lot of information on them. However, you can barely find any discussions in the crypto space directed towards custodianship of NFTs. Do you know who controls your NFT after you have created or purchased one? While NFTs offer the promise of sole ownership over the concerned asset, you may not have complete control over the NFT. How? 

You can let third-party take custody of your NFT and take care of it on your behalf. On the other hand, you can also take custody of your NFT. Therefore, you can notice the foundations of the custodial vs non-custodial NFTs debate emerging from the differences in types of wallets for storing them. In addition, the platforms used for creating and trading NFTs also play a crucial role in differentiating custodial NFTs from the non-custodial variants. 

Want to know how one can buy and sell NFTs? Read Now: Buy And Sell NFTs

Importance of Crypto Wallets

Crypto wallets, just like your physical wallets, help in storing cryptocurrencies and facilitating transactions with desired blockchain networks. You need a crypto wallet for using decentralized applications or making transactions on a blockchain network. The two most significant aspects of any wallet refer to a public key and the private key. Interestingly, you can use crypto wallets for storing NFTs, depending on the type of crypto wallet. 

Since NFTs are basically tokens on a blockchain network, you won’t experience any troubles storing your NFT in crypto wallets. If crypto wallets can store NFTs, then why do you have to find the difference between custodial and non-custodial NFTs? You can find the answer to the question by reflecting on the individual definition of custodial and non-custodial variants of NFTs.

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What is a Custodial NFT?

If you want to know the definition of custodial NFTs, then you must reflect on the basic definition of custodial crypto wallets. The custodial crypto wallets do not offer complete control over the private keys to the wallet owners. On the contrary, a third party, like a custodial wallet service provider or an exchange, helps in storing and managing your private keys and related assets. You can store your NFT in a custodial crypto wallet, and it automatically answers “What is a custodial NFT?” as you entrust the access to your NFT in another platform. How far is it reasonable to place the control of your valuable NFTs in the hands of a third-party custodian?

A third-party custodian could ensure better support in storage and management of private keys required for accessing custodial NFTs. You can pass the responsibility of private keys to your NFT to the custodian. Furthermore, you can also receive support from the NFT custodian in situations where you forget your password for accessing the custodian’s services. However, one of the prominent highlights in answer to “What is a custodial NFT?” emphasizes entrusting custody of NFTs to a third party. Therefore, custodial NFT owners have to rely on the security mechanisms of the custodial for the safety of their NFTs.

Want to know some of the prominent vulnerabilities and security risks associated with NFTs? Read Now: NFT Vulnerabilities And Security Concerns

What is a Non-custodial NFT?

After an overview of custodial NFT basics, it is important to learn about non-custodial NFTs for drawing reasonable differences. Similar to the case of custodial crypto wallets, you can identify answers to “What is a non-custodial NFT?” with non-custodial crypto wallets. The non-custodial wallets are crypto wallets that entrust the control of private keys to the asset holder. You can think of non-custodial NFTs as the ones you can put in a non-custodial wallet. The option of non-custodial wallets is suitable for users who demand better control over their NFTs. 

On the other hand, the NFT owners have to take responsibility for the security of their valuable assets. You have to remember the private keys and backup seed phrase for ensuring safety of your NFTs. However, non-custodial wallets provide flexibility of use alongside additional enhancements for secure storage of private keys. 

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Differences between Custodial and Non-custodial NFTs

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The basic overview of custodial NFTs and their non-custodial counterparts shows that the difference between them rests primarily on the type of wallet. However, you can discover many other differences between custodial and non-custodial NFTs on the grounds of other factors. A detailed comparison between custodial and non-custodial NFT with respect to various points of difference can help you find the ideal choices according to your requirements. 

• Definition

The fundamental aspect for comparison in a custodial vs non-custodial NFTs debate refers to their definition. Interestingly, you don’t have to encounter any complicated propositions when comparing custodial and non-custodial NFT variants in terms of definition. 

As a matter of fact, the definition of custodial NFTs and their non-custodial counterparts relies heavily on the type of wallet used for storing the NFTs. If an NFT is in a custodial crypto wallet, it is a custodial NFT. On the other hand, NFTs in non-custodial wallets qualify as non-custodial NFTs. 

In the case of a custodial NFT, you have to allocate the control of private keys to the wallet service provider. Basically, you will have to entrust the control over your NFTs to a third-party custodian with a custodial NFT. On the other hand, the NFT owner enjoys complete control over their asset in the case of a non-custodial NFT. 

