Cryptocurrency NFTs and Digital Assets 3

Question 1

What is the ERC-1155 standard, and how does it differ from ERC-721?

Accepted Answer

ERC-1155 supports both fungible and non-fungible tokens in a single contract, while ERC-721 handles only unique NFTs

Answer

ERC-1155 only supports fungible tokens; ERC-721 supports both fungible and non-fungible

Answer

ERC-1155 is the Ethereum standard for stablecoins; ERC-721 is for governance tokens

Answer

ERC-1155 requires no gas fees; ERC-721 requires standard gas fees

Question 2

What does 'fractionalization' of an NFT mean?

Accepted Answer

Dividing ownership of an NFT into multiple fungible tokens so several parties can share ownership

Answer

Burning an NFT and splitting the proceeds among multiple wallets

Answer

Creating derivative NFTs with reduced traits from a parent NFT

Answer

Splitting an NFT into its component trait layers for separate sale

Question 3

What is a 'dynamic NFT' (dNFT)?

Accepted Answer

An NFT whose metadata and appearance can change based on external data or on-chain conditions

Answer

An NFT that automatically increases in price over time

Answer

An NFT that can be split into multiple unique tokens

Answer

An NFT issued by a DAO through a governance vote

Question 4

What is 'provenance' in the context of NFTs?

Accepted Answer

The verifiable ownership and transaction history of an NFT recorded on the blockchain

Answer

The geographic location where an NFT was created

Answer

The legal copyright registration of an NFT's underlying artwork

Answer

The estimated future value of an NFT based on market trends

Question 5

What is typically meant by a 'blue-chip NFT'?

Accepted Answer

An NFT from an established, highly valued collection with strong market liquidity and brand recognition

Answer

An NFT minted by a government entity with official backing

Answer

An NFT priced under $100 that is accessible to all buyers

Answer

An NFT that pays staking rewards denominated in blue chips

Question 6

What is the key risk of storing NFT media files on a centralized server rather than IPFS or on-chain?

Accepted Answer

If the server goes offline, the media file disappears and the NFT loses its visual content

Answer

Transaction fees become significantly higher for the owner

Answer

The NFT can be duplicated and sold multiple times simultaneously

Answer

Gas costs for transfers increase proportionally to file size

Question 7

In the US, how does the IRS currently treat NFT sales for tax purposes?

Accepted Answer

NFT sales are treated as capital gains or losses, similar to other cryptocurrency disposals

Answer

NFT sales are tax-exempt as they are classified as digital art donations

Answer

NFT sales are taxed as ordinary income regardless of holding period

Answer

NFT transactions are only taxed if the sale exceeds $10,000