Question
Q69) With Reference of Non-Fungible Tokens (NFTs), consider the following statements?
- They enable to digital representation of Physical Assets.
- They are Unique Cryptographic Tokens they exist in a blockchain.
- They can be traded or exchanged at equivalency and therefore can used as a medium of commercial transactions.
Which of the statements given above is/are correct?
- 1 and 2 Only
- 2 and 3 Only
- 1 and 3 Only
- 1,2 and 3
Answer: 1
Detailed Explanation
Non fungible tokens (NFTs)
- Anything that can be converted into a digital form can be an NFT.
- Everything from your drawings, photos, videos, GIF, music, in-game items, selfies, and even a tweet can be turned into an NFT, which can then be traded online using cryptocurrency.
- But what makes NFTs unique from other digital forms is that it is backed by Blockchain technology.
- For the uninitiated, Blockchain is a distributed ledger where all transactions are recorded.
- It is like your bank passbook, except all your transactions are transparent and can be seen by anyone and cannot be changed or modified once recorded.
Non fungible tokens (NFTs)
How do NFTs work?
- NFT works on blockchain as it gives users complete ownership of a digital asset.
- For instance, if you’re a sketch artist, and if you convert your digital asset to an NFT, what you get is proof of ownership, powered by Blockchain.
How is an NFT different from cryptocurrency?
- NFTs and cryptocurrencies are very different from each other. While both are built on Blockchain, that is where the similarity ends.
- 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, that means the value of one NFT is not equal to another. Every art is different from other, making it non fungible, and unique.
