Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

What does the term "non-fungible" mean in regard to non-fungible tokens (NFTs)?

1. NFTs cannot be attributed to an owner, developer, or artist.

2. NFTs have a set value and can be bought or sold for any other digital asset.

3. NFTs are unique and cannot be exchanged for one another.

4. NFTs cannot be bought or sold without registration on a government-backed blockchain.

The correct answer is: NFTs are unique and cannot be exchanged for one another.

The term "non-fungible" is crucial in understanding what sets non-fungible tokens (NFTs) apart from other types of tokens, particularly fungible ones, such as cryptocurrencies. Non-fungible tokens are unique digital assets that represent ownership of a specific item or piece of content, such as art, music, or collectibles, and each NFT has distinct characteristics and value. This uniqueness means that they cannot be exchanged on a one-to-one basis like currency, where each unit is the same as another of its kind. For instance, one Bitcoin can be exchanged for another Bitcoin at equal value, demonstrating fungibility, while each NFT represents a one-of-a-kind asset that carries its own value, privileges, and history, making direct exchange between NFTs impossible. This property of NFTs and their individual identities is what defines them as non-fungible, highlighting their role in the digital ownership ecosystem. The incorrect options illustrate misunderstandings about NFTs. Some suggest that NFTs lack ownership attribution or claim that they must be registered on a specific blockchain, neither of which accurately reflects their unique nature and the decentralized technology of blockchain itself. Additionally, asserting that NFTs have a set value disregards the varied market prices and desirability associated with each unique token