A semi-fungible token (SFT) is a type of digital asset that combines the properties of fungible and non-fungible tokens (NFTs). SFTs display partial interchangeability within a token class, as opposed to fungible tokens, which are identical and interchangeable, and NFTs, which represent unique goods. Each SFT has its own distinct set of characteristics or qualities, allowing for differentiation and customization. SFTs are widely utilized in applications that need token variations or editions, such as limited editions of digital collectibles or tokenized assets with different properties.
Fungible Tokens
Fungible tokens and assets are replaceable and not one-of-a-kind. We can use the US dollar as an example. $1 is worth the same in every American city. One Ethereum is equal to one Ethereum when using a fungible token. Therefore, the requirement of no value loss is a point. A token’s (or currency’s) ability to be swapped for or replaced with another of its kind of tokens with no loss in value is known as fungibility.
Fungible tokens have the following features:
- Divisible: The same tokens can be divided.
- Non-unique: There is nothing special about the $1 bill; there are billions of the same bills all across the world.
- Interchangeable: It is instantly replaced by a token or coin of the same value.
Examples: the US dollar, Euro, Bitcoin, Ethereum, and others.
Non-Fungible Tokens (NFTs)
Non-fungible tokens (NFTs) are distinctive digital assets that serve as proof of ownership or validity for a particular good or piece of content. Each NFT has unique features and cannot be swapped one-for-one for another token, in contrast to fungible tokens. Digital valuables, works of art, virtual properties, and other distinctive goods are frequently represented by NFTs. They provide scarcity, provenance, and verifiable ownership using blockchain technology, adding a new dimension of value and ownership to the digital world.
Because NFTs are kept on a blockchain, each token has certain characteristics:
- Indivisible: You can’t buy parts of NFTs
- Indestructible: You can’t delete or remove it
- Immutable: Once data is stored, it cannot be changed.
- Verifiable: Because NFTs are recorded on public blockchains, their origin, and ownership can be easily traced by anybody at any moment.
Examples: In-game objects such as a shield or sward, digital and non-digital collectibles such as a sports card, domain names, event tickets, a plot of land in a sandbox game, etc.
Semi-Fungible Tokens (SFTs)
Semi-fungible tokens (SFTs) include elements of fungibility and non-fungibility. SFTs are somewhat interchangeable among members of the same token class, but they also have special qualities that set them apart from one another. Variations in scarcity, color, or other distinctive characteristics might be included in these characteristics. SFTs are frequently utilized in applications where customization and differences within a certain token class are sought, such as tokenized assets with varied properties or limited editions of digital collectibles.
Examples: gift cards, tickets, vouchers, in-game currency, etc.
So, what does an SFT mean?
SFTs are relatively new to the world of crypto tokens, which is why they modeled themselves after their elders — fungible and non-fungible tokens — in order to adapt to changing conditions. SFTs were first seen as fungible tokens that could be swapped for other SFTs of the same value. A token representing a valid ticket to a rock event, for example, would have the same value as an identical ticket with the same expiration date and hence be interchangeable.
The main feature that distinguishes these tokens as “semi-fungible” is that fungible tokens lose their face value when redeemed. They become non-fungible once they lose their exchangeable value. SFTs are popular in the gaming industry and the metaverse. They also give transitional fungibility. In this regard, SFT offers the same advantages as NFT. SFTs, like NFTs, provide rapid transactions.
After selling or exchanging the item, SFT owners are not permitted to do so again. SFTs are useful when other fungible tokens become worthless. Who is able to utilize the SFTs? Organizations, businesses, and institutions. SFTs may more easily add new features and components since they are constructed on the Ethereum blockchain.
Semi-fungible tokens get around the limits of both fungible (ERC-20) and non-fungible (ERC-721) tokens, as well as the “disagreement” between various standard tokens.
The key feature of fungible tokens is their irreversible transactions. It basically implies that if you transmit coins to the wrong address, you will lose them.
Semi-fungible tokens, on the other hand, are constructed on smart contracts that allow for the tracking of errors. As a result, incorrect token transfers are reversible.
Semi-fungible tokens support batch transfers, but NFTs do not. Many SFTs can be transferred in a single transaction, resulting in cheaper gas prices and expenditures.
How to create semi-fungible tokens?
The SFTs are created using Ethereum’s ERC-1155 standard. ERC1155 is mostly used for the creation of non-fungible tokens (NFTs).
The ERC-1155 standard was developed in 2017 by blockchain game companies Enjin, Horizon Games, and The Sandbox as a hybrid of the ERC-20 (fungible token) and ERC-721 (non-fungible token) standards.
SFTs are notably useful in the gaming industry, where fungible components such as in-game cash coexist with non-fungible objects such as trinkets and weaponry.
Semi-Fungible Tokens Use Cases
Semi-fungible tokens (SFTs) have diverse use cases across different industries. Here are some specific applications of SFTs:
Gaming: SFTs are widely used in the gaming industry to represent in-game assets with varying attributes. Players can collect and trade SFTs that possess unique features, such as rare weapons, limited edition skins, or special abilities, enhancing the gameplay experience and enabling a thriving virtual economy.
