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 transaction of commercial transactions.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
c) 1 and 3 only.
(d) 1, 2 and 3
Ans: a
Explanation:
An NFT or non-fungible token is a unique digital asset stored on the blockchain that serves as proof of ownership or authenticity for a digital or physical item/right. Unlike fungible assets, NFTs are one-of-a-kind and cannot be replaced. They use blockchain technology to provide decentralized, secure, and transparent records of ownership and transfers.
There is a close link between NFTs and cryptocurrencies as many NFTs are traded in cryptocurrencies.
Fundamentally, NFTs are digital certificates that hold the potential to deliver significant value for both organizations and end users. For companies, NFTs provide a new way to connect with customers and create loyal communities. For users, they provide a new avenue for inclusive ownership in digital goods.
Hence, statemetnt 2 is correct.
Non-fungible tokens, or NFTs, are digital representations of unique assets stored on the blockchain. They are a key component of Web3, allowing for new forms of digital interactions, ownership and exchange. NFTs are unique, and their ownership is recorded on the blockchain, so they cannot be duplicated or counterfeited.
Hence, statement 1 is correct.
Cryptocurrencies are usually fungible from a financial perspective, meaning that they can be traded or exchanged, one for another. This fungibility characteristic makes cryptocurrencies suitable as a secure medium of transaction in the digital economy.
In NFTs each token is unique and irreplaceable, making it impossible for one non-fungible token to be “equal” to another. They are digital representations of assets and have been likened to digital passports because each token contains a unique, non-transferable identity to distinguish it from other tokens. They are also extensible, meaning one NFT can be combines with another to create a third, unique NFT— this is called “breeding.”
Hence, statement 3 is incorrect.
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