With reference to Non-Fungible Tokens (NFTs), consider the following statements:They enable the digi

Question

With reference to Non-Fungible Tokens (NFTs), consider the following statements:They enable the digital representation of physical assets.They are unique cryptographic tokens that exist on a blockchain.They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions.Which of the statements given above are correct?

Accepted Answer

Non-fungible tokens, commonly known as NFTs, are unique cryptographic tokens that exist on a blockchain and cannot be replicated—having a unique identification code and metadata. Hence, statement 2 is correct.Anything that can be converted into a digital form can be an NFT. Everything from one’s drawings, photos, videos, GIFs, music, in-game items, selfies, and even a tweet can be turned into an NFT. Hence, statement 1 is correct.NFTs and cryptocurrencies are very different from each other. Cryptocurrency is a currency and is fungible, meaning that it is interchangeable. For instance, if you hold one crypto token, say one Ethereum, the next Ethereum that you hold will also be of the same value. But NFTs are non-fungible, which means the value of one NFT is not equal to another. Every art is different from the other, making it non-fungible and unique.Thus, unlike cryptocurrencies, they cannot be traded or exchanged at equivalency and therefore cannot be used as a medium of commercial transactions. Hence, statement 3 is not correct.