NFT Art NFT Marketplaces and Trading 4 — Questions and Answers
Question 1: What is 'wash trading' in NFT marketplaces, and why is it problematic?
- Legally transferring NFTs between wallets for tax purposes
- Artificially inflating an NFT's trading volume by buying and selling to oneself (Correct answer)
- Using multiple credit cards to purchase the same NFT
- Minting the same artwork on multiple blockchains simultaneously
Correct answer: Artificially inflating an NFT's trading volume by buying and selling to oneself
Wash trading involves a user selling NFTs to wallets they control to fake trading activity, artificially inflating perceived popularity and value.
Question 2: Which NFT marketplace launched its own token ($BLUR) and used token rewards to incentivize trading volume?
- OpenSea
- Rarible
- Blur (Correct answer)
- LooksRare
Correct answer: Blur
Blur launched the $BLUR token and distributed rewards to traders, rapidly capturing significant market share from OpenSea.
Question 3: What does 'provenance' mean when evaluating an art NFT's value on a marketplace?
- The technical resolution and file size of the artwork
- The verified ownership history and origin of the NFT (Correct answer)
- The number of editions minted in the collection
- The smart contract standard used to create the NFT
Correct answer: The verified ownership history and origin of the NFT
Provenance refers to the documented history of an NFT's ownership, including the original creator and all subsequent owners, which is permanently recorded on-chain.
Question 4: On most NFT marketplaces, what is the typical range for creator royalties on secondary sales?
- 0.1% to 1%
- 2.5% to 10% (Correct answer)
- 15% to 25%
- 30% to 50%
Correct answer: 2.5% to 10%
Creator royalties on secondary NFT sales typically range from 2.5% to 10%, with 5-10% being most common for art NFTs.
Question 5: What is a 'bundle sale' on an NFT marketplace?
- A sale that includes the NFT's underlying artwork files
- Selling multiple NFTs together as a package for a single price (Correct answer)
- A discounted sale during marketplace promotional events
- An option to pay for an NFT in installments
Correct answer: Selling multiple NFTs together as a package for a single price
A bundle sale allows sellers to group multiple NFTs together and offer them as a package deal for a combined price.
Question 6: Which blockchain's high gas fees historically pushed many NFT art collectors toward alternatives like Polygon or Solana?
- Bitcoin
- Ethereum (Correct answer)
- Binance Smart Chain
- Cardano
Correct answer: Ethereum
Ethereum's notoriously high and volatile gas fees made smaller NFT transactions economically unviable, driving users to cheaper alternatives.
Question 7: What is the significance of the 'verified' checkmark on an NFT collection page on OpenSea?
- The NFTs have been authenticated by art critics
- The collection meets a minimum trading volume threshold and has verified ownership (Correct answer)
- The creator has completed KYC identity verification
- The smart contract has been audited for security vulnerabilities
Correct answer: The collection meets a minimum trading volume threshold and has verified ownership
OpenSea's verification badge indicates the collection has reached significant trading volume and the creator has confirmed ownership of the collection.
NFT Art NFT Marketplaces and Trading 4
What is 'wash trading' in NFT marketplaces, and why is it problematic?