Want to know the different types of crypto wallets? Read Now: Types of Crypto Wallets

• Methods of Purchasing 

The next important point of difference between custodial and non-custodial NFTs would refer to the methods of purchasing them. You can decide the method of purchasing depending on the level of control you want to have on your NFT. 

The best way to purchase non-custodial NFTs refers to a decentralized platform. Popular decentralized exchanges such as Binance DEX showcase the perfect example of a non-custodial wallet for NFTs. You don’t have to fulfill any basic requirements for creating accounts or signing up for the services of a third-party provider. In addition, the custodial vs non-custodial NFTs comparison also focuses on how the non-custodial variants facilitate direct trades between wallets. 

The methods for purchasing custodial NFTs would include prominent references to an NFT marketplace. The marketplace would serve as a custodian for the NFT during the purchase process. For example, you have to send funds to the custodian if you want to purchase a custodial NFT through them. You can choose to keep the NFTs in the custodial wallet or transfer them to non-custodial wallets. 

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• Accessibility 

The significance of accessibility as a prominent factor of difference between custodial and non-custodial NFTs is clearly evident. People wouldn’t have to wonder about the time they could access the NFTs they own. However, is it really necessary to let anyone access NFTs?

When you think of crypto and NFTs, you can obviously draw some hints at democratization. After all, the basic vision of blockchain focuses on democratizing access to the digital world. However, custodial NFTs present a different perspective on the same. You can store custodial NFT in a wallet only after completing the formalities of account registration and KYC verification. On the other hand, non-custodial NFTs paint a different picture by allowing accessibility to anyone. A non-custodial NFT service is accessible to anyone without the need for registering an account or completing KYC verification procedures. 

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• Transaction Costs

The transaction costs associated with custodial and non-custodial NFT variants also serve an important role in custodial vs non-custodial NFTs comparisons. Since the custodian would invest resources in storage and management of private keys to your NFTs, they would obviously charge you a price for the same. 

In the case of custodial NFTs, transaction costs are generally higher due to involvement of the custodian. On the contrary, a non-custodial NFT provides the assurance for generally lower transaction costs. With the limited parties involved in non-custodial NFTs, you can have the assurance of reduced transaction costs. 

• Security 

The element of security will always serve as a profound highlight in the difference between custodial and non-custodial NFTs in all cases. Storage and management of private keys with custodial and non-custodial NFT variants define the foundations of security. In the case of a custodial NFT, the NFT owner has to place control of their private keys with the service provider. 

As a result, you have to rely on the efficiency of the NFT custodian’s security infrastructure to determine the security status for your NFTs. On the contrary, non-custodial NFTs are a step apart by allowing complete control of private keys to the NFT owner. In the case of a non-custodial NFT, you have the final say in the security of the private keys. Therefore, you can have the assurance of better security in non-custodial NFT by implementing personalized security mechanisms. 

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• Support

The final aspect for comparison in the custodial vs non-custodial NFTs debate would bring the topic of support into consideration. Custodial NFT platforms provide the assurance of support in the event of losing your password to the exchange. On the other hand, you may lose access to your NFTs permanently in the case of non-custodial NFT platforms, which offer limited support. 

Final Words

On a final note, it is clear that custodial and non-custodial NFTs have been tailored for different purposes. Depending on the type of custody you want for the NFT you have created or purchased, custodial NFTs and their non-custodial counterparts present distinct value advantages. For example, you are free from responsibilities of managing private keys with a custodial NFT. 

On the other hand, you have to compromise on the control you can exert over your NFTs. In the case of non-custodial NFTs, you can find improved prospects for security, albeit with limited support. If you lose your private keys for a non-custodial NFT, then you can very well bid goodbye to it. Learn more about NFTs and choose the best variant which fits your bill.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post Custodial vs Non-Custodial NFTs – Key Differences appeared first on 101 Blockchains.

However, the choice of zero knowledge technologies has turned out to be a troublesome decision for many professionals in the crypto world. With the growing hype around Zksnarks vs Zkstarks debate, anyone would obviously look for the better alternative among them. The following discussion offers you a detailed overview of ZK-SNARKs and ZK-STARKs alongside the notable points of difference between them.

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Basics of Zero Knowledge Proof Technologies 

Before diving into an outline of differences in a Zkstarks vs zksnarks comparison, you must have a basic impression of the background for zero knowledge technologies. The rise of cryptocurrencies has spelled an inevitable growth in popularity of zero-knowledge-proof technologies. 

