NFTs: boom, bust and meaning

• A. New Financial Token
• B. Non-Fungible Token ✓
• C. Networked File Transfer
• D. Nominal Fixed Trade

Why: NFT stands for Non-Fungible Token. 'Non-fungible' means each token is unique and cannot be exchanged one-for-one with another token of the same type, unlike currency such as dollars, where any one unit is interchangeable with another.

• A. It is one-of-a-kind and cannot be replaced
• B. Each unit is interchangeable with any other unit of the same type ✓
• C. It can only be stored on a blockchain
• D. It is protected by copyright law

Why: Fungible assets are interchangeable. A $10 bill can be swapped for any other $10 bill with no loss of value. NFTs are non-fungible because each one has distinct identifying data that makes it different from the others.

• A. A centralized government database
• B. A private email server
• C. A distributed ledger such as Ethereum ✓
• D. A local spreadsheet stored on one computer

Why: NFTs are most often recorded on distributed ledgers such as Ethereum. The blockchain keeps a public, tamper-resistant record of who owns each token and how it has changed hands, without relying on a single central authority.

• A. A unique token ID
• B. A record of ownership
• C. Automatic legal copyright over the underlying image or file ✓
• D. A link or reference to metadata

Why: An NFT records ownership of a token, but owning it does not automatically grant copyright to the artwork or file it points to. Copyright is usually retained by the creator unless the license explicitly transfers rights, so buyers should read the terms carefully.

• A. Directly inside the blockchain transaction itself
• B. Often off-chain, such as on a server or decentralized storage, with the NFT pointing to it ✓
• C. Inside the buyer's wallet software
• D. In the Ethereum network's mining hardware

Why: Storing large media files directly on a blockchain is expensive, so the image or video is usually kept off-chain. The NFT contains a reference, often a URL or content identifier, that points to where the file lives, and that link can break or change if storage is not well managed.

• A. New Financial Token
• B. Non-Fungible Token ✓
• C. Networked File Transfer
• D. Nominal Fixed Trade

Why: NFT stands for Non-Fungible Token. 'Non-fungible' means each token is unique and not interchangeable one-for-one with another, unlike currency such as dollars or bitcoin, where any unit is equivalent to any other.

• A. Bitcoin
• B. Ethereum ✓
• C. Litecoin
• D. Dogecoin

Why: Ethereum was the dominant blockchain for NFTs during 2021, largely because its smart contract functionality, and the ERC-721 and ERC-1155 token standards, made it well suited to creating and trading unique digital assets.

• A. Staking
• B. Hedging
• C. Speculation ✓
• D. Mining

Why: Speculation means buying an asset mainly to profit from expected price changes rather than for its intrinsic use. Much of the NFT market in 2021 was driven by speculative buying in the expectation that prices would keep climbing.

• A. Converting an NFT into a physical artwork
• B. Buying an NFT and quickly reselling it at a higher price ✓
• C. Transferring NFTs between two wallets you own
• D. Burning an NFT to permanently remove it from circulation

Why: Flipping means purchasing an NFT and reselling it soon after, aiming to capture a quick price gain. It was a common strategy during the 2021 boom, when many buyers treated NFTs more like short-term trading positions than collectibles.

• A. The full digital image or video file itself, stored entirely on-chain
• B. Ownership of a unique item, usually with a link pointing to its media file ✓
• C. A guarantee that the artwork's copyright has been transferred to the owner
• D. The physical location where an artwork is stored

Why: An NFT usually records ownership of a unique token and often includes metadata pointing to an image or file, which is commonly stored off-chain. Owning an NFT does not automatically grant copyright or the right to reproduce the underlying work.

• A. Non-Fungible Token ✓
• B. New Financial Transaction
• C. Networked File Transfer
• D. Nominal Funded Trust

Why: NFT stands for Non-Fungible Token. 'Non-fungible' means each token is unique and not interchangeable one-for-one with another, unlike currency or a bitcoin, where any unit is equivalent to any other.

