With reference to Non-Fungible Tokens (NFTs), consider the following statements:
- 1. They enable the digital representation of physical assets.
- 2. They are unique cryptographic tokens that exist on a blockchain.
- 3. They can be traded or exchanged at an equivalency and therefore can be used as a medium of commercial transactions.
Which of the statements given above are correct ?
[amp_mcq option1=”1 and 2 only” option2=”2 and 3 only” option3=”1 and 3 only” option4=”1, 2 and 3″ correct=”option1″]
This question was previously asked in
UPSC IAS – 2022
– Statement 2: An NFT is by definition a unique, non-interchangeable unit of data stored on a digital ledger (blockchain). Each NFT has a unique identifier and metadata.
– Statement 3: NFTs are non-fungible, meaning each token is unique and not interchangeable with another NFT on a one-to-one basis. This is in contrast to fungible tokens (like Bitcoin or standard currency), which can be exchanged at an equivalency and used as a medium of commercial transactions. While NFTs can be bought and sold, they are typically traded for fungible cryptocurrencies or fiat currency, and are not used *as* a medium of commercial exchange themselves due to their uniqueness.