It has served as a vital tool for use cases focused on privacy safeguards alongside verifiable computation. The fundamental pillars of Zero-Knowledge Proof (ZKP) technologies serve as the common highlights in the Zksnarks vs zkstarks comparison. Here are the three important features you would find in a zero-knowledge proof.

• Soundness

Soundness is the foremost aspect of ensuring confidentiality and privacy in blockchain. It basically implies that the verifier can identify any discrepancy on behalf of the prover.

• Completeness

Completeness implies that verifiers have assurance of true data from an honest prover in ZKP technologies.

• Zero-Knowledge

The final and most important highlight of zero knowledge protocols obviously refers to the zero knowledge trait. It implies that in the event of a true statement, the verifier would not find out the details of the statement. On the contrary, the verifier would only know that the statement is true. 

In simple terms, zero knowledge proof technologies help one party prove that they know something to another party without revealing the information. For example, you don’t have to show your date of birth to prove that you are above 18 years of age. Quite fascinating, isn’t it? However, the zkstarks vs zksnarks debate has been gaining profound levels of attention in the crypto space recently. 

Both of them are significant entries in the family or ZKP technologies, with unique privacy enhancing functionalities. The two zero knowledge technologies help in reducing the amount of information shared among users alongside the advantages of a scaling technology. Zero knowledge proof or ZKP technologies help in faster verification of proofs as they don’t hold the complete share of information on public systems. Where do they differ?

Want to know about cryptocurrency security too? Read: A Complete guide on Cryptocurrency Security

Differences between ZK-SNARK and ZK-STARK

The two most prominent zero-knowledge proof technologies in the market right now are ZK-SNARK and ZK-STARK. ZK-STARK stands for Zero-Knowledge Scalable Transparent Argument of Knowledge. On the other hand, ZK-SNARK stands for Zero-Knowledge Succinct Non-interactive Argument of Knowledge. Both of them are the most appealing zero-knowledge technologies available in the crypto market right now. 

Both of them are crucial aspects in the evolving base of zero knowledge technologies. Subsequently, you should also note that the two zero knowledge protocols are practically non-interactive, thereby implying the possibilities for autonomous actions and deployment of code. Let us find more about the differences in a zksnarks vs zkstarks debate, starting with an overview of both technologies.

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ZK-SNARKs

The earliest entry among zero-knowledge technologies, ZK-SNARKs evolved as a trustworthy option for elevating security in ZKP technologies. The primary design of these ZKP protocols revolved around the use of elliptic curves for improving security. Elliptic curves serve as a vital highlight in cryptography for efficient discovery of the discrete logarithm of a random elliptic curve element. Without diving into the complex theories of cryptography, how can you find an ideal overview of the first player in a Zkstarks vs zksnarks comparison? Let us decode the term ‘ZK-SNARKS’ itself for understanding it. 

The term ZK-SNARK represents zero-knowledge succinct non-interactive argument of knowledge, and you can separate each term for understanding ZK-SNARKS. By ‘succinct’ ZK-SNARKs imply the smaller size of proofs and quick verification. Older variants of ZKP protocols required interactions between prover and verifier. However, the ‘non-interactive’ factor in ZK-SNARKs suggests limited to almost no interaction between the verifier and prover. 

Now, the ‘arguments of knowledge’ part of the ZK-SNARKs acronym supports the integrity of the computational system. Dishonest prover would have limited chances of success without the actual arguments of knowledge for supporting their statements. As a result, the ZK-SNARK-based systems can ensure soundness alongside assumptions of limited computing power of the prover. 

Want to know how can ZKP deliver better security? Read: ZKP security

ZK-STARKs

The other prominent player in the Zksnarks vs zkstarks debate, i.e., ZK-STARKs, is also one of the recent additions in the family of ZKP protocols. ZK-STARKs arrived in 2018 with a prominent focus on hash functions for their cryptographic foundations. ZK-STARKs stand for zero-knowledge scalable transparent argument of knowledge, and the term itself gives out a lot about its functionalities. 

First of all, you can witness the ‘scalable’ aspect, which serves as an essential factor for overcoming the limits of transaction capacity. In addition, the ZK-STARKs do not need any initial trusted setup, thereby verifying the ‘transparency’ aspect clearly. Basically, ZK-STARKs offer a simpler structure when you look at the cryptographic aspects. Furthermore, the use of leaner cryptography mechanisms by employing collision-resistant hash functions could also provide the assurance of efficient security.

