Q. With reference to fungible and non-fungible assets, consider the following statements:
1. A fungible asset can be readily interchanged.
2. A non-fungible asset can also contain smart contracts.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C

Both statements are correct. 

What are Fungible and Non-Fungible assets? 

  • A fungible asset is something that can be readily interchanged like money. With money, you can swap a £10 note for two £5 notes, and it will have the same value. 
  • On the other hand, a non-fungible asset means it has unique properties which cannot be interchanged with something else. Example: It could be a painting that is one of a kind. You can take a photo of the painting or buy a print, but there will only ever be one original painting. 

What are Non-Fungible Tokens(NFTs)? 

  • Non-Fungible Tokens(NFTs) are unique cryptographic tokens that exist on a blockchain and cannot be replicated. 
  • They are one-of-a-kind assets in the digital world that can be bought and sold like any other piece of property, but they have no tangible form of their own. 
  • The digital tokens can be thought of as certificates of ownership for virtual or physical assets. 
  • NFTs can also contain smart contracts that can solve the problems of provenance and duplication of the art. 

Source: Article