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UPSC Prelims 2022 Paper-1 📅 05 Jun, 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?

A
(a) 1 and 2 only
B
(b) 2 and 3 only
C
(c) 1 and 3 only
D
(d) 1, 2 and 3
Result Summary
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UPSC Prelims
2022 • 05 Jun, 2022 • Paper-1
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?
Correct Answer
(a) 1 and 2 only
Asset Representation: Statement 1 is correct. NFTs can be actively used to securely tokenize real-world physical assets (such as premium real estate, rare physi......
Ref/Book : UPSC Prelims 2022
Ref. Subject Science & Technology
Chapter -
Ref. Topic IT & Computers
Pg. No -
💡 Analysis & Explanation
Asset Representation ▼
Statement 1 is correct. NFTs can be actively used to securely tokenize real-world physical assets (such as premium real estate, rare physical artwork, or collectibles), providing an immutable digital certificate of ownership tracked on a ledger.
Cryptographic Uniqueness ▼
Statement 2 is correct. By definition, NFTs are strictly unique cryptographic assets hosted on a distributed blockchain. They contain distinct metadata and specific identification codes that completely and permanently separate them from one another.
Fungibility Clause ▼
Statement 3 is fundamentally incorrect. The very term "non-fungible" explicitly dictates that they *cannot* be traded or exchanged at equivalency. Unlike fungible cryptocurrencies like Bitcoin or standard fiat cash (which are identical and act as a medium of exchange), every single NFT holds entirely unique value and cannot serve as standard commercial money.
Conclusion ▼
Statements 1 and 2 perfectly and accurately define the technical parameters of NFTs.
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