Nonfungible tokens (NFTs) are essentially digital assets that represent real-world items like art, music, in-game goods and videos. They are bought and sold online and are generally coded with software to make them unique and non-interchangeable, hence the term `nonfungible`. They are stored on a blockchain, which is a decentralized digital ledger that documents transactions.

Option 1 is correct because NFTs are indeed digital assets on a blockchain.

Option 2 is not related to NFTs. Banking correspondents operate in rural and remote areas where banking services are less accessible, providing basic banking functions such as money transfers, withdrawals, and deposits.

Option 3, multifactor authentication security requirement in banking transactions, is a method used to ensure a user’s claimed identity by utilizing multiple verification procedures. It is a different concept from NFTs.

Option 4, transactions through `small finance banks`, is also off the mark as small finance banks function as standard banks, providing basic banking services to underserved sections of the society; they don`t specifically deal in NFTs.