NFT Marketplaces and Trading Mechanics 4 — Questions and Answers
Question 1: What is 'royalty enforcement' and why did it become controversial among NFT marketplaces in 2022-2023?
- Enforcing copyright on NFT artwork in court
- Some marketplaces made creator royalties optional, undermining artists' passive income (Correct answer)
- Governments mandating royalty payments on NFT sales
- Requiring royalties to be paid in stablecoins only
Correct answer: Some marketplaces made creator royalties optional, undermining artists' passive income
Blur and other marketplaces made royalties optional to attract traders, sparking debate about whether platforms should technically enforce or merely suggest creator royalties.
Question 2: What is a 'phygital' NFT in the art market?
- An NFT stored on a physical hard drive
- A digital NFT linked to a redeemable physical artwork or object (Correct answer)
- An NFT that can only be viewed on physical screens
- A printed certificate representing NFT ownership
Correct answer: A digital NFT linked to a redeemable physical artwork or object
Phygital NFTs bridge digital and physical worlds, where owning the NFT entitles the holder to claim or receive a corresponding physical item.
Question 3: What is the role of an 'escrow' mechanism in peer-to-peer NFT trades?
- To store NFT metadata permanently
- To hold assets from both parties during a trade until conditions are met (Correct answer)
- To calculate royalty distributions automatically
- To verify the authenticity of an NFT's artwork
Correct answer: To hold assets from both parties during a trade until conditions are met
Escrow smart contracts lock both the NFT and payment until both parties fulfill their obligations, enabling trustless peer-to-peer swaps.
Question 4: What does 'paper hands' mean in NFT trading slang?
- Collectors who only buy physical art certificates
- Traders who sell quickly at the first sign of a price drop (Correct answer)
- Artists who mint on paper-themed collections
- Buyers who pay with fiat currency instead of crypto
Correct answer: Traders who sell quickly at the first sign of a price drop
Paper hands describes traders who panic-sell early, often at a loss, rather than holding through market volatility.
Question 5: How does Blur's 'Blend' protocol differ from traditional NFT marketplaces?
- It blends multiple NFT images into one
- It offers NFT-backed lending, allowing owners to borrow ETH against their NFTs (Correct answer)
- It merges two NFT collections into a single contract
- It provides cross-chain bridging for NFTs
Correct answer: It offers NFT-backed lending, allowing owners to borrow ETH against their NFTs
Blend is an NFT lending protocol where holders can use their NFTs as collateral to receive ETH loans without selling their assets.
Question 6: What is a 'bundle' sale in NFT marketplaces?
- Selling multiple NFTs from different collections as a single package at one price (Correct answer)
- A discount offered on a collection's entire supply
- A group of wallets coordinating a purchase
- Minting NFTs in bulk at reduced gas fees
Correct answer: Selling multiple NFTs from different collections as a single package at one price
Bundle sales let sellers group multiple NFTs into one listing, which buyers purchase together — sometimes saving gas compared to individual transactions.
Question 7: What is 'shill bidding' and why is it considered unethical in NFT auctions?
- Promoting your own NFT on social media
- A seller using alternate wallets to artificially drive up auction bids (Correct answer)
- Sharing another collector's NFT listing for a commission
- Bidding on NFTs you have no intention of buying
Correct answer: A seller using alternate wallets to artificially drive up auction bids
Shill bidding involves the seller or their associates placing fake bids to inflate prices, deceiving legitimate buyers about true demand.
NFT Marketplaces and Trading Mechanics 4
What is 'royalty enforcement' and why did it become controversial among NFT marketplaces in 2022-2023?