With reference to Non-Fungible Tokens (NFTs), consider the following statements : 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 equiv

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Q: 69 (IAS/2022)
With reference to Non-Fungible Tokens (NFTs), consider the following statements :
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.
Which of the statements given above are correct ?

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,109,101,109,25,5,71

keywords: 

{'unique cryptographic tokens': [0, 0, 0, 1], 'nfts': [0, 0, 0, 1], 'commercial transactions': [0, 0, 0, 1], 'physical assets': [0, 0, 0, 1], 'blockchain': [0, 0, 0, 1], 'digital representation': [0, 0, 0, 1]}

Non-Fungible Tokens (NFTs) are unique digital tokens that exist on a blockchain. They use cryptographic algorithms to verify their authenticity and ownership, making them ideal for representing digital assets such as art, music, videos, and other types of content.

Statement 1 is incorrect because NFTs enable the digital representation of unique digital assets rather than physical assets.

Statement 2 is correct as NFTs are unique cryptographic tokens that exist on a blockchain, such as Ethereum.

Statement 3 is incorrect because while NFTs can be traded or exchanged, they are not equivalent to each other and therefore cannot be used as a medium of commercial transactions. NFTs derive their value from their uniqueness and scarcity, and their value is determined by the market demand for them.

 

Preparing for Future Exams: Learning from the Analysis of Past Questions

Topics:

  1. Non-Fungible Tokens (NFTs)
  2. Blockchain technology
  3. Cryptocurrencies
  4. Digital assets
  5. Digital ownership

Sources:

  1. "What are NFTs and why are some worth millions?" by BBC News
  2. "What Are NFTs? And What Do They Mean for the Future of Art?" by Artwork Archive
  3. "The Complete Guide to NFTs: How to Create, Buy, and Sell Non-Fungible Tokens" by CoinCentral
  4. "Blockchain Basics: A Non-Technical Introduction in 25 Steps" by Daniel Drescher
  5. "Cryptocurrency Investing Bible: The Ultimate Guide About Blockchain, Mining, Trading, ICO, Ethereum Platform, Exchanges, Top Cryptocurrencies for Investing and Perfect Strategies to Make Money" by Alan T. Norman

Related Concepts:

  1. Fungibility vs. Non-fungibility
  2. Smart contracts
  3. Decentralized finance (DeFi)
  4. Tokenization
  5. Proof of ownership

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