• A. A copy of the full image or file itself
• B. Ownership of a unique digital item, usually via a pointer to its metadata ✓
• C. The creator's personal bank account details
• D. A guarantee that the artwork will increase in value

Why: An NFT records ownership on a blockchain and typically points to metadata and a file stored elsewhere. The large media file itself is usually stored off-chain, such as on IPFS or a company server, so the token proves who owns the item rather than containing the artwork.

• A. A system where creators sell goods and services directly to audiences, with fewer intermediaries ✓
• B. A government program that funds artists through taxation
• C. A stock market index tracking entertainment companies
• D. A type of cryptocurrency mining operation

Why: The creator economy refers to independent creators earning income directly from their audiences through platforms, sales, memberships and similar means. NFTs were promoted as a way to cut out middlemen such as galleries and labels and to offer creators royalties on resales.

• A. Governments banned all digital art sales worldwide
• B. Speculative demand fell, liquidity dried up, and many buyers had bought for resale rather than lasting interest ✓
• C. The blockchain was permanently deleted
• D. Artists stopped creating digital work entirely

Why: Much of the boom was driven by speculation, with buyers purchasing in hopes of quick resale profits. When prices and sentiment turned, demand collapsed, sales slowed sharply, and many NFTs became very difficult to sell at any price, so their value fell dramatically.

• A. Automatically pay the original creator a percentage when the NFT is resold ✓
• B. Give the buyer a discount on their next purchase
• C. Guarantee the NFT can never change owners
• D. Convert the NFT into physical currency

Why: Creator royalties are a percentage of future sales that can be coded into an NFT's smart contract so the original artist receives payment on secondary sales. In practice, enforcement has been inconsistent because marketplaces and wallets can choose not to honor these settings.

• A. A legally enforceable copyright over the underlying artwork
• B. A verifiable record of ownership and transfer history for a specific token ID ✓
• C. A permanent copy of the image file stored fully on the blockchain
• D. A guarantee that the artwork's price will rise over time

Why: An NFT records who holds a specific token ID and how it has moved between wallets. It proves control of that token on the ledger, not legal rights to the artwork or the image itself.

• A. Blockchains cannot store any data at all
• B. Storing large files directly on-chain is expensive, so the image is usually hosted elsewhere ✓
• C. Off-chain storage makes the token more valuable
• D. Regulators require artwork to be kept off the blockchain

Why: On-chain storage costs scale with data size, so most NFTs store only a small reference such as a URL or content hash. If that off-chain host disappears or changes, the token may point to missing or altered content.

• A. The geographic location of the artist when the work was made
• B. The recorded chain of ownership and transfers that a token has gone through ✓
• C. The total number of copies that exist of an artwork
• D. The artist's official certification from a museum

Why: Provenance refers to the documented history of a token's custody. An NFT's ledger makes this history easy to view, but it only shows transfers of the token, not whether the original seller had the right to create or sell the work.

• A. That you control the wallet holding the token
• B. That the token ID is unique within its contract
• C. That you hold the copyright to the underlying artwork ✓
• D. That the transfer is recorded on a public ledger

Why: Many NFT sales transfer only the token itself, and the creator often retains copyright unless the terms explicitly say otherwise. Buyers should check the license attached to the sale rather than assuming copyright comes with the token.

• A. That the NFT has been stolen from its owner
• B. That the token's ownership record and the image file are separate things ✓
• C. That the blockchain has been hacked
• D. That the NFT has no value at all

Why: Copying the image does not change who owns the token on the ledger. This shows that ownership of the token and possession or copying of the digital file are distinct, which is a key point about what an NFT actually proves.