Vouchers and Coupons: SFTs can be utilized as digital vouchers or coupons that offer specific discounts, promotions, or access to exclusive offers. Each SFT can represent a different discount value or a specific deal, providing flexibility and customization for businesses and customers alike.
Tickets to Events and Concerts: SFTs can be employed as digital tickets for events, concerts, or other forms of entertainment. Each SFT can hold specific details about the event, including the date, time, venue, and seating arrangement. This enables secure and traceable ticketing, reducing the risk of counterfeit tickets and allowing for seamless transferability.
Points and Rewards Systems: SFTs can serve as digital points or rewards in loyalty programs. Each SFT can represent a different tier or level within the program, allowing users to earn and redeem points for various perks, discounts, or exclusive benefits.
Limited Edition Collectibles: SFTs are commonly used for limited edition collectibles, such as digital artwork or virtual trading cards. Each SFT within the limited edition class can possess unique attributes, rarity levels, or special editions, creating a sense of exclusivity and collectability for enthusiasts.
Benefits and Advantages of SFTs
- Flexibility and Customization: Semi-fungible tokens offer flexibility and customization within a specific token class. Developers and users can create unique variations or editions, allowing for more engaging and tailored experiences.
- Enhanced Value Differentiation: The uniqueness of semi-fungible tokens adds value differentiation, as tokens with distinct attributes may have different levels of desirability or rarity within a particular class.
- Unique Identification and Tracking: Each semi-fungible token possesses unique identifiers, making it easier to track and identify specific instances or variants within a tokenized ecosystem.
Difference Between SFTs and NFTs
| Factors | SFTs | NFTs |
|---|---|---|
| Interchangeability and Uniqueness | Semi-Fungible Tokens (SFTs): SFTs possess partial interchangeability within a token class, allowing for differentiation based on unique attributes while maintaining some level of interchangeability. | Non-Fungible Tokens (NFTs): NFTs represent unique and distinct items, with each token being entirely non-interchangeable and possessing its own distinct properties. |
| Token Attributes | SFTs have varying attributes within the same token class, such as different rarity levels, editions, or other distinguishing features. | NFTs have inherent uniqueness, often representing one-of-a-kind digital assets with distinct properties that set them apart from all other tokens. |
| Use Cases | SFTs find applications in areas where customization and differentiation within a specific token class are desired, such as gaming, limited editions, vouchers, and points systems. | NFTs are widely used for representing and trading digital collectibles, virtual real estate, digital art, and other unique digital assets that require non-interchangeability and proof of ownership. |
| Value Differentiation | Value differentiation among SFTs is based on the uniqueness and scarcity of their attributes within the token class. | Value differentiation of NFTs is driven by the inherent uniqueness and rarity of the assets they represent, as well as the demand and perceived value in the market. |
Conclusion
Semi-fungible crypto tokens offer a unique blend of fungibility and uniqueness within a token class. They enable customization, value differentiation, and enhanced user experiences, particularly in digital collectibles and tokenized asset domains. While challenges remain in terms of implementation and standardization, the growth of semi-fungible tokens showcases the continuous evolution of tokenization and its potential to shape the future of the blockchain industry.
FAQs
Q. What are semi-fungible crypto tokens?
A. Semi-fungible crypto tokens (SFTs) are a type of digital asset that combines characteristics of both fungible and non-fungible tokens. While fungible tokens are identical and mutually interchangeable, and non-fungible tokens represent unique items, SFTs introduce a level of uniqueness within a token class. Each SFT retains its own unique attributes or properties, allowing for differentiation and customization.
Q. How do semi-fungible tokens differ from non-fungible tokens (NFTs)?
A. While both semi-fungible tokens (SFTs) and non-fungible tokens (NFTs) have unique attributes, the main difference lies in their interchangeability. SFTs possess partial interchangeability within a token class, meaning they can be exchanged within the same class based on their distinct attributes. In contrast, NFTs are entirely non-interchangeable, representing one-of-a-kind assets with no interchangeability.
Q. What are some use cases for semi-fungible tokens?
A. Semi-fungible tokens find applications in various industries. Some common use cases include gaming, where SFTs can represent in-game assets with unique attributes; vouchers and coupons that offer different discounts or deals; tickets for events and concerts with specific details; point systems and loyalty programs with varying reward levels; and limited edition collectibles with different variations or rarity levels.
Q. How can one create and manage semi-fungible tokens?
A. Creating and managing semi-fungible tokens involves designing and implementing smart contracts on a compatible blockchain platform. Developers define the token class, specify the unique attributes within the class, and deploy the smart contracts to facilitate the issuance, transfer, and management of the tokens. Users can interact with the tokens through compatible wallets or applications that support the relevant blockchain standards.
Q. Can semi-fungible tokens be traded or sold?
A. Yes, semi-fungible tokens can be traded or sold, similar to other types of digital assets. The value of each token may vary based on its unique attributes and the market demand for those attributes. Trading and marketplace platforms that support specific token standards can facilitate the buying and selling of semi-fungible tokens.
