NON-FUNGIBLE TOKEN (NFT) Flashcards
What is fungibility?
The ability of an item or asset to be interchanged with other individual items or assets of the same type.
Fungible items possess equal value and can be easily substituted for one another.
Provide three examples of fungible items.
Currency: A ₹2000 note can be broken down into smaller denominations (4 x ₹500) and still hold the same value.
Gold: A 1kg gold bar can be divided into smaller pieces, and its value remains proportional to its weight.
Cryptocurrencies (e.g., Bitcoin): One Bitcoin can be divided into smaller units (Satoshis), and their value remains proportional.
Provide two examples of non-fungible items.
Unique Diamonds: A large single diamond is generally much more valuable than many smaller diamonds adding up to the same weight. They lack interchangeability.
NFTs (Non-Fungible Tokens): NFTs are digital assets representing unique items such as art, collectibles, or in-game items. Each NFT is distinct.
Why is the concept of fungibility important?
Liquidity: Fungible assets are easily traded, creating a liquid market where they can be bought and sold quickly.
Standardization: Fungible items have predictable and consistent value, aiding in price determination and reducing uncertainty.
Efficiency: Fungibility streamlines transactions because you don’t need to worry about the specific identity of the items being exchanged.
Why is the concept of fungibility important?
Liquidity (Easy Trading): Think of fungible things like money. You can easily swap a ₹100 note for two ₹50 notes. This makes buying and selling smooth and fast.
Standardization (Clear value): Fungible things have standard values. Just like 1kg of gold is always worth the same as another 1kg of gold, no matter where it comes from. This makes pricing and trading easier.
Efficiency (No Fuss): With fungible things, you don’t need to worry about which exact one you have. One ₹50 note is just as good as another ₹50 note, so transactions are quick and simple.
What is an NFT?
A Non-Fungible Token (NFT) is a unique digital asset stored on a blockchain. It represents ownership of items like digital art, videos, music, collectibles, or even real-world assets.
Explain the concept of non-fungibility.
Non-fungible means that something is unique and cannot be directly replaced by something else. For example, a dollar bill is fungible because you can exchange it for another dollar bill and have the same value. An NFT, like a piece of digital art, is non-fungible because there’s only one original, making it irreplaceable.
What are some popular examples of NFTs?
Digital Art: Beeple’s $70 million JPG, Sophia the Robot’s “Sophia Instantiation” artwork.
Collectibles: Sports highlights, virtual trading cards.
Music: Songs or albums released as NFTs.
Video Games: In-game items, characters, or virtual land.
Celebrity Memorabilia: Autographs, limited edition merchandise.
How does blockchain technology relate to NFTs?
Blockchain provides a secure, transparent, and immutable ledger. This does the following for NFTs:
Verifies ownership: Records who created and currently owns the NFT.
Preserves authenticity: Creates a history of transactions, making it hard to counterfeit NFTs.
Enables Smart Contracts: Can be programmed into NFTs for things like automatic royalty payments to the original creator.
What are NFT-Charms?
NFT-Charms are digital assets linked to a unique identifier on a blockchain.
They can represent various items including artwork, collectibles, tickets, in-game items, and more.
Their main purpose is to establish provable ownership and authenticity.
How do NFT-Charms benefit multimedia creators?
Easy Trading: NFT marketplaces offer creators a simple way to sell and trade their digital assets.
Clear Ownership: Blockchain acts as an immutable record, proving who created the work and who currently owns it.
Plagiarism Prevention: Creators can ensure the uniqueness and originality of their work using NFTs.
Can NFT-Charms replace physical items?
Cinema, Sports, and Travel Tickets: Digital tickets stored on the blockchain provide ownership verification and fight fraud.
Paperless Administration: NFTs streamline ownership records, reducing the need for physical documents in many situations.
What are NFTs?
NFTs stands for Non-Fungible Tokens.
They are digital assets that exist on a blockchain.
They are unique and cannot be replicated or exchanged for something of equal value.
Can represent anything from artwork and music to in-game items and tweets.
Describe the NFT boom of 2021.
NFTs gained significant attention in 2021.
Prices skyrocketed, with simple digital art, GIFs, and memes selling for millions in cryptocurrency.
This fueled speculation of a ‘bubble’ in the NFT market.
What are concerns about the potential collapse of the NFT market?
Many view the high prices as unsustainable and part of a speculative bubble.
Critics argue that when the hype fades, investors could lose substantial money.