• A. Ethereum was permanently banned in major economies
• B. Speculative demand fell as buyers who had entered to flip assets stopped finding buyers at higher prices
• C. All NFTs were automatically delisted from major marketplaces
• D. Blockchain networks stopped processing transactions

• A. The NFT has been permanently deleted from the blockchain
• B. The lowest price at which any listed NFT in a collection can currently be bought has decreased
• C. The creator has removed the NFT's copyright protections
• D. The NFT's smart contract has been upgraded

• A. Blockchain records automatically expire after a set number of years
• B. An NFT is only a record of ownership and does not guarantee demand, liquidity, or any underlying value
• C. The token is destroyed whenever its price drops
• D. Owners are legally required to sell when prices fall

• A. Buying during peak hype is usually safe because prices always recover
• B. Due diligence on projects, realistic expectations about liquidity, and caution about speculation are important
• C. Only celebrity-created NFTs hold long-term value
• D. Market crashes cannot happen to digital assets

• A. The project's community and utility promises are not delivered and holders lose interest
• B. The blockchain adds too many transactions per second
• C. The token becomes too widely recognized
• D. Governments issue mandatory buy orders

• A. Buying an NFT and immediately reselling it at a profit to a third party
• B. Repeatedly trading an NFT between wallets controlled by the same person to create a false impression of demand and inflate its price
• C. Cleaning the metadata of an NFT to remove copyright violations
• D. Transferring an NFT to a cold wallet for long-term storage

• A. The project team delivers all promised features and royalties to holders
• B. Developers hype a project, collect funds from buyers, then abandon it or drain the proceeds
• C. The smart contract is audited and publicly verified before minting
• D. Prices rise steadily over several years as the community grows

• A. NFTs are stored on paper ledgers that require physical transport
• B. Proof of Work blockchains consume large amounts of electricity to validate transactions
• C. NFT artwork files are typically printed on recycled materials that release toxins
• D. Mining rigs must be replaced every few days, creating electronic waste only

• A. The team is anonymous and the project promises returns or exclusive utility that is vague or undeliverable
• B. The collection has a clearly published roadmap with milestones
• C. The smart contract code is open source and reviewed by independent auditors
• D. The creators have a long track record of public project delivery

• A. The metadata stored on IPFS servers
• B. Users' wallet seed phrases or private keys, often through fake minting sites or direct messages
• C. The gas fees paid to blockchain validators
• D. The royalty settings on secondary marketplaces

• A. Each token is interchangeable with every other token of the same type
• B. Each token is unique and cannot be directly swapped one-for-one with another ✓
• C. The token can only be sold once and never resold
• D. The token is backed by physical gold held in a vault

Why: 'Non-fungible' means each token has a distinct identity or property that makes it not directly interchangeable with another token, unlike currencies such as dollars or bitcoin, where any unit is equal to any other.

• A. An entry on a blockchain that links to a digital or physical item, often through metadata ✓
• B. A copy of the actual image file stored permanently inside the blockchain itself
• C. A government-issued legal deed to a piece of real estate
• D. A password that grants access to a company's internal servers

Why: An NFT is a record on a blockchain that references an asset, usually through metadata containing a link or pointer. The underlying file is often stored off-chain, which is why owning the NFT does not automatically mean owning the copyright or the full file.

• A. Holding the token often grants access to shared spaces, events, or discussions with other holders
• B. Blockchains automatically send holders monthly social invitations
• C. NFT owners are legally required to join a membership association
• D. The tokens can only be viewed in private by their owner and no one else

• A. Using tokens as non-transferable records of course completions, memberships, or certifications ✓
• B. Replacing all cash with a single NFT for everyday purchases
• C. Storing the full text of national laws inside each token
• D. Using NFTs to replace internet connections entirely

Why: Some proposals use NFTs or similar tokens as verifiable credentials, such as diplomas or event attendance records. Non-transferable (soulbound) versions are designed so the credential stays tied to the person who earned it.

• A. Value often depends on ongoing community attention, and if interest fades, prices and relevance can collapse ✓
• B. Blockchains permanently delete all NFTs after one year
• C. Artists are prohibited from ever selling digital work online
• D. Every NFT is required by law to be stored in a physical museum

Why: Much of an NFT's perceived value comes from social status, community, and hype rather than intrinsic utility. When that attention moves elsewhere, both market value and cultural meaning can decline quickly.