With reference to Non-Fungible Token (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?
[UPSC Civil Services Exam – 2022 Prelims]
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
- Non-fungible tokens (NFTs) are cryptographic assets on a blockchain that uniquely identify real-world items such as artwork and real estate.
- By “tokenizing” these assets, it becomes more efficient to buy, sell, and trade them, reducing the likelihood of fraud.
- NFTs typically contain references to digital files such as photos, videos, and audio.
- “Tokenizing” these real-world tangible assets makes buying, selling, and trading them more efficient while reducing the probability of fraud. Hence, Statement 1 is correct.
- It is cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other. Hence, Statement 2 is correct.
- Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. Hence, Statement 3 is not correct.