RAS question
Non-Fungible Tokens (NFTs) are unique because:
Correct answer: (C) Each NFT has a unique identifier and cannot be replicated or exchanged on a like-for-like basis.
Non-Fungible Tokens are unique because each NFT is a distinct, non-interchangeable digital token linked to identifying information on a blockchain, so it cannot be exchanged on a like-for-like basis.
Explanation
An NFT is not a physical coin or a standard currency unit. Britannica describes a non-fungible token as a non-interchangeable digital asset, such as a photograph, song or video, whose ownership is authenticated and stored on a blockchain. NFTs are cryptographic tokens representing ownership of a unique item, unlike cryptocurrencies where units are meant to be interchangeable. The key idea is minting: the digital asset is associated with identifying information, such as ownership and media location, and that information is recorded on the blockchain. Each NFT is tied to its own identifying information and asset, which makes it a distinct, non-interchangeable digital token.
Why the other options are wrong
- (A) Identical and interchangeable units describe fungible assets, whereas NFTs are defined by being non-interchangeable and distinct from one another.
- (B) NFTs are digital assets authenticated and stored on a blockchain, not physical tokens.
- (D) NFTs represent ownership of digital assets such as art, music, photographs or videos, so their use is not limited to currency transactions.
Concept
Blockchain-based digital assets are an important Science and Technology concept, especially the difference between fungible cryptocurrency units and non-fungible tokens. Blockchain, digital ownership and emerging technology terms often recur in RAS as basic-concept areas.