Characteristics and utility of Non-Fungible Tokens
Question
With reference to Non-Fungible Tokens (NFTs), consider the following statements: Which of the statements given above are correct?
- 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 equivalency and therefore can be used as a medium of commercial transactions.
Options
1 and 2 only
2 and 3 only
1 and 3 only
1, 2 and 3
Explanation
Statements 1 and 2 are correct. NFTs act as unique digital certificates of ownership, recorded on a blockchain, and can represent either digital or physical assets. Statement 3 is definitively incorrect; the very name "Non-Fungible" means they are unique and cannot be exchanged at equivalency (like trading a 10 bill for another10 bill). Because they are not fungible, they cannot function as a standard medium of commercial exchange (currency).
Answer: (a).
Question details
Year
2022
Paper
GS Paper 1
Question
Q69
Subject
Science & Technology
Sub-topic
Computing, AI & IT
Type
Statement-based
Difficulty
Medium
Nature
Current-affairs-linked
Source hint
Cryptographic Assets / Non-Fungible Token Blockchain Registers
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