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?

(a) 1 and 2 only

(b) 2 and 3 only

(d) 1, 2 and 3

Explanation

Based on the given statements, here is the analysis:

1) They enable the digital representation of physical assets.

This statementQW is correct. NFTs are non-fungible tokens that exist on a blockchain to represent ownership of unique digital assets. They do not directly represent physical assets.

2) They are unique cryptographic tokens that exist on a blockchain.

This statement is correct. NFTs are unique tokens minted on a blockchain like Ethereum. Each NFT has a unique identification code and metadata that distinguishes it from other NFTs.

3) They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions.

This statement is incorrect. NFTs are non-fungible, meaning they cannot be directly exchanged with each other at equivalency. Each NFT represents a unique asset and has a distinct value.

In summary:

Statement 1 is correct: NFTs represent digital assets, not physical assets directly.
Statement 2 is correct: NFTs are unique cryptographic tokens minted on a blockchain.
Statement 3 is incorrect: NFTs are non-fungible and cannot be exchanged at equivalency.

Therefore, option (a) 1 and 2 only is the correct answer.

NFT stands for non-fungible token, which is a unique cryptographic token that exists on a blockchain
NFTs are minted through a process that records the token’s information immutably on the blockchain
They can represent digital items like art, music, videos, as well as real-world assets like real estate
NFT data includes information like ownership, transaction history, and metadata to establish authenticity
The non-fungible nature means each NFT has a unique value and is not interchangeable with other NFTs
They enable digital scarcity and verification of ownership for digital assets
NFTs are bought and sold online, often using cryptocurrencies like Ether
They allow creators to monetize their digital works and gain royalties if the NFT appreciates
NFTs can also represent identities, qualifications, event tickets, memberships, and more
While very popular in 2021, NFT interest has since declined significantly
Key challenges are high energy use of some blockchains, copyright concerns, and speculative trading