With reference to Non-Fungible Token (NFTs), consider the following statements:
1. They enable the digital representation of physical assets.
2. They are unique cryptographic token 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?

The correct option is 1 and 2 only.

Let us analyze each statement step-by-step to understand why they are correct or incorrect:

Statement 1 is correct: Non-Fungible Tokens (NFTs) can represent physical assets digitally. By tokenizing physical assets like artwork, real estate, or collectibles, they can be bought, sold, and traded more efficiently while reducing the probability of fraud.

Statement 2 is correct: NFTs are unique cryptographic tokens that exist on a blockchain. Unlike cryptocurrencies, each NFT has unique identification codes and metadata that distinguish it from another, making them non-interchangeable (non-fungible).

Statement 3 is incorrect: NFTs cannot be traded or exchanged at equivalency (which is the definition of fungibility). For example, one Bitcoin is always equal in value to another Bitcoin, making it fungible and suitable as a medium of commercial transactions. In contrast, each NFT is unique and has a distinct value, so they cannot be traded at equivalency. Therefore, they are not designed to be used as a standard medium of commercial transactions.