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Non Fungible Tokens

  • IASbaba
  • August 23, 2022
  • 0
Science and Technology
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Non Fungible Tokens

  • Anything that can be converted into a digital form can be an NFT.
  • Everything from drawings, photos, videos, GIFs, music, in-game items, selfies, and even a tweet can be turned into an NFT, which can then be traded online using cryptocurrency.

Working of NFT:

  • If anyone converts its digital asset to an NFT, he/she will get proof of ownership, powered by Blockchain.
  • There is a need for a cryptocurrency wallet and an NFT marketplace where one can buy and sell NFTs.
  • Some of the NFT marketplaces are OpenSea.io, Rarible, Foundation.
  • NFTs are different from other digital forms in that they are backed by Blockchain technology.
  • NFTs can have only one owner at a time.
  • Apart from exclusive ownership, NFT owners can also digitally sign their artwork and store specific information in their NFTs metadata.
  • This will be only viewable to the individual who bought the NFT.

How is an NFT different from a cryptocurrency?

  • Apart from NFTs and cryptocurrencies being built on Blockchain, both are different from each other.
  • Cryptocurrency is a currency and is fungible, meaning that it is interchangeable.
  • For instance, if one holds one crypto-token, say one Ethereum, the next Ethereum that the one holds will also be of the same value.
  • However, NFTs are non-fungible, which means the value of one NFT is not equal to another.
  • Nonfungible means NFTs aren’t mutually interchangeable.
  • Every art is different from others, making it non-fungible, and unique.

Source: The Hindu

Previous Year Question

Q.1) With reference to Non-Fungible Tokens (NFTs), consider the following statements.(2022)

  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?

  1. 1 and 2 only
  2. 2 and 3 only
  3. 1 and 3 only.
  4. 1, 2 and 3

 

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