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Notable Points of Difference in ZK-STARKs vs ZK-SNARKs Debates

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The overview of both the zero knowledge protocols presents them in a good light in their respective domains. However, it is important to identify the specific points of difference that set them apart. ZK-SNARKs presents some problems, which led to the development of ZK-STARKs. However, that does not mean ZK-SNARKs are obsolete in the existing crypto space. The prominent issues associated with ZK-SNARKs are responsible for preventing them from gaining popularity in the mainstream crypto landscape. Here is an outline of the notable differences you can find in a Zkstarks vs zksnarks comparison.

• Transparency

The prominent highlight in zero-knowledge scalable transparent argument of knowledge or ZK-STARK is transparency. As a matter of fact, transparency serves as a prominent highlight in the zksnarks vs zkstarks debate. In the case of ZK-SNARKs, you have to go through a mandatory trusted setup phase. For example, one of the notable cryptocurrencies using ZK-SNARKs, i.e., Zcash, requires users to set up a Genesis block alongside assuming its security. 

While the initial setup phase may seem like a formality, it has many hidden consequences. For example, users have to place their trust in the initial setup phase alongside the parties involved in setting up the system. In such cases, ZK-SNARKs does not come out as the best of zero knowledge protocols, considering the fact that the initial setup phase may have been compromised or would be in the future. 

On the other side of the debate, ZK-STARKs does not require any external trusted setup phase. They offer randomness with scope for public verification, thereby preventing any party from obtaining the setup parameters. The public verifiability of proofs with anonymity also avoids the creation of any false proofs. 

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• Scalability

The next point of comparison between zero-knowledge succinct non-interactive argument of knowledge or ZK-SNARK and ZK-STARKs points to scalability. You have the opportunity to enjoy better scalability with ZK-STARKs in comparison to ZK-SNARKs. How? As a matter of fact, ZK-STARKs resolved many issues in ZK-SNARKs, which imposed restrictions on scalability. 

First of all, ZK-STARKs reduced algebraic representations and the associated computation tasks in proof generation and verification. Optimization of the code for reducing arithmetic and computational complexity provides the ideal foundation for improved scalability. 

The reduced arithmetic complexity of ZK-STARKs makes them a winner in a zksnarks vs zkstarks debate. They are almost 8 to 10 times faster than ZK-SNARKs in terms of the computation size required for generating proofs. On top of it, ZK-STARKs use the FRI algorithm and new FFT algorithms as add-ons for speeding up verifier runtime. 

ZK-SNARKs also present a formidable setback for scalability in terms of communication complexity. For example, the amount of messages needed among parties for solving a problem grows in a linear fashion for ZK-SNARKs. On the contrary, ZK-STARKs imply the growth of messages between parties at a slower rate.

However, ZK-SNARKs do not go down completely in terms of scalability in a Zkstarks vs zksnarks comparison. ZK-SNARKs have the advantage of a smaller proof size which leaves ZK-STARKs with a scalability limitation.

Want to understand blockchain scalability problem? Read: Blockchain Scalability Problem And Solution

• Safety against Quantum Attacks

Another notable highlight in the comparison between zero-knowledge scalable transparent argument of knowledge and ZK-SNARKs refers to resilience against quantum attacks. ZK-SNARKs depend on private-public encryption approaches such as ECDSA and RSA for creating private-public key pairs. The growth of quantum computing has led to the development of new algorithms, which can compromise such encryption approaches. 

On the other hand, ZK-STARKs utilize collision-resistant hash functions and random oracle models. In addition, they also use Merkle trees for improving resilience against quantum attacks. The cryptographic primitives help in improving the resilience of ZK-STARKs towards quantum computation attacks. 

Want to learn the differences between public vs private keys? Check the Presentation: Public vs Private keys

Final Words 

The final take away from the Zkstarks vs zksnarks comparison obviously presents ZK-STARKs in a positive light. They offer better scalability, transparency, and security in comparison to ZK-SNARKs. However, it is also important to note that ZK-STARKs have a bigger proof size and require more time for verification. 

On top of it, ZK-SNARKs also require 24% of the amount of gas required for transactions with ZK-STARKs. Therefore, you can notice how both the zero knowledge technologies have their unique value propositions. While ZK-SNARKs is well-established with a full-fledged community, documentation, and resources, ZK-STARKs is still in the initial stages. Learn more about both the popular zero knowledge technologies in detail now.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post Zksnarks vs zkstarks – Key Differences appeared first on 101 Blockchains.