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)
- 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?
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only.
- 1, 2 and 3